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Zacks Industry Outlook Highlights: New York Times, Gannett, McClatchy, Washington Post and Journal Communications

NYT GCI MNI JRN

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For Immediate Release

Chicago, IL – September 4, 2013 – Today, Zacks Equity Research discusses the U.S. Publishing, including The New York Times Company ((NYT - Analyst Report)-Free Report), Gannett Co. Inc. ((GCI - Analyst Report)-Free Report), The McClatchy Company ((MNI)-Free Report), The Washington Post Company (-Free Report) and Journal Communications, Inc. ((JRN - Snapshot Report)-Free Report).
 
Industry: Publishing
 
Link:  http://www.zacks.com/commentary/28831/Publishing-Industry-Stock-Update---Sept-2013
 
Changing consumer preferences and the advent of new and innovative technologies have been altering the way news is read and offered. Readers now have more choices to collect and read articles and news through devices such as netbooks, tablets or other hand-held devices.

These have been weighing upon the print newspaper industry, as advertisers now get low-cost avenues through which they can reach their target audience more effectively. We believe that an alternative and a stable source of revenue is the demand of time to salvage the dwindling print newspaper industry.

Let’s have a look at what is happening in the publishing industry and how newspaper companies are adapting with the changing scenarios to keep themselves alive in the race for survival.

Circulation Falling Prey to Internet

Newspapers have fared far worse than magazines, as web-based news options have gotten the better hand in recent years. The two-decade-long erosion in newspaper circulation reinforced the decline in advertising revenue. Circulation has also fallen prey to budget cuts with newspaper companies reducing the number of print pages and newsroom staff to combat the downturn.

Despite the fall in newspaper circulation, some companies are reporting improved revenue from circulation due to the increase in subscription and newsstand prices. On the flip side, while the increase in prices for print editions is generating more circulation revenue, it is also resulting in subscriber losses due to the shift in preference for free online content.

Waning Newspaper Advertising Revenue

Advertising volumes are still under pressure as advertisers keep shying away from making any upfront commitments in an economy which is still not completely awoken from a state of hibernation.

According to the data released by the Newspaper Association of America, total advertising revenue for U.S. newspapers slipped 8.5% year over year in the fourth quarter of 2012 (October to December) to $6.26 billion, after falling 5.1% in the previous quarter, marking the 26th consecutive quarter of decline. The last time the Industry witnessed an increase in revenue was in the second quarter of 2006, when advertising revenue grew 1.1%.

Data compiled by the Newspaper Association of America suggested print advertising declined 10.8% to $5.29 billion in the fourth quarter of 2012, after declining 6.4%, 7.9% and 8.2% in the third, second and first quarters of 2012, and 8.0%, 10.8%, 8.9% and 9.5% in the fourth, third, second and first quarters of 2011, respectively. National advertising sales declined 16.2% to $874.9 million, retail dropped 10.0% to $3.11 billion and classified dipped 8.9% to $1.31 billion during the fourth quarter.

Print advertising revenue at The New York Times Company ((NYT - Analyst Report)-Free Report) dropped 6.8% in the second quarter of 2013. At Gannett Co. Inc. ((GCI - Analyst Report)-Free Report), publishing advertising revenue fell 5.3% in the quarter.

Print advertising revenue tumbled 8.7% at The McClatchy Company ((MNI)-Free Report) and 4.0% at The Washington Post Company (-Free Report) during the second quarter of 2013. Publishing advertising revenue dropped approximately 9.8% at Journal Communications, Inc. ((JRN - Snapshot Report)-Free Report) during the quarter.

Efforts to Mitigate Losses

In an effort to offset declining revenue and shrinking market share, publishers are scrambling to slash costs. This has compelled many newspaper companies to undertake cost-cutting measures, such as trimming of headcount, pay cuts, furloughs, suspension of dividends, voluntary retirement program and closure of printing facilities.

Newspaper companies have now been remodeling and restructuring themselves to better align with the growing need of marketers, targeting younger people, affluent households and other demographic groups with multiple web and print publications. The publishing companies are adapting to the changing face of the multi-platform media universe, which currently includes Internet, mobile, tablet, social media networks and outdoor video advertising in its portfolio.

Publishing companies have been offloading assets that bear no direct relation with the core operations. The New York Times Company in May 2012 divested its remaining stake (210 Class B units) in the Fenway Sports Group, the owner of the Boston Red Sox and the Liverpool Football Club, for $63 million.

Another example of shedding the assets by the company is the sale of Regional Media Group in Dec 2011, which has long been grappling with shrinking advertising revenue.

Waning print advertising revenue, in an uncertain economy, compelled The New York Times Company to take this tough decision of divesting Regional Media Group, part of The New York Times Media Group. This would allow the company to re-focus on its core newspapers and pay more attention to its online activities. The decision to divest the division is also considered part of the cost containment efforts undertaken to stay afloat in this turbulent environment.
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