'Double Whammy' Hurts Newspaper Industry's Statistics, Stock Values

American newspaper companies are going through what amounts to death by a thousand cuts, and some of the wounds are more obvious than others.

McClatchy Co.'s plan to eliminate about 10 percent of the workforce at its 30 papers, including the Miami Herald and the Charlotte (N.C.) Observer, is just the latest instance of an industrywide effort to cut costs as advertising revenue shrinks.

For a more subtle indicator of the industry's sorry state, compare the stock-market value of E.W. Scripps Co. and Scripps Networks Interactive, the cable-television unit that will be spun off in two weeks.

Scripps Networks, whose assets will include the HGTV and Food Network cable channels and the Shopzilla online-shopping site, started trading last week in anticipation of the split. The unit was valued at $6.9 billion as of Tuesday.

Subtract that amount from Scripps' own value, and that leaves $680 million for what will remain of the company, based in Cincinnati. Those assets include Denver's Rocky Mountain News and other newspapers, the Scripps Howard News Service and United Media syndication service, and 10 broadcast-TV stations.

This kind of disparity isn't unprecedented. A.H. Belo Corp., publisher of the Dallas Morning News and three other papers, has fallen 62 percent in U.S. trading since becoming a stand-alone company in January. Belo's sibling - Belo Corp., a TV broadcaster - has more than five times the company's $162.8 million of market value. Both companies are based in Dallas.

The newspaper industry's statistics are about as dismal as its stock performance. First-quarter sales of print advertising tumbled 14 percent, the biggest quarterly drop since at least 1971, the Newspaper Association of America said last week.

Papers are being hit with a double whammy: advertisers are moving to the Internet in growing numbers, and many of the ones that remain are suffering as the U.S. economy falters. Put the two together, and the result is 35 percent declines in real-estate and help-wanted ads for the quarter.

McClatchy, based in Sacramento, Calif., has the added burden of debt related to the $4.1 billion purchase of Knight Ridder Inc. two years ago. The job cuts announced Tuesday, totaling 1,400 people, account for most of a program to reduce annual costs by $100 million - only about half its annual interest expense.

The market value of McClatchy fell below $1 billion this year as its stock tumbled 36 percent. Aside from Scripps, only three U.S. newspaper publishers - Gannett Co., Washington Post Co. and New York Times Co. - exceed the billion-dollar mark.

Gannett, the McLean, Va.-based owner of USA Today, froze employees' pension benefits last week to save $30 million next year. The company is taking a $2.8 billion hit this quarter to reduce the value of acquired companies and other assets.

The Washington Post is reducing staff through voluntary buyouts at a cost of $80 million. The New York Times fired some of its news staff in May after a similar program eliminated less than 100 positions, the company's target.

There are surely more cuts to come in newspapers' budgets, employees - and yes, market value.