Part 4: Are Newspapers Buggy Whips?
While I do not believe that in their current form that newspaper companies will exist in the future, I believe that many of the “newspaper” organizations are well positioned to profit from what I would consider to be a major trend on the internet that I prefer to identify as ‘localization of content’. By this, I mean that customers require news content, advertisements, job postings, classifieds, coupons, obituaries, and periodicals pertaining to issues and events that are occurring within their particular community. The medium and form is with which individuals choose to receive their content is clearly shifting. Without credible and localized content developers there is no credible source for information at the community, city, or state levels. All businesses require a feedback loop with in their operating areas so that they can ensure that the customers in the primary markets that they serve have access to the appropriate products and services. A world absence of localization could become very expensive for businesses advertising on the web and extremely inefficient.
With that said, it is important to acknowledge that many of the large newspaper firms have struggled to take their nationalized news brands to the internet. Niche newspaper providers like the Financial Times and Wall Street Journal have been a lot more successful implementing an online pay model. This success can be atributable to the specialized nature of their content and ability to charge for this based on consumer demand. The demographic for specialized newspapers varies from national papers like the Washington Post, USA Today, or New York Times. Generally audiences appear to be younger and much more technology saavy, which lends itself to the implementation of a pull content model.
It should be noted that over the last several years, the larger traditional newspaper providers have been diversifying their businesses through the acquisition of internet based information services platforms. Gannett specifically has increased its position in Careerbuilder several times, in addition, to making additional investmetns in websites like Shop Local. It has yet to be seen whether the traditional newspapers can integrate these web services into their news content delivery and advertising model. Fully integrated sites like Google and Bing pose serious competition to advertising revenues; however the decoupling of advertising and content, makes it difficult for those sites to provide the kind of value that newspapers can potentially deliver.Overall, like everyone else I continue to remain skeptical about the ability of the newspaper industry to transform itself into a modern day goliath. The lack of responsiveness to a changing market, which could have been predicted nearly a decade ago, aging and legacy management, and a lack of direction, indicate that news paper firms are not a viable option in a long term investment portfolio. All of the firms previously listed are trading at discounts to both book value and earnings, which tend to make them somewhat attractive; I however, view these opportunities as value traps. Continual erosion of market share, lack of barriers in an online environment, poor management, and major business strategy flaws make me extremely concerned. News papers are not going to go away in my life time; however, they will certainly operate in an entirely different fashion than they are currently. Technology and content production and dispersion methods have changed entirely from the good old days . I am thankful that I no longer have to get my hands dirty with running ink nor trip on the brick of a newspaper in the driveway on my way to leave for work.
Calling newspaper companies buggy whip manufacturers may be a bit extreme, particularly since the do produce and provide more valuable services. It may not be more than a few years before a physical newspaper is all but history.