US: Little relief seen for newspapers

The newspaper industry will continue to be plagued by an unstable advertising market, despite huge potential revenue growth online, according to UBS analyst Brian Shipman in a report on Thursday.

The analyst released the report following the Newspaper Association of America's Mid Year Media Review conference in New York.

“While interactive revenues remain a large potential growth opportunity for newspaper publishers, near term results will likely be impacted by a continuing volatile advertising environment, leaving us cautious on the space,” said the analyst

Indeed, as Shipman pointed out, newspaper companies risk losing ad revenue and audience share to other media platforms such as television, radio, cable or the Internet.

In some cases, they even cannibalize themselves, he said.

With online growth coming somewhat at the expense of the print business, the analyst said he isn't convinced that the newspaper online sites will be able to capture enough incremental revenue to sufficiently offset the decline of the print business.

Lee Enterprises (nyse: LEE - news - people ), which has stakes in 58 newspapers, is a perfect example, according to Shipman.

“With online operations representing about 4% of Lee’s consolidated revenues, we believe it will be a significant period of time before online operations are a large enough part of the business to provide for meaningful growth,” the analyst said.

UBS maintained a “neutral” rating on the Iowa-based firm.

UBS also maintained a “neutral” on Gannett (nyse: GCI - news - people ), the largest newspaper chain in the country, despite 17% growth in color advertising revenue this year, as well as strong results in the automotive category.

The company’s web sites are also “seeing solid growth,” and its PointRoll ad products have seen 75% revenue growth this year.

 
 
Date Posted: 22 June 2006 Last Modified: 22 June 2006