News stock slide accelerates

The publicly held newspaper stocks lost another $2 billion of value in the first six months of 2007 on top of the $13.5 billion decline they suffered in the prior two years.

Bad as the 3.9% drop in value in the six months appears to be, the performance of the group actually is far worse, if you factor out the extraordinary $5 billion offer Rupert Murdoch made to buy Dow Jones.

Taking away the $1.6 billion surge in the market capitalization of Dow Jones occasioned by the News Corp. bid, the value of the remaining newspaper stocks fell $3.73 billion, or 7.4%, in the first half of this year. By contrast, the Standard and Poor’s index of 500 stocks gained 6% in the same period.

McClatchy led the slide in publishing stocks, collapsing by 41.2% from where it stood on New Year’s Eve. As detailed below, the other big losers were Journal Register, whose shares fell 38.5%, and Lee, whose stock slid 32.9%. Apart from DJ, the biggest gainers were Belo, up 12.2%; the Sun-Times Media Group, up 5.6%, and New York Times Co, up 4.6%.

(Disclosures: I own shares of McClatchy and Journal Register and am a consultant to the Sun-Times Media Group.)

As discussed here earlier, newspaper stocks lost $13.5 billion of their value in the years 2005 and 2006, representing a 20.5% decline during the two-year period.

Given that the 7.4% drop in share value in the first half of this year is more than a third of the loss experienced in the prior two years, it is clear that the decline in newspaper stocks has accelerated.

The market’s verdict coincides with the queasy drop in newspaper ad sales in the first five months of a year in which the industry appears to be headed to a $2 billion decline in year-over-year revenues.

This is occurring at a time when many, but not all, observers believe the economy is in a state of general well being. The dissenters doubtless would include the freshly unemployed newspaper workers who are trying to sell their homes.

With newspapers struggling so badly now, you shudder to think what would happen if the economy got worse.