Sundog Expert Dean Froslie

Dean Froslie

Director of Content

Adjusting the Newspaper Industry’s Profit Expectations

The well-documented struggles and ownership changes at major newspapers will ultimately benefit – and potentially save – the industry. That’s the case made by Jack Shafer in a column for Slate.

High-profile acquisitions of the Star Tribune (Minneapolis) and the Boston Globe have not delivered the expected shareholder returns – resulting in huge write-offs (for the Globe) and another sell-off (for the Star Tribune). Shafer argues that these types of failures represent a tipping point:

It pops the bubble that had carried newspaper valuation beyond the Van Allen Belt. And by doing so, it presents publishers—and Wall Street—with more rational expectations about what sort of profits the newspaper industry can make without destroying itself.

Historically, newspapers have enjoyed operating margins of 20 percent or better, which led to the bidding frenzy in the past decade or so. But since those days are probably over, many papers have turned to cost-cutting, increased subscription rates and steeper advertising costs. Now, however, Shafer suggests the industry may begin to form more realistic, self-staining expectations:

They need to acknowledge that now that they’re no longer the monopoly conveyors of information in their markets, their days of guaranteed 20 percent operating margins are over, and those astronomical valuations of yesteryear were a fluke.

The industry is still profitable, Shafer notes, but publishers must adjust to lower margins while still producing a quality product.

Posted in: Business, Media Strategy, Targeted Marketing Programs