Chicago, IL – November 12, 2010 – Today, Zacks Equity Research discusses the Steel Industry, including News Corporation (NWSA), Google Inc. (GOOG), Gannett (GCI) and The New York Times Company (NYT).
A synopsis of today's Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/43164/Publishing+Industry+Outlook+-+Nov.+2010.Over the last two years, newspaper companies have remained focused on transforming their business models to better position themselves to a multiplatform media universe. Although the U.S. economy is witnessing signs of recovery with a sluggish improvement in the advertising environment, we believe 2011 will not mark the resurrection of the publishing industry. However, it is expected to fare better than 2009 and 2010, as steps taken to curb the mayhem start paying off.
With steadying newspaper budgets, we should see fewer layoffs, more focus on web and local content, reduction in print pages dedicated to business or sports content, increase in subscription and concentration on profitable circulation.
News Corporation (NWSA) has taken a leap towards an online subscription-based model for general news content. News International, a subsidiary of News Corporation, began charging readers for online content for The Times of London and Sunday Times of London effective June 2010.
Rupert Murdoch, the Chief Executive Officer of News Corporation, has long been pushing for the online subscription model for all general news websites. But newspaper companies have been reluctant to tow the line for fear of losing readership and, in turn, advertisers.
Business newspapers, such as Financial Times and The Wall Street Journal (owned by News Corporation) have long been following an online pay model. But levying access charges on readers for online access to general news content is a first for any news publication.
Another media giant, The New York Times Company, has already taken a leap towards the paid model. During third-quarter 2010, the company's New England Media Group property, the Worcester Telegram & Gazette, launched a subscription-based model for its website.
The New York Times Company also plans to introduce a 'pay and read' model for NYTimes.com in 2011, with plans to launch a paid subscription website, BostonGlobe.com in the second half of 2011. The company will adopt the Financial Times' metered system, where readers after browsing a certain number of free articles, are being asked to subscribe.
However, we believe, people will be reluctant to shell out if the content is available free of cost elsewhere. To combat this, Rupert Murdoch has been devising ways to prevent Google Inc. (GOOG) from accessing News Corporation's articles or content through its Internet search engine.
OPPORTUNITIES
Despite the tough times faced by the publishing industry, there are a number of defensive names in the group that can hold their ground. Companies are radically changing their business models to fall in line with industry trends.
Gannett (GCI) is diversifying its business by adding new revenue streams to make it less susceptible to economic conditions. The company is also streamlining its cost structure, strengthening its balance sheet, and rebalancing its portfolio. The company is witnessing higher broadcasting and digital revenues. Consequently, the company posted better-than expected third-quarter 2010 results.
Moreover, with advertisers gradually returning to the market, Gannett hinted that the rate of fall in advertising revenue is decelerating. The company holds a Zacks #3 Rank, which translates into a short-term Hold rating.
WEAKNESSES
The newspaper industry has long been grappling with plummeting advertising revenues due to economic headwinds. Although murmurs about advertisers returning to the market are gaining ground as the economy recovers, but a full recovery has been elusive thus far.
The New York Times Company (NYT) third-quarter 2010 earnings dropped more than 50% from the prior-year quarter. The company's top line also dipped 2.7% following a fall in print advertising and circulation revenues. The company cautioned that circulation revenue in the fourth quarter might fall by 4% to 5%. A slowdown in digital advertising has also led the company to forecast a 10% rise for the fourth quarter as against a 14.6% growth in the third quarter, reflecting sluggish advertising trend.
We are also apprehensive of potential risks that the company faces from its high dependence on advertising revenues. To mitigate this, the company is adding new revenue streams by diversifying its business, thereby making it less susceptible to economic conditions. The New York Times Company holds a Zacks #4 Rank, which translates into a short-term Sell rating.
We currently have a neutral outlook on publishing stocks, which is reflected in its Zacks Industry Rank of 116 out of 255.
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GANNETT INC (GCI): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
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NY TIMES A (NYT): Free Stock Analysis Report
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