As lifelong readers of newspapers, we take no pleasure in the difficulties experienced by this industry. But technology has made the distribution of news (and more importantly, the dissemination of advertising messages) on dead trees comparatively slow and expensive. Shares in two of the biggest American newspaper publishers have hit 52 week lows. Even worse, important investment firms have downgraded their recommendations:

Deutsche Bank issued a report downgrading Gannett to "Hold" from "Buy." [snip]

Though Tribune has been going through a rough patch with recent downgrades of its debt because of an adverse U.S. Tax Court ruling that left it with a tax bill of nearly $1 billion, JPMorgan said it downgraded the company to "Neutral" from "Overweight" because of concerns about the strength of its future advertising revenue.

JPMorgan noted that the merger of Federated Department Stores Inc. and May Department Stores Co. will mean the closing of 15 department stores in Tribune markets.

Hollywood's widely expected reduction in movie ads also factors into the firm's calculus.

We have covered these developments in the advertising markets months ago. And we can read a trend line. The news business is going through a cataclysmic change. Count on it.

Hat tip: Jack Kemp

Thomas Lifson   10 14 05