The Business Beat #

It is still lost on many journalists and journalism educators that most changes in the industry are based on economics. Satan is not waving a wand bringing plagues on newspapers (although sometimes you have to wonder). #

Publicly traded media companies rely on stockholders to fund companies. If stockholders don’t believe their investment will pay off, they put their money somewhere else. #

Morningstar is basically the gold benchmark when it comes to analyzing investments in the Standard and Poors 500 market. They pick apart companies from top to bottom trying to determine a valuation and then sell that info to others to they can make good stock picks (okay, very oversimplified). #

In a recent article, Morningstar took a broad and critical look at big media. Still lots of bad news out there and the bottom is yet to be reached, especially in newspapers. #

Meanwhile, we think margins will continue to be pressured at newspaper publishers. Newspaper companies should see some benefit in 2007 from lower newsprint prices and usage. But newsprint and supplements make up only about 15% of publishers’ total operating costs. Because the bulk of newspaper publishers’ costs are fixed, anticipated top-line challenges should cause negative operating leverage to continue. We wouldn’t be surprised to see yet another round of layoffs in the near future as publishers attempt to combat this. #

However, not all is doom and gloom in media according to the Morningstar report. The Internet, while only providing five percent of media revenue currently continues to hold great promise. This is especially true for specialized information providers like Dow Jones which can almost charge face value for their financial commodity most of which will be delivered in real time over the Web. #

The rest of the Morningstar piece here. #

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