Friday, March 20, 2009

One Banker’s Plan to Save the Newspaper Industry

From a Deal Journal blog interview with Jonathan Knee, an investment banker who advised on the San Diego deal and who has covered the media industry for over 15 years:

Knee: All advertising-based businesses face cyclical upturns and downturns along with the cycles in the economy. We are obviously right now in a down cycle, particularly in some of the advertising segments that newspapers rely disproportionately on, like employment, housing and automotive. But in addition, the secular phenomena that has been most devastating to newspapers has been the loss of their classified franchises to the Internet. And although classified revenue was less than a quarter of newspapers’ overall revenue, it represented more than half of the profit. The fact that some newspapers have done a good job of setting up their own online classified businesses is cold comfort because the real problem is that the barriers to entry in the business that they once enjoyed in an offline world are simply not there in an online world. [Deal Journal: that means it is cheaper to start a Web site than a newspaper, so anyone can compete with traditional newspapers now.]

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