Newspapers Are Hurting, How To Help

This article is by Marc Wilson

The newspaper industry received a wake-up call this week when Knight Ridder, the nation’s second largest newspaper group, put itself up for sale.

Bloomberg News Service explained it this way: “Shares of newspaper companies such as Knight Ridder Inc. and New York Times Co. are among the worst performers in the U.S. stock market this year, and it’s no mystery why: Readers, and thus advertisers, are shifting to the Internet.”

The Knight Ridder news sent shock waves through the industry. “There will be other newspaper companies that now have to consider what their strategy is going forward,” said Jake Newman, analyst at Credit Sights.

Knight Ridder — publisher of the Philadelphia Inquirer, Miami Herald, San Jose Mercury and 28 other daily newspapers — put itself on the market after its three largest stockholders demanded that the company be sold because of poor stock performance. Knight Ridder stock hit a three-year low in October, but has rallied on news of a possible sale. Newspaper stocks were hurt by a 2.6 percent drop in print circulation over the last six months.

Knight Ridder has hired Goldman Sachs to explore strategic alternatives, including a possible sale of the group.

At least one expert predicts there will be buyers for Knight Ridder. “It’s a slow death overall for newspapers,” said Scott Black of Delphi Management Inc. “But the bottom line is they (newspapers) are money machines that generate a lot of cash.”

The American Press Institute now calls the nation’s newspapers an “industry at risk.” The API has started a project called “Newspaper Next: The Transformation Project,” with a stated goal of developing “viable new strategies for newspaper organizations, executable in the next five years that will reverse the decline in our industry’s share of audience and advertising.”

API has hired strategist Clayton Christensen of the Harvard Business School and his firm Innosight, to lead the project.

Adapting to a “broad-band” world is the major issue facing newspapers. When — some 10 or 11 years ago — we at TownNews.com started sounding the alarm to newspaper executives about the effects of the Internet, we ran into what we called “the 1 percent rule.”

This started when we asked the president of one mid-size newspaper group to meet with us to discuss Internet issues. He responded: “The Internet is only 1 percent of my business. I’m too busy to deal with that now.”

Over the years, most newspaper executives have — often grudgingly — come to realize the importance of the World Wide Web to the newspaper and advertising worlds.

Today, few are asleep. The headline over a Reuters story this week said it all: “Knight Ridder wakes up sleepy newspaper business.” Let’s hope the wake-up call didn’t come too late.