Noose Tightens Around Newspapers, Magazines (TWX, GCI, NYT)

Newspaper companies are in deep trouble again, and it is not because of the economy exclusively. Ad dollars have moved to online media fast enough so the slide in newspaper revenues is permanent.

Gannett (NYSE: GCI), the country’s largest newspaper chain, announced that its advertising revenue for the last quarter dropped 8.5%. This reflects a revenue drop for this segment of Gannett’s sales from $591.7 million in the period compared to $646.7 million in the third quarter last year. Gannett’s total revenue dropped 3.5% to $1.266 billion. Net income dropped 1.7% to $112 million. The company’s problem has become that it has already cut costs sharply and has nearly run out of places to save money

The news comes the same week that The New York Times Company (NYSE: NYT) reported it would offer buyouts to 20 newsroom staff members and a number of workers in other departments. The Times has also aggressively cut costs. It must now count on its online operations to offset print ad declines, and analysts forecasts indicate Wall St. does not think that is likely.

The Gannett problems mean that other parts of the print industry are likely to be affected as well. This includes the magazine division of Time Warner (NYSE: TWX), the operations of Conde Nast, and properties which have been deeply troubled recently–Newsweek and Business Week.

There was a reason to believe last year that as the economy stabilized so would print ad revenue. It has not turned out that way. The newspaper and magazine closings that were so prevalent two years ago are about to return.

Douglas A. McIntyre