Beyond the LAT

To those who remain fixated on that dastardly Sam Zell and his unseemly re-engineering, check out the YTD stock prices of the major media companies:

News Corp. -29.8%
CBS -34.8%
Viacom -31.8%
Disney -3.9%
Time Warner -11.6%
NYT Co. -27%
Gannett -52.6%

You get the message. All media companies, not just the ones focused on newspapers, are being shunned by Wall Street, in large part because they have all failed to figure out how to ride the Internet gravy train. (This reality check would be especially helpful to the leaders of the Screen Actors Guild, who somehow insist that they’re going to get a better contract than their brothers and sisters in other guilds. Dream on.) As MarketWatch's Jon Friedman notes, "when analysts say they're 'cautious' about a high-profile industry, you can often infer that they're actually quite pessimistic." That's been the story with most all these stocks (with the possible exception of Disney), and the crazy thing is that 2008 was supposed to have been a decent year, what with the Olympics and the elections. Those two mega-events are still bringing in piles of money, but other areas are not.

On Wednesday, Standard & Poor's Ratings Services jolted investors when it warned it might lower its rating on New York Times Co. to junk status. S&P is pessimistic because the Times Co. earned 15 cents a share for the latest three-month span, when the Street had called for 22 cents a share. Plus, the agency doesn't expect to find an elixir to cure the paper's gloomy advertising prospects.

The second quarter results are bad enough. But even more ominous is that five of the big newspapers companies - McClatchy, Lee, E.W. Scripps, NYT and Gannett - said ad revenue dropped the fastest in June. Most said July is looking as bad or worse (here's the AP story). Tribune is now privately held so we don’t have access to its financials, but you can assume that the numbers are similar. It’s the same old problem: On one side you have plummeting revenue because of the economy and the shift of classified ad dollars to the Internet, and on the other side you have huge increases in the cost of newsprint. So less money is coming in and more is going out. It doesn't take a math whiz to see where this is heading.

Blogger Mark Potts, who has been spot on in his assessment of the newspaper business (and of Tribune in particular), puts it this way:

It may not be much fun to work at Tribune Co. these days–is it fun at any newspaper company anymore?–but these angry journalists seem oblivious to the true roots of their problems, which are shared by all newspapers and can also be traced back to the management team that ran the company before Zell bought it. Tribune's former bosses are the ones who didn't innovate, the ones who missed the boat on the Internet. Not Zell, who's trying to innovate as fast as he can. Nor did Zell cause the enormous changes that are rocking the industry, or the economic downturn that's making all the problems even worse. In fact, Zell is almost as much a victim as his employees are. And the misbegotten notion by Tribune staffers that they're somehow going to drive him away with idiotic slogans, protests or cake-defacement is just nuts. Believe me, I'm sure that if Zell could sell the company right now, he would.

And please, can we stop pointing out the goofs being made by the LAT folks still on the job? They’re not the ones responsible for the state of the newspaper industry or the dislocations that result from so many folks leaving at once.