Can you make money in the newspaper business?

Posted at 2:50 PM on December 13, 2008 by Bob Collins (2 Comments)

So what's the deal? Are newspapers on their deathbeds or not?

The Teamsters Union has a letter on their Web site today claiming the owners of the Star Tribune are asking for a 32-percent pay cut for the truck drivers, the reporters and editors are being asked for wage freezes and an end to some overtime, and the union speculates a buyer is waiting in the wings once the unions are busted.

What did in the Star Tribune? A loss of classified advertising? The Internet? The changing tastes of America? Partly, one supposes, but the root of the problem seems to be the same as people who couldn't keep their mortgages -- Avista Capital Partners paid too much in the first place hoping for a big payday down the road. In short, it's just another failed gamble.

The notion resonates even more after hearing Weekend America today. In a segment on newspapers, it was revealed that the average profit margin for newspapers in this country right now is 11 percent. Unfortunately the segment isn't anywhere on the show's Web site, but a search reveals a possible source of the assertion, albeit with a much higher number..

The Pew Research Center's Project for Excellence in Journalism, meanwhile, reported that the average pretax profit margin for newspapers was 18.5 percent in 2007. Some newspaper profits remained well above 20 percent. But the center also noted that newspaper companies were accustomed to profits topping 25 percent and that 2008 looked to be significantly weaker.

"The industry remains profitable, but it has come time to take the 'obscenely' out of that commonplace observation," the group said in its annual State of the News Media report.

If it really is possible to make money in the newspaper business, why hasn't someone else stepped in to try to make it?

Are we really seeing a societal shift here? Or just the fallout from poorly-run institutions?

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Comments (2)

"Avista Capital Partners paid too much in the first place hoping for a big payday down the road. In short, it's just another failed gamble."

Bingo!

Last I heard the newspaper still made a profit so I gather it's just not making enough of a profit to make the investment worth it; atleast not in the short term. I have to wonder if their fear is it'll always be a losing proposition.

Posted by David | December 13, 2008 3:36 PM

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Like many other businesses the problem with News Papers and probably local news stations was the transition out of private family hands into the hands of investors. A lot of families could get by just fine on 11% profit, but investors won't tolerate it.

Posted by Paul | December 14, 2008 6:35 PM

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