$23B zapped in news stock value

The market value of the American newspaper publishers entering 2008 as independent, publicly traded companies has fallen by $23 billion, or 42%, since the end 2004, the year before the wheels started coming off the industry.

Nearly half the slide in the market capitalization of newspaper stocks came in 2007, when the shares lost a collective $11 billion, or 26%, of their value. Thus, newspapers lost nearly as much value last year as they did in the two prior years put together.

The vaporized value of newspaper shares in 2007 exceeded the combined $10 billion market caps of Gannett and McClatchy, the nation’s two largest publicly held publishers by circulation. And the $23 billion drop in shareholder value since yearend 2004 equals the current total value of all the common stock of Belo, Gannett, Lee Enterprises, Media General, McClatchy, the New York Times Co. and the Washington Post Co.

The biggest losers in the three-year period were Journal Register Co., whose shares fell 91% to close 2007 at a mere $68.9 million in value; Sun-Times Media Group, which slid 86% to a market cap of $176.7 million, and McClatchy, which fell 82% to a value of $1.03 billion. Details for the balance of the group are in the table below.

The declines compare with respective increases in the last three years of 17% and 15.6% in the Standard and Poor’s average of 500 stocks and the Dow Jones average of 30 industrials.

The market values of only two American publishers have risen since 2004, the last year before advertising sales began crumpling after decades of delectably predictable growth.

One winner was the Washington Post Co., whose shares gained 4% in value in the last three years, thanks to aggressive diversification out of the newspaper business and into such lucrative endeavors as its Kaplan test-prep schools.

But the big winner, by far, was Dow Jones, which climbed 65% in value as the result of the sumptuous price News Corp. paid to buy it from the dysfunctional Bancroft clan.

News Corp. itself realized a 10% gain in value since 2004 but is not included in the averages for American newspapers, because the diversified global media company published only one U.S. newspaper, the New York Post, prior to the DJ acquisition. (Speaking of the Post, don't miss this banner story on the people who wear diapers to compensate for the lack of port-a-potties at the New Year's celebration at Times Square.)

The value of Tribune Co.'s shares over the three years remained negative despite the acquisition that took it private in the waning days of 2007. Sam Zell and his fellow employee-owners bought the company for 15% less than the value of the stock at yearend 2004.

Wall Street’s vigorous repudiation of newspaper stocks reflects a deep, and arguably growing, concern that publishers don’t know how to arrest three years of mounting declines in audience, sales and profitability. Even the industry’s promised efforts to improve new media sales are failing to keep pace with online competitors, as discussed here and here.

The accelerated erosion of newspaper shares since the collapse of the easy-credit markets in 2007 appears to reflect waning hopes on the part of investors that a fresh crop of daring souls like Rupert Murdoch or Sam Zell will arrive to bid up the stocks of the sagging public companies so they can take them private and try to fix them.

With neither improved business prospects nor white knights likely to be on the horizon, you can’t blame newspaper executives for cringing as they turn a new page on the calendar. Unless they come up with a lot of creative and profitable ideas in a hurry, many of them may not be around to ring in 2009.