Ed: Consistent with our themes:
- Newspapers are under water with paper costs greater than revenues
- Broadcast media is next - with high costs relative to revenues
- Web media dominates, but still challenged by effective monetization
Last year was one of the toughest ever for the 500 largest American companies —combined they lost over $500 billion—and media companies, unsurprisingly, are near the top of the list. Total U.S. advertising fell 4.1 percent last year, according to ZenithOptimedia, and since the majority of media companies make most of their revenue from advertising, it makes sense that three of the largest—Time Warner (NYSE: TWX), CBS (NYSE: CBS), and Gannett (NYSE: GCI)—made the top fifteen losers together, losing nearly $32 billion last year. Few media sectors were spared and most media companies took huge writedowns to assets they until recently viewed as far more valuable than they were worth. Highlights:
—Time Warner (#48; #9 biggest loser) lost $13.4 billion last year. Much of this was due to a $25 billion writedown of the media conglomerate's cable, publishing (Fortune parent Time.Inc.) and online businesses. Warner Brothers held up fairly well; The Dark Knight in the theaters and Two and a Half Men on TV drove solid results from that division.
—CBS Corp. (#10 biggest loser; #186) lost $11.7 billion last year, almost all of it from writedowns of its TV station assets ($10 billion). The network scored points for beating out NBC, ABC, and FOX in total ratings, but advertisers are cooling on TV and with heavy programming and distribution costs weakening ad revenue turns into poor profits.
—Gannett (#371; #14 biggest loser) lost $6.6 billion in 2008. Like TV it costs a lot to produce and distribute a newspaper and since many have burdensome union requirements newspapers saw their profits plummet in 2008. Gannett's $2.1 billion writedown of its UK newspaper assets and $4.4 billion writedown of its US newspaper assets didn't help either.
So far 2009 doesn't appear to be starting off any better. Many analysts believe Q109 could be worse for media companies than Q408. Gannett said its profit plunged nearly 60 percent in the first quarter and many point to similarly challenged results across most media companies.
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Media columnist Michael Wolff certainly knows an attention-getting quote. Appearing with Air America CEO Bennett Zier and CraigsList's Craig Newmark in a panel discussion sponsored by Gotham Media Ventures, the head of aggregation site Newser, predicted that big media, whether it's newspapers or conglomerates, are just months away from the dustbin of history. "About 18 months from now, 80 percent of newspapers will be gone. The Washington Post is supported by Kaplan's testing business. The testing business will still be around in 18 months, and they will probably continue to support the newspaper. But that'll be an exception."
Later on, Wolff was challenged by a devoted, if vehement, NYT reader over some criticisms he didn't make, he was pressed on whether the NYTwould survive. He conceded that he was being a bit hyperbolic, but was dead serious when he said, "The NYT will not be owned by the same company 18 months from now. I stand by that."
As many before him have done, Wolff pinned the cause of newspapers' impending death on CraigsList, which took away newspapers' auto, jobs and real estate ads. Newmark shook his head at that, saying that newspapers did not fulfill the public's trust. "They failed on that weapons of mass destruction thing. And they failed on that financial collapse thing," Newmark protested. Wolff: "CraigsList did it by taking away the ads. And they did it for good or bad, I would say for the better. They distribute ads more efficiently. But that's what supported newspapers for 100 years. People don't want to pay for content. And you could argue newspapers haven't done their jobs. But that's separate from the real story. They were supported by those three legs and they have gone to Craig's List. 18 months from now, 80 percent of newspapers will be gone. "
The panel, which took place at the back of the Samsung Experience store in the Time Warner Center, Wolff also forecast that in another 18 months, the media and entertainment company's home—which houses a mall filled with luxury retailers—would also fade from the scene.