Barron's reports, "This Dying Medium Has Plenty of Life":
Recent hysteria over the imminent demise of daily newspapers is misplaced. As an economic matter, most newspapers still are far more profitable than other, higher-profile consumer media. As a policy matter, those calling for government subsidies or other protections ignore the true state of the marketplace of ideas: It has never been so vibrant.
Newspapers do face a genuine crisis, but the nature of this crisis is misunderstood. [...]
Doing worse doesn't mean doing badly. Until recently, many newspapers had profit margins exceeding 30%. By 2008, the industry's average margin had fallen to the mid-teens. The speed and magnitude of this decline have resulted in wrenching changes in the way these historically stable businesses must operate.
The continuing drama shouldn't distract from real earnings power. Many newspapers still have almost double the profitability of other media sectors, such as movies, music and books -- which have long struggled to achieve margins of even 10%.
One note: Does it seem peculiar to anyone that the word "even" is used to characterize a 10% profit? Since when is profit of any size something to sneeze at?
(tip: Daily Dish)
Huh? What world do you live in? Are these things supposed to be free? Aren't they suppose to make some money? I haven't seen Citizen Kane since childhood so if it was a CK reference....OVER MY HEAD!
If it's not growing, no one cares. Absolute amounts have't mattered in years. All anyone cares about is growth; it's not putting food on the table today. It's about putting money in the bank sometime in the future.
Another thing to consider; negative growth (or as Normal People might call it, shrinkage) foretells of a business's demise. Aye, they have 10% today. But at the rate they have been falling, today ain't lasting very long.
I think it would be fun to run a newspaper.
Especially since so few companies are paying dividends to stockholders. If newspapers paid an 8% dividend to stockholders every year people would be climbing over themselves to buy newspaper stock, so I completely agree.
First, to "Bob": I don't think Jim was saying newpapers shouldn't make a profit -- just that 10% would be considered healthy by almost any business, and so the word "only" was not appropriate. Actually a lot of fuss over one word.
But as "Adam" implies, percentage profit doesn't mean much if absolute revenues on a steep decline. 10 cents is ten percent of a buck, but not much of a business.
JE: Yes, I didn't understand what Bob was getting at. I thought I stated it quite clearly: I find it disturbing that 10% annual profit would be considered insufficient in a multi-million/billion dollar business. Unsustainable expectations have brought down the entire economy before (by encouraging irresponsible risk-taking, corner-cutting, books-jiggering), and they'll do it again. Meanwhile, I'm fascinated that the newspaper industry is, by and large, more financially rewarding than the movie industry. Read the entire Barron's article to see why.
Shrinking margins can negate double-digit profits because they scare off investors, particularly at publicly traded papers. Stockholders don't give a damn about 15 percent profits if the prospect of 10 percent profits in the future is going to reduce the value of their investments.
But privately held papers can still manage well, depending on the owners' philosophy toward the product (i.e. whether they're interested only in keeping those double-digit numbers or they're willing to accept single-digit profits in order to continue providing a much-needed public service). A private-equity holder who is well-diversified may find reduced profits acceptable if those profits are still healthy. The question for them is how low are they willing to go? And right now, there doesn't appear to be a bottom for the newspaper industry.
I think responsible private ownership is the best model for newspaper companies in this economy. It's not unreasonable to think something like the Sam Zell model of taking a publicly traded newspaper company private could work, but it's doubtful when it necessitates anything close to the $13 billion debt created by his purchase of the Chicago Tribune and the Los Angeles Times. Finding ways of paying such a debt can only negatively affect the ability of reporters to do their jobs as more and more pennies get pinched.
ahh sorry for my misinterpretation. I saw my absolutism in your post!
Jim, thank you for the information. I am glad to hear that newspapers will be around a while.
As a side note, isn't it interesting that the newspaper industry is claimed to be on its last leg is making a 10% profit margin, but the health care insurance industry is making a 2-3% (average of 6%) according to the AP, but is claimed to be raking in money hand over fist on the back of the poor and the sick? (Say what you will on the debate, but that tired, old cliche is silly.)
In the future, you should clear all your references with 'Bob' beforehand, to ensure that they don't go OVER HIS HEAD!