Banker: Among Media, Newspaper Business Still ‘One of the Better Ones’

In case you missed, a newspaper was actually able to sell itself to a private equity group this week. The San Diego Union-Tribune changed hands in a deal considered “a rare vote of confidence in an industry that’s hurting so badly that several other once-prized newspapers have been unable to find buyers.”

Today, one of the advisers on that deal, investment banker Jonathan Knee, talks to the Wall Street Journal’s Deal Journal blog about the state of the newspaper industry. Knee lends some good perspective on all that’s happening right now, separating the debt-leaden newspaper companies from the smaller, less sexy, but more profitable community papers.

In fact, while the newspaper industry is facing a storm of “secular and cyclical phenomena,” Knee thinks that, all things considered, “the newspaper business is actually still one of the better ones” among media sectors because, for various reasons, they’ve enjoyed higher profit margins compared to most media.

So what’s his advice to newspaper companies? It won’t be surprising to many.

You have to focus on your competitive advantage, which is local. When the smoke clears, the local newspaper, which may not be the sexiest part of the newspaper industry but is overwhelmingly the largest and most profitable part of the industry, will be a smaller and more-focused enterprise whose activities will be directed to those areas where their local presence gives them competitive advantage and they will continue to generate as a result better profits than the supersexy businesses in the media industry asking for government or nonprofit help like movies and music.

The newspaper industry has not been blessed with the best managers, and generations of monopoly profits do dull the senses. On the journalism side, I think many managers would rather have avoided a fight with journalists than actually force them to think harder about what their readers want, rather than what they want their readers to want.

The full blog posting here.


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