Sunday, December 14, 2008

Daniel Borenstein: Bad times in newspaper biz

Across the country, the daily newspaper is in jeopardy. Some of it can be blamed on bad business decisions. Much of it can be attributed to an industry in trouble, exacerbated by a souring economy.

It is in many ways the perfect storm. Advertising revenues, the financial engine that drives newspapers, are down as many advertisers migrate to the Internet and others are sidelined by the depressed economy. Classified ads, once a mainstay, have shifted to Craigslist and other online sites of a similar ilk. Real estate advertising has been battered by the housing crisis. The only bright spot is legal ads, buoyed by foreclosure notices.

Much of the industry is still profitable, but that's due in large part to major cost-cutting that is led by staff reductions. As the New York Times reported last week, most newspapers still have earnings before interest, taxes, depreciation and amortization that are equal to 10 to 20 percent of their revenue. They would be doing OK if not for the burden of making debt payments on the money borrowed to finance high-priced acquisitions in the past few years.


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