The long-suffering print media industry continued its decline last year. Print circulations and advertising revenues are both down. Companies rooted in the printing press are surviving, and now profiting, thanks to their erstwhile competitors: the Internet and television.
The advent of internet paywalls and advertising in recent years marks the industry’s first attempt at monetizing online news. In recent months, some traditional print companies have increased their broadcast television presence, buying more local stations.
Print media’s slow transformation may at last be bearing fruit.
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The New York Times now has more than 760,000 subscribers to its digital paywall. Times stock rose over 78 percent from February 2013 to the end of last month and it hit a five-year high in December.
The grey lady isn't alone. Gannett Co., which owns 82 daily newspapers including USA Today, saw a 46 percent stock rise over the same period. E.W. Scripps gained 69 percent over the past year and McClatchy nearly doubled its stock, albeit to $4.79.
“I guess that if you think about the apocalyptic headlines there were about a year ago, that you would be surprised by this, you would just imagine that news companies’ stock prices would continue to fall,” says Emily Bell, Director of Columbia University’s Tow Center for Digital Journalism. “There’s a feeling, I suppose, of speculation about existing brands and companies actually being able to find value in new markets.”
Investors do not seem to be betting on a newspaper revival. The Tribune Company and News Corp are separating their television and print divisions in an effort to bolster share prices, and make the company’s market performance not subject to the decline of its newspapers.
Warren Buffett bought 28 small-city newspapers in 2012, and his company, Berkshire Hathaway, released its 2013 annual report, which announced that readership at the papers dropped 5.6 percent over last year. And Time Warner is spinning off Time Inc., its magazine division, after years of subscription and ad revenue declines. But stock market profits are not going up solely, or even mostly, because of these grim spin-offs.
Despite those dim developments, Wall Street is awarding the print media industry for diversifying. Edward Atorino, an analyst at Benchmark Co. LLC, attributes the stock rallies to the companies' investments in TV stations. Although they all have some digital presence, companies are profiting from a shift to broadcast news, he says.
"I wouldn't buy a newspaper company [stock] because it's a newspaper company," Atorino says. "They're really broadcast companies now."
Mark Jurkowitz, associate director at the Pew Research Center’s Journalism Project, says there is a “bull rush” of print companies buying local television stations. Their motives look towards the 2016 elections, he suggested.
“The flow of political advertising dollars just increased dramatically,” after the 2010 Citizens United Supreme Court Case, Jurkowitz says. “And much of it goes to local television. I think there was $3.1 billion [of political advertising spent] in the 2012 election.”
Gannett completed a $2.2 billion purchase of Belo TV in December, beefing up the number of its television stations from 23 to 40. Scripps bought two TV stations in Buffalo and Detroit in February for $110 million; it now owns 21 stations.
Atorino says these companies are making the push into broadcast because it's a long-term investment that can return a quick profit, at least quicker than a digital investment. "You really can't get a big bang for your buck in digital," he argues.
But Jurkowitz led a Pew study published last year on four newspapers that have found clever ways around that. For example, The Santa Rosa Press Democrat in California opened a digital marketing consulting service for merchants in its area. The service, independent of the newsroom, taught clients how to build websites and video production skills. The Press Democrat said 25% of its digital revenue comes from its marketing service.
Another, the Deseret News in Utah, channeled its focus on “Family and Faith” stories. The Deseret News, owned by the Mormon Church, just published a series with the Atlantic magazine on the impact of absentee fathers in America. The newspaper’s digital revenue has been growing at over 40% annually, according to the Pew study.
Douglas Arthur, an analyst at Evercore Partners, sees digital, not broadcast, as the profitable future for print media. "They're all going digital as fast as they can," Arthur says. "People are excited what that means for the business model going forward," he said.
The New York Times' subscription revenue surpassed its advertising revenue in 2013, the first paper to claim such a business model. Barclays Capital analyst Kannan Venkateshwar titled his February report on the Times “A Good Story Gets Better,” and said the number of digital subscribers exceeded his expectations. But financial experts and media analysts agree the Times “is a different ball game,” as Atorino put it.
Arthur says investors should only go for companies with "an aggressive digital strategy," while Atorino recommends buying Gannett stock because of its recent TV purchases.
Both analysts say staff reductions contributed to some stock price increases, but that the rises were mainly pushed by broadcast or digital investments. For the papers still in the daily news cycle, one trend is clear: no print media company is counting on its newspapers, the founding product for many, to propel it into the future.
“I think what doesn’t change is the long-term outlook for print and print revenues, which are likely, for most people, to continue to decline,” says Bell, the Columbia professor. “There’s a lot of fragility in the media business, particularly in newspapers and newspapers stocks.”