Investors tend to hang on Warren Buffet’s every word, so when the cool-headed American stock maven pronounced in 2006 that the “fundamentals are definitely eroding in the newspaper industry,” it had the ring of a death sentence. Established papers face a host of challenges. The past twenty years saw U.S. circulation numbers dwindle steadily, from sixty-three million in total circulation in 1984 to fifty-three million today (CBS). Print advertising is dropping too. The Economist cites data showing that newspapers lured 36 percent of total global advertising in 1995, but only 30 percent in 2005, and estimates another 5 percent decline by 2015. Online advertising surged, but not enough to offset print losses.
Given this bleak backdrop, the last few months deserve a double take. News media is hot. Investors are scooping up news operations left and right, from Sam Zell’s purchase of the Tribune Company, which owns the Los Angeles Times and the Chicago Tribune, to Thomson Corporation’s move to buy the Reuters news agency, to Rupert Murdoch’s high-profile bid for Dow Jones, which owns the Wall Street Journal.
Explanations for this exuberance vary. There may be an element of investor narcissism involved, the Economist notes, but news media operations might also seem legitimately undervalued, given recent stock declines (Poynter). Robert Kuttner, writing in the Columbia Journalism Review, adds that newspapers could have an extremely profitable future if they successfully evolve into multimedia hybrids.
New mergers could also accelerate a shift, already underway, in international news coverage. Regional newspapers rely more heavily on wire services as cost cuts have forced mid-sized papers, including notably the Boston Globe, to close foreign bureaus. The Tribune Company, for its part, clipped foreign bureaus at the Baltimore Sun and Newsday and consolidated its foreign staff under the Los Angeles Times and the Chicago Tribune.
Despite these cuts, the cost-benefit analysis of slashing foreign bureaus remains inconclusive. In a working paper for Harvard’s Joan Shorenstein Center on the Press, Politics, and Public Policy, the Christian Science Monitor’s Jill Carroll argues newspapers are making a “financial miscalculation” by cutting overseas bureaus, overlooking a demographic of “very high news consumers” Carroll says has been growing, unexpectedly, particularly since 9/11. This demographic tends toward high income brackets, Carroll adds, making it particularly enticing to advertisers (PDF).
The Wall Street Journal (which as of 2006 had more American foreign correspondents than any other U.S. newspaper—more than four times as many as the New York Times, according to data cited in Carroll’s paper), stands most ready to capitalize on this demographic. Given Murdoch’s outsized reputation in the news business—the tabloid New York Post is a whipping boy among critics—his Dow Jones bid prompted fears he might chop up the Journal, reorder its editorial priorities, or make it more parochial (Huffington Post). These concerns may be overblown, says the Economist: “If Mr. Murdoch gets hold of the Journal, he will ensure that its reporting is excellent not out of altruism, but because, in the financial newspaper business, that is how you make money.”