The plummeting value of newspapers

Now there’s a second huge writedown of the value of a recent newspaper purchase.

* Lee and the St. Louis Post-Dispatch, from Paid Content:

Back in March, newspaper publisher Lee Enterprises (NYSE: LEE) warned that it would take a $500-$700 million non-cash hit related to its $1.4 billion purchase of Pulitzer in 2005. We’d wondered previously when that would happen, given that all of the other newspaper deals have resulted in major writedowns. In a 10-Q filing (via AP) last night, the company confirmed that it had written down $721.9 million worth of goodwill related to that deal. It also warned that the final numbers aren’t set in stone, and could still change considerably.

* Earlier, the Minneapolis Star Tribune was written down twice: McClatchy had bought the paper for $1.2 billion and took a bath when it sold the orphan for $530 million and now the purchaser, Avista, has written that down by 75 percent. By my calculation, that’s a drop from $1.2 billion to $130 million — essentially a drop to 10 percent of its value only a decade ago.

And it’s not as if anyone is going to see that the price is so low it’s worth buying a paper now. Only a fool will do that. Witness Cablevision and Newsday.

  • Paul Zieke

    not sure about this math:

    By my calculation, that’s a drop from $1.2 billion to $130,000 — essentially a drop to 10 percent of its value only a decade ago.

    i think you mean $130 million. it’s still a big plunge

  • Thanks, Paul, that’s why I issue such caveats. Well, duh. Corrected. Pesky zeroes.

  • But what is the value of news? Is the value of information dropping or rising?

  • ken

    the value of information has dropped tremendously, due to a substantial increase in the supply, and the number of channels that can deliver it. sort of like what might happen to the price of oil or natural gas if we developed desk-top fusion generators and put one in every house.

  • Having worked for Lee in the past, this comes as no real surprise. Most of us (former Lee employees) realized long ago that the company was largely comprised of imbeciles…

  • @Ken:

    I think it is hard to argue that the value of information had dropped tremendously, if there is such a precipitous decline in value we wouldn’t be seeing the valuations of MySpace, Facebook, and today’s CNet bomb that we see. The weak content providers may be decreasing in value, but innovative delivery vehicles can attract eyes. Eyes attract ads. Ads attract value.

    Oil is a poor analog because I’m not sure a short-term inelastic product compares to any form of information. For example, if Google started charging 2 cents a search Google fails, very quickly. If BuzzMachine cost a nickel to access, it would be done (which I believe played, in part, into Jeff rejecting his blog as part of the Kindle package — information is free, let’s not require payment for it!).

    This brings us to an interesting question though, how elastic is information? I may not use Google at 2 cents per search, but if my ISP charges me a dollar more a month, I’m probably not going to switch providers (all else being equal). If it charges me 5 bucks more a month, I’d scoff, but probably still stay with them. Above that, I don’t — Vote WiMax?

    What do you think?

  • The next round of layoffs are about to begin here in Minneapolis. 10% newsroom cuts, among other slashes.

  • You need to do the math again.

    Starting ipoint: Avista wrote off 75% of its $100 million equity investment, not 75% of the value of the Star Tribune.

  • Jeff, we don’t know each other, so I’m not aware of the horrors you may have endured in the newspaper business, but I’m going to have to stop reading your blog. Most of my friends work in newspapers, and I freelance for several … there’s an overwhelming feeling of glee every time you write about the plight of papers that I find disturbing.

  • ken

    matt, those companies aren’t valued based on the information they produce, but on the share of people’s attention they command, which unlike information is a scarce and relatively fixed resource. (i extrapolated that idea from a talk David Robinson gave at Princeton this morning). the information they produce is getting cheaper, since anyone can start making it. even if its lower quality, as with my current pathetic contribution to Jeff’s comment section, like flooding a market with cheap chinese manufactured goods it will reduce the value placed on high-quality professional news. hopefully it will prove to be good, even if we occasionally get a bit of lead paint in our news.

  • Ken,
    Good response, and your point is taken (David Robinson is always an excellent resource as well), but I think I address this in my initial comment. The point being the companies are providing information one way or another, and they are grabbing significant market share while doing so, thus bringing advertisers quickly into the game. It’s symbiotic for both the publishers and advertisers to work together, and less so in any company where readers are leaving.

  • Joseph,

    Oh, come now. I still work for newspapers and I teach journalism. There is no glee in this. There is, instead, a desperate call for newspapers to wake up and reconstitute themselves for the future. If they don’t, they will kill themselves.

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  • Smalltown newspaper guy

    The big dailies and their corporate owners may be suffering from not making budgets (and those budgets have been set ridiculously high to please stockholders), but small town weekly newspapers are still thing thriving – making as much money as ever – and still maintaining circulation (at least they are here in the Midwest). In print and online, we are still the only media that our local advertisers can reach directly their target audience.