Thursday, April 02, 2009

Reports of the death of newsprint

are greatly exaggerated

When it comes to profits, local beats sexy
If you believe print is doomed, the opinion of investment banker Jonathan Knee might surprise you. What follows are some quotes from Knee that appeared in the Wall Street Journal. He's an investment banker who advised on the San Diego Union-Tribune deal and who has covered the media industry for over 15 years. Knee is the director of the media program at the Columbia Business School and the co-author of “Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies?”, which is to be published by Portfolio Books this year.

"The reason why most newspaper companies have gone bankrupt or appear perilously close to it is that they have too much debt, not that they have stopped being profitable. ... [C]ompared to most media businesses like movies and books, most newspapers still have higher profit margins ...

"There is widespread confusion ... regarding the source of the shocking historic profitability of many newspapers. The most profitable newspapers have tended to be monopoly markets with circulation of 20,000 to 100,000 readers. These are not sexy papers like The New York Times and The Wall Street Journal, which have historically have significantly low margins.

"Major market papers typically have suffered from the greatest anachronisms in their cost structure due to everything from oppressive union work rules to just bad management.

"When the smoke clears, the local newspaper, which may not be the sexiest part of the newspaper industry but is overwhelmingly the largest and most profitable part of the industry, will be a smaller and more-focused enterprise whose activities will be directed to those areas where their local presence gives them competitive advantage and they will continue to generate as a result better profits than the supersexy businesses in the media industry asking for government or nonprofit help like movies and music."

--this brief was borrowed from the SF/Pen Press Club, March 31 edition.

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