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From the current New Yorker:

But McClatchy’s gamble depends on a simple, if often overlooked, fact: newspapers remain a surprisingly robust business and generate tremendous amounts of cash every year. Most of them have profit margins that dwarf those of the average company; McClatchy’s operating margin last year was twenty-eight per cent, while ExxonMobil’s was around sixteen per cent, and the typical supermarket’s is around four per cent. The reach of newspapers remains huge. Daily circulation is around fifty-five million (not including online readers), giving the industry more customers than any other traditional media outlet. And those customers have the kind of demographics that advertisers like; even as circulation has dropped, revenue from print ads has stayed healthy, to the tune of more than forty-seven billion dollars last year. Newspapers are classic cash cows: solidly profitable businesses in a stagnant industry.

So why are newspapers everyone’s least favorite enterprise? One reason is that Wall Street tends to love growth stocks, and to underplay the value of steady cash generation. And no one likes to be in a business that’s losing customers.

Posted by edelfenbein at March 30, 2006 10:52 AM