Happy New Year. Before we look to the year ahead let's take a backward look at how newspaper stocks fared in 2007. Badly -- though that is not exactly news. As the chart below shows, Wall Street was especially hard on "pure play" companies with no earnings cushion from other businesses.
| Year-End Stock Prices |
| Company | 12/31/07 price | 12/31/06 price | % change |
| Washington Post Co. | 791.5 | 750 | +5% |
| Belo | 17.5 | 18 | -3% |
| E.W. Scripps | 45 | 50 | -10% |
| New York Times | 17.5 | 24.5 | -29% |
| Journal Communications | 9 | 13 | -31% |
| Gannett | 39 | 60 | -35% |
| Media General | 21 | 38 | -35% |
| Gatehouse | 8.75 | 18 | -51% |
| Lee | 14.5 | 30 | -52% |
| McClatchy | 12.5 | 42.5 | -71% |
| Journal Register | 1.75 | 7 | -75% |
Source: Yahoo finance
Note: Companies listed in order of performance |
I also see a glimmer of hope in these results that the investment community may be paying attention to quality -- or at least valuing strong brands in strong markets.
The sole winner with a 5 percent gain for the year was Washington Post Co., which balances eroding newspaper results with the fast growth of its Kaplan education subsidiary (though its lucrative TV station group currently provides much more in earnings).
Next best were Belo, with just a 3 percent loss for the year, and E.W. Scripps, at 10 percent. Both have announced plans to split into two companies in the first half of 2008, a financial maneuver that will "free up value," as the Wall Street crowd says, in their non-newpaper businesses.
The four bottom companies in 2007 stock performance -- Journal Register, McClatchy, Gatehouse and Lee -- all are exclusively in the newpaper business and expanded with overpriced acquisitions just before the business went truly sour over the last two years.
This depressing picture would look a bit cheerier if you add in the two public companies bought out in 2007 -- Dow Jones at a mammoth premium by Rupert Murdoch's News Corp., and Tribune, at a more modest premium by real estate investor Sam Zell. The Wall Street Journal, thanks to decades of editorial excellence, was a trophy property for Murdoch, and I can't help but think that the Chicago Tribune's prominence as a hometown institution piqued Zell's interest.
New York Times stock fell in 2007 but stabilized some compared to 2006. I interpret investors as giving a measure of respect to the franchise value of the paper and its industry-leading online operations --- same with the Washington Post.
Conversely, wringing high margins with tight cost controls, attractive to investors a few years ago, doesn't look like such an advantage in managing a multi-year transition to online and new business models together with the investments that will be required.
