Well… every time I begin to feel any trepidation about 2009, I thank myself I am not in the newspaper industry.
- Lee might default. Lee owns the St-Louis Dispatch, amongst others.
- Tribune files for bankruptcy.
- NYT on the brink on default/bankruptcy.
In fact, AdAge runs down other media giants all brinking on the edge of ruin, frankly, look at the list:
CBS
[$6.68, -73% off 52-week high]
CBS is saddled with some slow and no-growth industries, such as network TV, local TV stations, radio and publishing. To hedge that, the company paid $1.8 billion for CNet and expanded its billboard- and outdoor-advertising business. With plenty of cash, CBS will weather the downturn fine, but it’s most exposed to the deteriorating broadcast business and local advertising, hardest hit so far in this recession. In ordinary times, a go-private transaction would have some appeal, but these aren’t ordinary times. ”The numbers may work out because the share price has contracted, but the debt spigot has been shut off,” said Mike Simonton, senior director of corporate finance at Fitch Ratings. “At any price, certain transactions are not going to get funded.”
NEWS CORP.
[$7.67, -63%]
A well-run, diversified media conglomerate with more revenue coming from outside the U.S. than its competitors, News Corp. has an enviable cash hoard of $5.5 billion, meaning it could make some acquisitions in the downturn. Its prime-time TV slate has some of the highest-priced inventory around; its cable networks are highly profitable; and it’s turned MySpace into a better advertising medium than, say, Facebook. “They don’t have liquidity issues; you could see them use their cash for acquisitions,” Mr. Eatroff said. The question: Will it be able to hang on to President-Chief Operating Officer Peter Chernin, who’s in contract talks?
TIME WARNER
[$8.68, -45%]
Anchored by very strong cable TV properties, Time Warner is hobbled by its storied magazine division, Time Inc., and its online unit AOL, which is attempting to make the transition away from its origins as an internet-access business and toward ad-supported content (Lemondrop, Asylum) and, of course, Platform A, the world’s biggest ad network. Time Warner would very much like to sell it all to Yahoo, at a price. The company is managing decline at Time Inc. by slashing jobs but says it won’t sell it. The film studio and HBO don’t rely on advertising.
NEW YORK TIMES CO.
[$7.38, -53%]
New York Times Co. shares hit an all-time low two weeks ago, sinking to a level where investors start selling it short. The company wisely slashed its dividend 75% to build up its cash. It will be interesting to see the reaction of the owning family, which depends on income from their holdings. “The only saving grace for newspapers is that theirs is sheltered a bit by the wider tale of woe,” said Ken Doctor, newspaper analyst for Outsell. “All valuations are up in the air at the moment, and newspapers are a relatively small part of the story.”
MCCLATCHY NEWSPAPERS
[$2.03, -85%]
Revenue at the third-biggest newspaper publisher in the U.S. was down 20% in October. The market cap of the publisher of the Miami Herald, Fort Worth Star-Telegram and Kansas City Star has dipped below $150 million. Fitch rates McClatchy’s debt as junk with a high possibility of default. Newsprint costs are rising, ad revenue is falling, and digital isn’t picking up the slack. “We are going to see papers close,” Mr. Doctor said. “We are seeing this phenomenon of daily papers becoming less-than-daily.”
SIRIUS SATELLITE RADIO
[$0.15, -96%]
Got a satellite radio in your car? Enjoy it while it lasts. Sirius is in real danger of getting delisted from the Nasdaq if it can’t lift its stock price. Part of the problem is a glut of shares outstanding — more than either Ford or Disney — after the merger with XM Radio. Because new-car buyers are its greatest source of new customers, the downturn hit at just the wrong time. The upside here is that the stock is incredibly cheap. Downside is it could be going to zero.
CITADEL BROADCASTING
[$0.17, -91%]
Take any midsize owner of local radio, from Emmis Communications to CBS to Entercom, and you will see a deeply troubled company. The problem: Falling ad revenue and too much debt mean few options, and Citadel is trading as if the market thinks they’re going out of business. “These stocks have hit rock bottom, but the truth is they could go all the way to zero,” said Mr. Ryvicker. “I think any of them, if they could buy their shares and go private, they would.”
MARTHA STEWART LIVING
[$3.26, -70%]
It’s a diversified mini-media empire, but it remains at its core a magazine company, and publishing revenue dropped 25% in the third quarter. The upside for MSLO is that it’s a known brand with very advertiser-friendly content. The downside is that the kind of brand advertising it attracts will be hardest hit in 2009. It’s also a brand inextricably tied to a living icon.
SINCLAIR BROADCASTING
[$3.12, -65%]
One of the largest owners of TV stations in the U.S., Sinclair is in a predicament similar to that of Media General, LIN TV and Young Broadcasting, which are saddled with debt and declining businesses. An Obama administration probably means no loosening of local-ownership rules anytime soon, and high debt means going-private transactions or acquisitions by private-equity groups would be tough. There could be casualties in this sector in 2009. “Radio and TV balance sheets are being dismembered by a severe recession,” BMO Capital Markets analyst Leland Westerfield wrote in a recent report.
