Investors in the Content Business Dwindle Again?

The argument goes that if News Corp. (NASDAQ: NWS) spins off its print businesses, they will be unable to keep their editorial costs at current levels. Some of the properties in this new operation may be profitable enough to sustain those that are not. Even so, Wall St. will still want to see cuts to improve margins. The new spin-off corporation might fall under the same expense pressure experienced by public corporations like CBS (NYSE: CBS); Gannett (NYSE: GCI); New York Times (NYSE: NYT); Time Warner (NYSE: TWC), which owns TIME Inc.; and Walt Disney (NYSE: DIS), which owns ABC.

Less than a half a dozen large companies continue to invest in their news businesses. Reuters and Bloomberg have added to their editorial staffs and continue to do so. But most experts believe that is not because their managements essentially believe in strong journalism. Rather, they have trading terminal businesses to support. Coverage of the markets and world news are essential to the value of these terminals.

AOL (NYSE: AOL), which has added scores of people to the editorial staff of The Huffington Post, is an improbable champion of a financial commitment to journalism. It is small, based on sales, compared to Time Warner or Gannett. And unlike most other relatively large media companies, it loses money. It has taken a much greater risk than Reuters and Bloomberg have, and it has taken it against comparatively long odds.

Of course, the picture of American companies that have decided to support their editors includes Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A). It is a mystery whether Buffett believes that newspaper values have bottomed and he can get a return in a business where most others have failed, or he is a fan of quality journalism and will support it regardless of whether he makes money.

The number of out-of-work journalists increases each year. Many analysts would argue that this means the news business can no longer fulfill its primary mission to provide the public with information that it cannot provide itself. Supporters of editorially stripped, more profitable “content” businesses believe that the Internet is so full of content that large news organizations are unnecessary. That will be proved or disproved based on how stupid Americans are a few years from now. Most people are unwilling to be self-taught, at least as far as news is concerned. That, among other things, is why newspapers, and the other content businesses that came after them, became a business in the first place.

Douglas A. McIntyre