Change of the Newspaper Firm in the 1990s (and Beyond)

Abstract

How prosperous is the future of the newspaper industry? When the investment community is to be believed, the future looks promising. For instance, Veronis, Suhler & Associates, a well respected investment bank in the communications industry, forecasts a 5.4% compound annual growth of total newspaper spending in the U.S.A. for 1995 to 2000 (compared with 2.2% for the 1990–1995 period) (Veronis, Suhler & Associates, 1996a:225). Compared with a compound annual growth of 8.5% for subscription video services, what is said to be a growth industry, the future rating of newspaper industry can be said to be fairly good. Another indication that the (perceived) industry future perspectives are fairly good (from the investors perspective), might be found in the price-earnings ratios of publicly traded newspaper companies. If the P/E ratio is relatively high, a strong growth of earnings in the future is expected or the stock is perceived to be stable. The average P/E ratio of twelve large public newspaper companies in the U.S.A. for 1996¹, an expression of the stock markets appraisal of the middle term growth expectations², was 28.7 compared with 21.5 for the Standard & Poor Index. For 1997 the investment bank Merrill Lynch estimated the average P/E ratio for this peer group at 21.6, again above the S&P level of 19.7. Publicly traded newspaper companies in the Netherlands are also valued as above average growth stocks: the average P/E ratio of three publishing firms³ with large stakes in newspapers for 1997 is estimated at 22.9.⁴

’You can starve a business into profit. In many cases that is what we were very close in many of our operations. We were always looking in the mirror, not out of the window for opportunities. The biggest change has been our culture: to take some risks.’ (INT49.081195)