YAHOO
[$11, -57%]
It’s tough to be a slow-growth internet company, but that’s just what Yahoo has become, with its bread-and-butter display advertising under assault by tightening marketing budgets. EMarketer is predicting just 1.4% growth for Yahoo in 2009. At the same time, Yahoo has the best advertiser brand on the web, and a new CEO could execute a helpful deal with Microsoft in search or an acquisition of AOL on the cheap.
This echoes our Manic Media Meltdown post from two months ago:
Somewhere, a bunch of Chinese accountants are salivating at the opportunity to scoop up every US media company for a song.
The broader economy is certainly going to get a lot worst before it gets better. In fact, worst does not even begin to cover it. Here’s more doomsday talk from none other than Yale’s Robert Schiller, found via SAI.
But as the saying goes: there’s a bull market somewhere at all times, and reading this rosy outlook for online advertising, I wonder if maybe, just maybe, my stoic outlook in September 2007 was not ill-placed. Here’s what I said then:
If tomorrow you had to cut 10, 25, 50% of your ad budget, would you cut print, radio, tv, or web?
This ain’t 2000 when the bubble burst and the Nasdaq crashed, or 2001 when 9/11 happened; then, few F500 companies spent heavily or were experienced with web advertising, then it was a matter of “we don’t have the resources to experiment with the Web.” At the time, there were also less people online. It just did not offer you as much reach x frequency as the other medium.
In technical terms, online advertising’s beta (the ratio compared to the average) was much higher so in a downturn it suffered a deeper decline.
Today, the secret’s out of the bag: print advertising is pretty ineffective, TV is expensive and random, no one listens to radio etc., and online is where it’s at. If an externality - say the sub-prime credit situation turns sour - online advertising might be affected, but TV and other more expensive (and inefficient, effective etc.) formats will be hit harder, faster, and unlike the Web, they simply will not recover.
In other words, once advertising budgets recover, a much larger portion will be allocated to the Web, but if something does happen, the Web will be the least affected thanks to the 3 Ts:
- tracked
- targeted
- timely.
Hopefully I won’t look like a buffoon for writing that a year ago, but I still think online advertising will be the major winner with:
- Print being the biggest loser: why? no one reads print and it is a very archaic distribution method, facing massive asset value drops (hmm… all of them) and steep debt (NYT, Tribune) they will also have to cut resources at a time when they should be investing more and more digital media and in digital distribution. Print’s only salvation will be the fact that you don’t need to be connected and can take it on the go.
- Followed by TV: even more expensive as audiences fall, marketers’ will have a disdain for untracked media
- Then Radio: satellite radio saw that better technology does not translate into success, terrestrial radio is free and the local flavor is hard to beat. Radio will be smaller and smaller for sure, but it won’t be as decimated as some expect.
- Then Outdoors: the only real way to reach people when they’re outside, not connected to anyone of the other media. Plus, as more and more digital screens proliferate, the options for outdoors begin to get better and better. Still, this will be small relative to the Web. I should note, WatchMojo.com’s videos reach 15M consumers across 2,000 screens in North America in digital networks outdoors…
Yahoo!’s message to marketers: “do as we say, not as we do”
Yahoo! will only win in search if
a) more marketers spend money in online advertising in general and search in particular and
b) if they spend more on Yahoo! than other sites, and of course
c) more users use it.
Clearly, neither one is going according to plan, as Google continues to kick Yahoo!’s ass. But now, to further hurt Yahoo!’s own chances, News.com is reporting (via SAI) that Yahoo! actually advertised on radio to achieve its objectives. Need we think of Ask.com’s wonderful billboard strategy?
Who, may I ask, is the genius who thunk this up? When I say, as a shareholder, that YHOO has no credibility and its upper management has lost its marbles, am I crazy or stating the obvious?
To be fair, some disagree with me: The Yahoo search ads seemed to have the desired effect on one blogger, Luca Filigheddu, who wrote: “I’ll be honest, it works. If I hadn’t listened to it today, (I) wouldn’t ever (have) realized that Yahoo search had improved so much. Good.”
But, want something very troubling? I have used Yahoo! less and less in the last 3 to 6 months. Over 3 years ago I began using Gmail and never went back to Yahoo! mail… though when I started WatchMojo.com I began to use gmail for work… so that had more to do with it.
But even the last bastion of Yahoo!’s defenses has recently failed: I used to live on My.Yahoo! and now I almost spend no time on it (it got buggy after they changed the design then simply stopped using it).
Yahoo! should spend 200% on getting users like me to use Yahoo! products when we’re online and spend 0% of its resources on anything like TV, print, outdoors or radio.
Compare to this to the Web, from comScore:
PLAY
