Some buyers still bullish on newspapers

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

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

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.

Daily newspapers are also ideally suited to reflect the complexities of life, says Sir Harry Evans, former editor of The Times of London. "All human life is there," he writes in an e-mail. And, he adds, much of a nation's agenda is still set by newspapers, with television often following the lead of the press.

Despite these strengths, however, newspapers will have to reinvent themselves, Davis says. "Our business is not dying. It's changing dramatically," he says.

In fact, one change is the ownership of the industry. Davis says he grew up at a time when the person running the newspaper was a journalist. "Now, there is a trend in our business where the person steering the ship is a business-first mind versus a journalism-first mind," he says. "That's a big change, a profound change."

Indeed, the biggest criticism of Murdoch is that he has used his vast media empire to further his own business and political interests. He and his top executives have been accused of dropping the venerable BBC from his Star TV satellite operations in China because its reporting reportedly upset China's political leadership. Harper Collins, a News Corp. publishing company, has handed out lucrative book contracts to key legislators involved in vital regulatory control over the American media.

Murdoch and his executives contend the BBC was simply too expensive for Star TV, and they say other decisions were business based, not politically motivated. "It isn't so much that his politics are far right," says media analyst Mark Crispin Miller of New York University. "It's that his business interests come first."

That's led him to support such notably different politicians as Sen. Hillary Clinton and President Bush, as well as the Chinese Communist leadership, Professor Miller notes. And Murdoch isn't shy about using his company to curry favor with them, Miller says.

Other analysts agree, in general, but say there are exceptions. Ken Auletta of The New Yorker notes that while The Times of London is not as good a paper as it was prior to Murdoch buying it, it is still respectable. And so are several other Murdoch papers like The Australian.

"Has he at times been intrusive? Yes," says Mr. Auletta. "But is he as intrusive at those publications as he is at the New York Post? No, he's not. Or as intrusive as he was with Star TV in China, no."

Still, such concerns prompted the Bancroft family, which holds the controlling interest in Dow Jones & Co., to insist that a separate framework be set up to ensure the editorial independence and integrity of the Journal and Dow Jones' other publications. "Everybody who wants integrity means that we want to do as neutral, unbiased coverage as possible," says Mr. Bailon. "That's something that would certainly be under a microscope [if Murdoch does buy Dow Jones.]"

There's also concern about News Corp.'s tabloid brand of journalism. On Wednesday, when the news of a preliminary agreement between Murdoch and the Dow Jones board was noted on the front page of the Journal, Murdoch's New York Post focused on Paris Hilton.

"It isn't like he's going to turn the Journal into something as ostentatiously tacky as the Post. He knows enough not to do that," says Miller. "The danger is subtler than that. The Journal will look the same, but careful readers of the paper may well notice some troubling differences."