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 CEO Steve Ballmer told a group of executives at the Washington Post:
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 for
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 print 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 wasy 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 though News Corp. (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.
Anyway, watch Ballmer in action, sans sweat:
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