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Some buyers still bullish on newspapers

Rupert Murdoch and others see potential in the industry's digital-age transformation.

By Ron SchererStaff writers of The Christian Science Monitor, Staff writers of The Christian Science Monitor / June 28, 2007

New York

A year ago, the cover of The Economist magazine asked, "Who Killed the Newspaper?"

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Hold the murder charges.

Some people think the old gray sheets still have a role to play and still have value, but they'll have to be patient – very patient – until newspapers find a way to beef up the bottom line in a rapidly changing media environment.

And so, despite sagging revenues and subscription rates, newspaper deals are being done. In April, Chicago real estate mogul Sam Zell reached an agreement to invest initially $250 million in the Tribune Co., which will become privately held. Last week, news conglomerate Gannett purchased a chain of community newspapers in central Ohio. And Rupert Murdoch is moving closer to planting the News Corp. logo over Dow Jones & Co., publisher of the venerable Wall Street Journal.

Such deals reflect the keen interest of some investors to tap into the media's historic transformation in a digital age of convergence between print, the Internet, video, and television.

"It does show … that things are indeed changing, and they're changing rapidly," says Gilbert Bailon, president of the American Society of Newspaper Editors. "People outside the industry are seeing value in newspapers and particularly in the potential for the content to be used across multiple platforms. That's definitely what Murdoch is looking at – not just The Wall Street Journal on paper, but the entire company and the possibilities across different platforms."

Such purchases may indicate there is still a significant number of wealthy people willing to buy media properties. But the rationales behind each sale are different. In some cases, such as the battle over the Tribune purchase, it's an intersection of ego and interest in ensuring that local communities have a strong newspaper voice. In the case of Mr. Murdoch, the potential purchase of a unique business franchise may be part of a larger plan to give yet more power to News Corp. when it begins its own national business TV network.

However, media experts don't believe the purchases necessarily mean the tide has turned for the industry. Newspapers are still trying to sort out how to make money from websites that are offered for free to readers. And print advertising continues to shrink in many markets as retailers consolidate.

"Newspapers are not dead, but the trends are quite negative," says Rick Edmonds, media business analyst at the Poynter Institute in St. Petersburg, Fla. "It will probably get worse for another 18 months or so before it gets better."

The private-equity firm of Veronis Suhler Stevenson is forecasting revenue growth in the industry of 1 or 2 percent for the next few years and then another period of falling revenue.

"The newspaper industry is definitely in a period of transition, and its traditional form is flat and shrinking," says Jim Rutherfurd, managing director of the New York firm.

Yet newspapers are also prime purveyors of information – still something that people want, says Steve Davis, chair of the newspaper department at the S.I. Newhouse School of Public Communication at Syracuse University in New York.

"I still don't think anyone rivals newspapers for the resources they can marshal in that service," says Mr. Davis.