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SPEAKING OF NEWSPAPERS: Newspapers adapting to changing habits

In theory, publicly traded companies have to be profitable. Who would buy the shares of a poorly performing corporation? But there are degrees of success. And about two years ago, holders of Knight Ridder Inc. stock felt the newspaper company was...

In theory, publicly traded companies have to be profitable. Who would buy the shares of a poorly performing corporation?

But there are degrees of success. And about two years ago, holders of Knight Ridder Inc. stock felt the newspaper company was producing an insufficient margin, even though it hovered around 20 percent.

So the company's majority owners, a cabal of large institutional investors, forced a sale of Knight Ridder, which then owned The Daily Telegram and Duluth News Tribune. McClatchy Newspapers Inc. was the successful bidder, buying the firm and becoming the second largest newspaper publisher nationwide (after selling off some properties, it dropped to third).

When the sale closed, McClatchy's share price was $37.93. When markets closed Friday, it was $16.58. Preliminary third quarter results showed profits at the California corporation declined by 55 percent compared with the same quarter of 2006. On the surface, it would appear institutional investors shot themselves in the foot.

But McClatchy isn't the only newspaper company stung by week third quarter results. Gannett, the nation's largest newspaper owner, reported a 10.5 percent net income decline. Profits at Dow Jones were off 87 percent. Media General's were a bit worse -- off by 88 percent.

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Meanwhile, Google's Q3 profits jumped 46 percent. It's stock was priced at $674 this morning.

This seem to suggest the Internet has become the media of choice for news readers. Let's not forget, however, the stock market has its ups and downs, as do various industries. Just seven years ago, the entire technology sector toppled.

In the current situation, profits at metro newspapers, which typically are owned by big corporate chains, have suffered more than elsewhere. Much of the decline is tied to sluggish home sales and the resulting slump in real estate advertising. Although disconcerting, it won't last forever.

Still, newspaper companies are keenly aware they must redefine themselves. Printed newspapers will remain the core product for several more years, but revenue growth most likely will come through the introduction of new products -- many of them on the Internet. For instance, The Daily Telegram recently launched a full-page pdf Internet edition, but it's only one of several new initiatives in the works. We won't be more specific at this time, but they're all designed to serve our customers in unique, exciting and helpful ways.

We welcome reader input as we move forward. Give us a call or send an e-mail to editorial@superiortelegram.com with your suggestions. This is your newspaper. Let us know how to best serve your needs.

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