Goldman Sees Little Upside to Federated/May Merger

By: E&P Staff The Federated/May merger will make an already soft advertising environment worse, according to a report released today by Goldman Sachs.

"The wave of consolidation ... brings further bad news to newspaper companies, exacerbating already weak trends in advertising growth rates," the report said. The investment firm says the Federated/May merger is "particularly troubling" since the department stores contribute so much towards the retail category.

Goldman said that in a worst-case scenario the newly combined company could cut its newspaper advertising spending by 50% -- especially if Federated/May aims to become a national rather than local brand as indicated -- reducing retail ad revenue by 2%.

Though national newspapers like The New York Times, USA Today, and The Wall Street Journal could see an upside from this, Goldman points out that these papers skew towards a male-demographic somewhat "reducing their appeal."


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