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Holman Jenkins in today's WSJ:

Peter Drucker once pointed out that new business models are seldom pioneered by old companies, because old companies are loath to cannibalize their existing businesses. On the specific case of voting lockups, a study by Harvard and Wharton economists found that such companies have lower share prices than their peers, and invest less in R&D and advertising. The authors conclude that a "misalignment of incentives leads dual-class firms to invest too little, leading to lower sales growth and valuations."

That describes the newspaper business to a tee. A Columbia University survey recently found that many operators have actually been dumbing down their online editions for fear of cannibalizing their dead-tree audiences. Newspapers have cut costs in round after round of journalistic downsizing, some of which was perfectly sensible: The local paper's impregnable strength is local reporting, not having a Rome bureau. But while this disinvestment in customer service has helped maintain the industry's enviable cash flows, it hasn't done much for stock prices or boosting investor confidence in the future.

Today's New York Times Company's press release:

The New York Times Company also announced today that first-quarter diluted earnings per share are expected to be in the range of 22 to 24 cents, compared with 76 cents in the same quarter last year, which included a gain of 46 cents per share from the sale of the Company's current headquarters and another property.

The first-quarter range includes estimated expenses for the Company's staff reduction program announced in September 2005 of $8 to $10 million or 3 to 4 cents per share.

Posted by edelfenbein at March 22, 2006 10:17 AM