Three ideas to boost newspapers

DEBATE has begun in the US Senate to see what government can do to support America’s ailing newspaper industry.

The hearing began overnight, less than 24 hours after the US President, Barack Obama, point-blank refused to even consider the notion of bailing out the newspaper industry in his country.

Among the ideas presented at the hearing were:

  • Offer government subsidies to re-hire reporters
  • Make newspaper and magazine subscriptions tax deductible
  • Provide government-funded avenues for newspapers to collaborate and create new, innovative business models using the Internet

 The ideas were put before the Senate’s “Court and Competition Subcommittee”, chaired by former presidential candidate, Sen. John Kerry.

The aim of the hearings is to reconsider anti-trust legislation that prevents newspapers from merging, or combining resources. Structural change and continual pressure from new Internet business models, plus the economic downturn, has hurt newspapers.

Some of the pain, however, has been self-inflicted. American publishers have spent the past five years buying competitors in an effort to impress investors and win industry battles through newsprint volume and regional market strengths.

The spending spree is now proving hugely costly. Newspapers that were bought for millions, even more than US$1 billion in the case of the Boston Globe, are now loss-makers and hold only a fraction of the value they did less than three years ago.

One market analyst is currently spruiking the view that the New York Times is worthless (hardly something that can be taken seriously, surely) because it has more than US$1 billion of debt, and its major revenue-earners, including the Globe, are producing losses.

For the record, this claim came in a research note published by Barclays analyst, Craig Huber, who said: “Net debt to (operating profit) is way too high. We could argue the stock to zero given the high debt load.” He says the company’s debt is 4.5 times EBITDA (earnings before interest, taxes, depreciation and amortisation).

The US Senate hearing goes to a second day tonight (Pacific time).

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