The Internet is quickly becoming the medium of choice for information gathering and reading news. I cancelled my newspaper subscriptions after realizing that I rarely sit down and read a hard- copy newspaper anymore. The Internet has become my source for daily news. I can read news as it comes across the wires. In fact, I was paying $30 a month for one newspaper subscription that I was reading on the Internet for free. Better yet, the online version was searchable.
The use of the Internet is steadily rising, but at the expense of the newspaper. According to the Newspaper Association of America, the daily circulation of U.S. newspapers has been on a decline. This is not a surprise to me, as newspapers are having a difficult time trying to retain paying subscribers because of the availability of “instant news” on the Internet. I expect this trend to continue going forward.
The long-term trend will continue to be negative for the newspaper industry. One of my favorite newspapers, The Wall Street Journal, published by Dow Jones & Co., is the number-two selling paper in the United States, but it has been seeing sales of its print version decline. My belief is that people who have traditionally read the Wall Street Journal may have switched to the online version or have just decided to opt out and seek free information on the Internet.
According to the Newspaper Association of America in research undertaken by Nielsen/NetRatings, the visitors to newspaper Internet sites increased 7.4% in the fourth quarter of 2006 versus the prior year. The fourth quarter saw about 57.6 million readers in all. These are alarming numbers if you’re a newspaper company.
As an investor, stick with new media companies that deliver a pool of news sources rather than investing in newspaper stocks. I would take Yahoo! Inc. (NASDAQ/YHOO) as a trade over the New York Times Company (NYSE/NYT).