ANALYST: MORE NEWSPAPERS MAY GO ON THE BLOCK

By: Joe Nicholson Predicts More Family Owners Will Sell



Newspaper companies are selling at all-time high prices, industry
analyst John Morton said last week at a meeting of the International
Newspaper Marketing Association (INMA) in New Orleans. 'Prices are as
high as they have ever been,' Morton said. Morton is president of Morton
Research, based in the Washington, D.C., area.


In an interview with E&P Online after his speech, Morton said some
newspaper owners, particularly family owners, may be tempted to add
their papers to those already on the selling block. Owners may figure
there is no guarantee that prices will remain high, declared Morton, who
said he believed the Chandler family sold the Los Angeles Times
because of that sort of concern 'more than anything else.'



'You know you can get [a high price] right now and that's why they are
on the market,' he said, referring to the owners who are selling. One
factor boosting prices has been the long-term decline in the number of
newspapers, which has created 'a classic imbalance between supply and
demand,' he noted.



Another influence strengthening prices has been the success of many
newspaper companies in creating clusters, which give the papers extra
leverage with advertisers. Moreover, Morton said newspaper advertising
revenue is likely to continue growing this year, rising to a record
total 'close to $50 billion.'



Even though newspapers are raking in vast sums of ad revenue, Morton
said publicly held companies are likely to have their long-term stock
prices held back somewhat by an undercurrent of sentiment among
investors who look upon newspapers as a product of the past like 'quill
pens and buggy whips.' The stock market has become focused on the
earnings of a company in the next quarter rather than its value five
years in the future, Morton said. 'Trading, not investing, has become
the hallmark of Wall Street,' he said.


Many newspapers companies reduced investment in their print products
during lean years in the early 1990s, and some - particularly the
smaller papers of some chains - have failed to do the 'smart thing'
by returning to investment in their product, Morton said.



Morton said it was unlikely large metropolitan dailies would ever switch
from sales to free distribution, but he said the San Francisco
Examiner might be an exception. 'I suspect [the Examiner's
pending buyer] will start off trying to charge for it and end up giving
it away,' said Morton. 'I think he'll be forced into it' by the
substantial circulation duplication with the San Francisco
Chronicle, he explained. At the same time, Morton said it was
possible the Examiner could succeed with free distribution
because 'there might be a niche there that would work.'



Turning to other newspapers, Morton said The New York Times has
done a stunning job of raising the quality of its editorial product even
higher than in the past - all the while boosting ad revenue. He
praised the Times' special sections, especially those that have
drawn Web advertising.


Times' tabloid citymates, the New York Daily News and
New York Post, depend on the willingness of their owners to
swallow losses in order to survive, Morton said. Prior to the purchase
of the Daily News by Mortimer B. Zuckerman, the daily 'tried to
go upscale, tried to go downscale, tried to go to the suburbs, [and]
nothing [had] really worked,' Morton said. In addition, efforts by the
Daily News to seek readers among the city's vast immigrant
population targeted readers who were 'not attractive to newspaper
advertisers. In recent years, it's tried to be a responsible tabloid,
and I guess we're going to see eventually whether that works out.'