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| New Money Rediscovers Old Media |
Losing the Paper Chase
Michelle Leder
05/01/2007
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Investors need not look very far to find out why newspaper company share prices have
plummeted in recent years. While Mark Cuban may read four newspapers a day, the
majority of Americans don’t even read one. A recent study by the Pew Research
Center for People and the Press found that only 40 percent of Americans read a
newspaper on a daily basis. Among those under age 30, only 24 percent do so.
Daily newspaper readership did not fall off a cliff overnight,
however. In the mid-1960s, a Gallup poll found that more than 70 percent of all
Americans read a newspaper each day. By the mid-1990s, that number had dipped to
just below 50 percent, according to the Pew study. But the speed at which daily
newspaper readership has declined has clearly accelerated in recent years. To
help combat this, the Newspaper Association of America recently launched a $50
million public image campaign.
In many ways, the problem is a classic Catch-22: Declining readership and a
migration to online sources forces papers to charge less for advertising, which
causes them to reduce costs by cutting back on news coverage, which, in turn,
leads to lower readership. Repeat. Adding to many newspaper companies’ woes has
been a growing chorus of institutional investors unsatisfied with shrinking
profit margins and declining stock prices. This vicious cycle prompted the
dismantling of Knight-Ridder, the nation’s second largest newspaper chain, last
year. This breakup caused a dominolike chain of mergers and acquisitions that
saw about a dozen daily newspapers change hands over the past year.
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