Late Monday, Citigroup issued a research report showing newspapers are facing a reduction in information flow control because of the Internet. In addition, Web options are grabbing classified advertising market share.
Analyst William Bird said the industry is also dealing with an aging readership base, as older readers who are most likely to subscribe are replaced by younger consumers accustomed to online access to news.
"We believe industry operating profits could decline for about five years, until newspapers' online scale offsets the degradation in print," Bird wrote.
Right now, EW Scripps Co. is best positioned online, and the most likely to be able to adapt to change, he said. But New York Times Co., which Bird separately downgraded to "Sell" from "Hold," is most likely to be hurt by online pressures. That's mainly due to increased Web and other competition in the company's main metro markets.
"In the U.S., the newspaper companies we see most at risk based on broadband penetration in urban versus rural areas are New York Times and Dow Jones, while the least impacted would be E.W. Scripps and McClatchy," wrote Bird.
The analyst noted that domestic households with broadband access often terminate their newspaper subscriptions. City areas tend to offer better access to high-speed connections than rural areas, though this is evening out, Bird notes. In addition, metro markets face competition from free and other rival papers.
Shares of Gannett Co., whose properties include USA Today and 89 other daily papers in the U.S., shed 8 cents to $58.99, while shares of Dow Jones & Co., which owns The Wall Street Journal, were flat at $34.44 in midday trading on the New York Stock Exchange.
Shares of Tribune Co., which owns the Los Angeles Times and the Chicago Tribune, slumped 13 cents to $31.65. New York Times Co., which also owns The Boston Globe, dropped 26 cents to $23.64. News Corp. fell 31 cents to $21.11, all on the Big Board, while Media General Inc., which publishes newspapers in the South, added 11 cents to $36.46.
McClatchy Co., which bought most of former media company Knight Ridder Inc., tumbled 30 cents to $41.10 on the NYSE. EW Scripps, which publishes The Rocky Mountain News and other papers, lost 10 cents to $48.33 on the NYSE.