Newspaper Economics

The bigger companies added a third leg to their growth strategies in 2005 with a wave of acquisitions. A couple — “Marketwatch” for Dow Jones and Slate for the Washington Post — mostly bulked up online news and commentary. More typically, the new family of ventures are Internet-based and information-driven but not news, with names few journalists would recognize — About.Com, Shopzilla and Topix.net . (See sidebar for discussion of each.)

Broadly they move the newspaper companies into a new type of business. The services typically offer shoppers product information, comparative prices and a capability to order directly. Clark Gilbert, a Harvard Business School professor and longtime student of innovation and lack of innovation by newspapers, explained the strategy in a Wall Street Journal column in November: First, it moves the companies into a new and explosively growing market space, reaching shoppers who may or may not care for news. Second, it adds some in-house expertise in online innovation.25

Two of the first newspaper companies to pair a growth business with profitable but slow-growth newspaper and local TV holdings have had considerable success. The Washington Post’s Kaplan education division now generates more revenue than the newspaper, though not as much profit. E.W. Scripps has had huge success with the Food Network and Home and Garden Television. It has three other channels under development, and some on Wall Street now view Scripps as a cable content company that also owns some newspapers and television stations.

It is still early, though, to fully judge the synergies and innovative spark the acquisitions are supposed to provide.

If all breaks well, the businesses will be fast-growing moneymakers. In the December 2005 meetings, companies were already wrapping revenue into their online divisions, the better to bolster a growth story.