To go along with my post on the top 8 media companies, here is a brief analysis of what I see as the top 4 newspaper stocks. As online news gains ground, it is interesting to see how these giants are struggling in adapting their business models to new trends and how they are faring in the current difficult market.
1. News Corp
News Corp has many good things going for it. It has a well-diversified portfolio of online and offline media strategies, as is evident from its acquisitions of PhotoSharing and MySpace. As newspapers are losing classifieds to online, News Corp has been working out a vertical classified strategy consistently. It knows which mergers and tie-ups to target, the merger with Dow Jones which gave them ownership of the Wall Street Journal being a case in point. Finally, it continues be a pioneer in digital media. I expect the current year to continue be one of aggressive deal-making for the company, and there are rumors of its wanting to acquire LinkedIn. But the current quarter was not good for News Corp, primarily owing to macroeconomic conditions. Nonetheless, News Corp is the best positioned of the newspaper stocks.
Gannett has also been actively focused on the online media business. It realized early in the game that circulation numbers of its US daily newspapers were falling and geared itself towards establishing an online presence through strategic investments. Gannett is one of the few publication houses that has managed to develop an Internet business around its publications and monetize them. The company sees itself as the largest local content aggregator and distributor, and has invested in sites like ShopLocal. Here are our recommendations for Gannet to fill their portfolio gaps. Like others in the industry, the previous quarter’s results drove down the stock price.
As macro conditions continue to deteriorate, The New York Times did not fare any better than peers last quarter, despite being the number one newspaper website in June. The company has been steadfastly pursuing online traffic as part of its transformation strategy but still needs to do much more. The company also needs to go through some financial engineering, so this isn’t necessarily a stock I recommend buying right now.
McClatchy is the third-largest newspaper company in the US and has made significant progress in converting its revenues online. According to the company, “A decade ago, most of our online ads were up sells from print or a combination buy with print. In 2006, 70% of our online revenues were tied up with print. And now year-to-date nearly 50% of our online revenues come from ads that are placed online only.” The transformation is taking time, but it is still a company to watch. Our detailed coverage of McClatchy in a web 3.0 era is here.