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Sale of Dow Jones indexes would be in keeping with current trend

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It's no secret that newspapers are struggling mightily. Total print advertising revenue fell 17.7% in 2008 compared with the previous year, according to the most recent annual data available from the Newspaper Association of America.

Further, newspaper companies are also struggling, particularly those that have assumed debt in their expansion by acquisition. The nasty combination of decreasing revenue and onerous debt has led many newspapers to sell or contemplate selling peripheral products. A few recent examples: 

  • Tribune Co., which publishes the Chicago Tribune and Los Angeles Times, last week announced its $845 million sale of the Chicago Cubs and the team's stadium, Wrigley Field. Tribune Co. was laden with substantial debt following the 2007 buyout of the company by real estate mogul Sam Zell.
  • The New York Times Co. is considering a sale of the Boston Globe, which has an ownership stake in the Boston Red Sox.
  • Times Publishing Co., which publishes the St. Petersburg Times, completed its sale of Congressional Quarterly earlier this month.
And just last Saturday, The Wall Street Journal reported that News Corp. is exploring the sale of its stock market indexing business, which includes the Dow Jones Industrial Average. The Journal is owned by News Corp., so even though Dow Jones & Co. declined to comment on the story, it is hard to doubt its veracity.

“There's a lot of value in them,” Roland DeSilva, managing partner of media investment bank DeSilva & Phillips, said of the stock market indexes. “They're great brands. It would be an interesting acquisition. “I think [News Corp. Chairman-CEO Rupert] Murdoch selling them off also indicates that he wants to lower his debt structure.”

Rick Edmonds, media business analyst for the Poynter Institute, said, “I'm not terribly surprised that they would look at selling something that has quite a lot of value that they can use to bolster the newspaper through these difficult times.”

The Journal story estimated that the Dow Jones' stock market indexing business could generate $700 million for News Corp. The story said Goldman Sachs is handling the process and mentioned MSCI Inc. as a potential buyer.

Exploring this sale is a sign that News Corp. plans to focus on Dow Jones' core assets, such as the Journal, and remains open to divesting noncore assets, such as the Ottaway newspapers and Far Eastern Economic Review, several sources said.

DeSilva said the debt associated with the Dow Jones acquisition has forced News Corp. to contemplate these sales to help fund the Journal's continuing investment in its vibrant digital business led by wsj.com.

“They're caught in this conundrum of this huge debt structure and they have to service this debt, and concurrently they have to make substantial investments in this movement to digital media,” he said.

The Journal has been among the most successful newspapers in making the transition to digital.

According to a report released Tuesday by Outsell, newspaper publishers in general are failing to move as fast as other media categories in the conversion from print revenue to digital revenue, according to a report released Tuesday by Outsell.

“Simply put, the news industry has so far failed to make the digital transition,” Outsell analyst Ken Doctor wrote in the report, which is titled “Top 15 U.S. New Companies Print-to-Digital Market Size and Share.”

“While the wheels are coming off the industry—with six bankruptcies and massive product and job cutbacks—it remains dependent on print revenues. The news segment still stands out as the biggest laggard in the information industry overall. The largest of Outsell-tracked segments, it earned but 11.0% of its revenues from digital in 2008.”

By comparison, the report notes that the scientific, technical and medical information publishing segment generated 69.3% of its revenue from digital in 2008. Similarly, the b-to-b trade publishing and company information segment generated 36.0% of its revenue online in 2008.

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