NEW YORK (Reuters) - Top media executives on Wednesday raised fresh doubts about the U.S. newspaper industry's future, saying the advertising climate remains depressed and publishers may be forced to look at sales.
"There's a real question about what the sustainable model is in the newspaper business," David Sanderson, head of the global media practice at consulting firm Bain & Co., told the Reuters Media/Advertising Summit in New York.
Even with a stock market slump that has seen shares of publishing companies fall an average of 12 percent this year, Sanderson said that newspapers may still be overvalued.
"Multiples are high right now for newspaper assets. It's hard to see how you connect the dots between the multiples that exist today" and the challenges the industry faces, Sanderson said.
Underscoring troubles in the industry, which has struggled to find younger readers, is the demand by two of Knight Ridder Inc.'s (KRI.N: Quote, Profile, Research) largest shareholders that the publisher put itself on the auction block. Knight Ridder has agreed to explore a possible sale.
Sanderson declined to comment specifically about the future of the Knight Ridder newspaper chain, but said private equity companies could be interested in newspapers, which offer substantial cash flow.
Because of the tough business conditions hitting Knight Ridder and the rest of the industry, "it's possible we could see more assets on the block," Sanderson said.
Charles Rutman, chief executive of media buying agency MPG North America, echoed the view that prospects for the newspaper industry as it currently exists are bleak.
"I think the newspaper industry's long-term outlook is really questionable at best," said Rutman, CEO of the unit of France's Havas (EURC.PA: Quote, Profile, Research) advertising holding company.
"There's not a lot of vibrancy," he added.
In advertising meetings, he said, companies are much more excited by the prospect of advertising on the Internet or through cell phones and other new media than taking out space in newspapers.
When we talk about online ... that's a real force and it's considered a foundation media form," he said. "The Internet is sitting at the adult table, it's ordering from the adult menu."
One reason newspapers have fallen out of favor with advertisers is that that the younger consumers they often try to reach have moved beyond traditional forms of media, he said.
"Money chases the customer," he told the summit. "It's an undeniable fact that the generation growing up today is not dependent on newspapers, magazines or broadcast television for their entertainment the way my generation was."
Indeed, for newspapers the latest data reaffirmed thoughts that the industry is struggling to keep traditional readers or find new ones.
A Newspaper Association of America analysis of 789 papers found the average daily circulation for the six-month period ended September 30 fell to 45.15 million from 46.35 million in the same period a year ago. Sunday circulation at the 627 newspapers that reported data was down 3.1 percent, according to the report, released earlier this month.
"The print industry -- magazines and newspapers -- is tough and getting tougher," Rutman said.
(Additional reporting by Peter Henderson)
