Memo to Print: It’s the Multiples

Back in March 2007, I penned Stop the Newspaper Obituary, Please, commenting that in essence, yes the print business is shrinking, but that the main culprit was the price-to-sales and price-to-earnings multiples that print businesses were fetching.

In fact, back then (roughly 13 months ago), the companies’ revenues were higher:

But their market caps were not:

Of course, the mere fact that in the past couple of years most of these companies have been ravaged speaks volumes; today for example Tribune announced draconian cuts to the business and a revolutionary shift in its strategy.

Naturally, these two things go hand-in-hand: the multiples investors bid on revenues and profits are slipping because the businesses are allegedly dying.

Which takes us to what Microsoft (MSFT) CEO Steve Ballmer told a group of executives at the Washington Post (WPO):

There will be no media consumption left in ten years that is not delivered over an IP network. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in an electronic form.

Print won’t disappear, but it will be much smaller, that is for sure. In that sense, I tend to agree with Globe & Mail writer Mathew Ingram, especially when you consider that MSFT failed to grasp the opportunity - and risk - of the Web even more so than the print industry. In other words, while the newspapers chose to put their heads in the sand hoping the web would not decimate their businesses, MSFT seems to have had their head up their arse in thinking that the Web would not affect software.

Which thinking is crazier? I don’t know.

But back to the argument I am making: print media’s problems will not be answered by building web operations from within. The growth in digital revenues is nowhere near as large as the fall in offline revenues. So no matter how large digital revenues grow in absolute terms, relative to the offline loss and cannibalization, it is moot. The only way possible for these companies to remain relevant and large is by buying, and buying fast.

It’s understandable that print companies never bought into search or even tech-centric ad networks… but why on earth print companies are not buying anything that moves in media, content, publishing and what not beats me. Mind you, you are starting to see more and more activity on this front, but when you consider just how big print companies like Conde Nast, Hachette, Hearst et al. are, it’s gonna take a whole lotta spending to move the needle back above the warning level.

After all, even News Corp. (NWS) (a TV-centric but very strong print media company) has spent $2B on digital acquisitions but it has yet to generate 10% of revenues from those assets, meaning that Wall Street does not reflect digital assets in the multiples.

Comments

[FSBOFOOL:]

Newspaper execs have had their head in the sand (and other places) for 25 years. Most top management in the industry was promoted on seniority, not productivity - or nepotism (the right last name). They keep blabbing that their readers are going to the internet - WRONG! They are going to the grave! Yes, they are dying off. Quit blaming the internet and wake up. The ad execs in the industry have no clue how to market or sell advertising. Think about this: for 20 years readership is done, but duringthe same time, their ad rates go up. Hmmm, isn't that what advertising is all about? Eyeballs? Less eyeballs, rates hould be less, but not in the holier than thou daily newspaper! In every major city its biggest employers, small businesses (less than 25 employees) are priced out of the daily newspaper - regardless of ad execs saying our TMC or "zoned" issues cover them they are drunk. They have no clue what is going on in the real world. When was the last time the VP of adv or Publisher called on a small business for advertising? It never happens. They're fat, lazy and counting the daystil they can retire and hope their retirement plan is still active. They price their online web sites to the point you need a PhD to figure it out - most are way overpriced/valued by the newspaper. They just don't get it. Never will, never will change. So hold on to your union news rooms, hold on to your old fossil ways of doing business, I hope to see you in the soup lines! I for one will not cry for you.

2008 Jun 17 05:13 PM