The stock price of the New York Times Co. is up 37 percent during the past six months. Gannett shares have advanced 34 percent, while McClatchy is up 24 percent during the same period. Hearst's newspaper group is expected to post a 25 percent profit this year, its best since 2007.
What’s going on?
The Economist reported the robust performance of the above stocks in a wrap-up of the newspaper sector. The reason for the upbeat stock news: long live paywalls.
The Economist piece noted that U.S. newspapers have dropped their reluctance to erecting paywalls and are charging readers for their content. The number of American papers with paywalls has doubled in 2012. More than a quarter of U.S. papers now charge for their content.
The magazine noted that “charging for content online used to be the privilege of the lucky few, such as the Financial Times and Wall Street Journal, offering market-sensitive information readers would pay for. General newspapers opposed charging because they feard their traffic would drop and their fragile digital ad revenues would fall rather than rise.”
The rise of technology that made creation of pay systems cheaper (e.g., Press+) and growth of tablets and mobile devices have made digital subs more attractive. “All access” editions of print/digital bundles have buoyed newspapers. That has made print’s persistent and inevitable decline less threatening since digital editions bring in fatter margins, according to the Economist.
Since digital ads will never offset what newspapers are losing in print advertising, the traditional model depending on ads for 80 percent of revenue is now kaput. The Economist points out that the New York Times earned more than 55 percent of its third-quarter revenues from circulation, up from 29 percent in 2009.
There is a caveat to the paywalls may save newspapers story. Content remains king. Paywalls aren’t going to work at newspapers that have cut themselves to the bone.
Readers aren’t suckers.