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Mon, Nov 20, 2006 - Page 11 News List

US newspapers losing ground to new media


The US newspaper industry is facing growing turmoil as readers and advertisers increasingly turn to newer media, pressuring some of the industry's most prominent players.

Uncertainty over the future of the Tribune Co, an industry leader that owns the Los Angeles Times and Chicago Tribune, is highlighting the shakeup in newspapers and other media.

The Chicago-based company, under pressure from shareholders, is exploring strategic options to boost the company's value and has been entertaining interest from other media groups and private investors to sell all or part of the group.

This year, Knight-Ridder Newspapers was bought out and broken into several pieces, placing prestigious dailies such as the Miami Herald and the Philadelphia Inquirer under new ownership.

Elsewhere in the media sector, Readers' Digest was sold this week to a private equity firm for US$2.4 billion.

And reports have been swirling that other papers, including the Boston Globe, now owned by the New York Times, might be up for sale.

Meanwhile, newspaper readership has been declining.

A recent survey showed just 49.9 percent of US adults read a daily newspaper this year, down from 58.6 percent in 1998 and a far cry from the 80.8 percent in 1964, according to the Newspaper Association of America

The Audit Bureau of Circulation said the 770 newspapers it surveys had a combined circulation this year of 43.7 million, a drop of 2.8 percent from last year. For Sunday papers, readership was 47.6 million, down 3.4 percent.

By contrast, 56.9 million people visited a newspaper Web site at least once during September, up from 53.1 million last month.

Advertising revenues for newspapers grew just 1.5 percent last year to US$47.4 billion, even though the companies saw a 31 percent jump in online advertising.

"The newspaper industry is going through a transition and it is going to be bumpy for a while," said John Morton, a veteran industry analyst and consultant who operates Morton Research.

Morton said profit margins "will be under pressure," but major newspapers as a whole have "still quite high" margins of around 18 percent this year.

Yet media stocks have been rallying amid anticipation of mergers and buyouts. Some reports said former General Electric chairman Jack Welch is interested in the Boston Globe and former AIG chief Hank Greenberg might be a buyer for the Tribune Co.

"Over the last eight weeks [through last Tuesday] newspaper stocks have enjoyed their first sustained rally in nearly three years, advancing roughly six percent," Goldman Sachs analyst Peter Appert said in a note to investors.

The shakeup in newspapers raises questions among industry observers about whether the tradition of public service and investigative journalism can continue as corporate owners face growing shareholder pressure.

Newsrooms from Los Angeles to Philadelphia have been trimming reporting staff as financial pressures grow.

These cuts reinforce fears that newspapers may be less able to launch the kinds of investigations that uncovered scandals such as Watergate.

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