The Times-Picayune of New Orleans is owned by Advance Publications, which in turn is owned by the uber-rich Newhouse family. Advance announced it would cut back printing and delivery of the paper to three days a week — Wednesday, Friday and Sunday. Advance also will gut three other papers — the Birmingham News, the Press-Register of Mobile and the Huntsville Times. Advance has practice in “downsizing” papers. It made a similar move in 2009 in Ann Arbor, Michigan. The daily was cut in favor of AnnArbor.com.

The next move by the Newhouse family likely will be to take similar steps with three other big city dailies it owns — the Plain Dealer of Cleveland, the Star-Ledger of Newark and the Oregonian. In a little more than one wave of a hand, four large cities will be without dailies.

The notion that Internet versions of papers can tip the industry back toward success is a flawed. An examination of the financial results of the Washington Post Company (NYSE: WPO), the New York Times Company (NYSE: NYT), Gannett (NYSE: GCI) and deeply troubled McClatchy (NYSE: MNI) shows that online revenue remains a tiny part of overall sales. The New York Times newspaper operation announced a drop in digital sales of 2.3% last quarter. Digital advertising is now 22.5% of the group’s revenue. That is not nearly enough to stanch the sharp erosion of print ad revenue that has dropped sharply for a decade. And it is worth noting that the New York Times sites have by far the largest audience of any newspaper group in the country.

The impression that analysts who follow the industry have for now is that the biggest newspaper chains will not cut back the number of days they print their largest daily papers. Newspapers that are more than 100 years old can be maintained by plans to lower circulations and charge loyal customers more for their subscriptions. That is only a delaying tactic. Nothing can entirely offset disappearing print advertising.

It is inevitable that large dailies in more and more cities will cut the number of days that they print newspapers, except in metropolitan areas where Warren Buffett owns the properties.

Douglas A. McIntyre

News came on Thursday morning that Berkshire Hathaway Inc. (NYSE: BRK-B) (NYSE: BRK-A) has reached a deal with Media General, Inc. (NYSE: MEG) to buy all of Media General’s newspapers outside of the Tampa paper.  Buffett is joining a sector that has wrecked many private equity firms looking for deals over the last decade in printed news.  The price tag is listed as $142 million in cash, but Berkshire Hathaway will simultaneously issue a $400 million term loan and a $45 million revolving credit line.

Today’s news is likely to bring a focus on other newspaper outfits around the nation.  Some companies with high concentrations in newspapers are Gannett Co., Inc. (NYSE: GCI), The McClatchy Company (NYSE: MNI), Daily Journal Corp. (NASDAQ: DJCO), A. H. Belo Corporation (NYSE: BLC), Lee Enterprises Inc. (NYSE: LEE).

Berkshire Hathaway also owns 1.7 million shares of The Washington Post Company (NYSE: WPO), although Warren Buffett does not hold a board seat any longer.  Does it beg the question, “Does this increase or decrease the value of The New York Times Company (NYSE: NYT)?”…

Media General will also issue Berkshire Hathaway ‘penny warrants’ for approximately 4.6 million Class A shares and that will give Buffett the right to buy 19.9% of Media General’s existing shares outstanding. Berkshire Hathaway also has the option to nominate a director to Media General’s board of directors.

The newspaper sale includes websites and mobile applications and these outfits have commercial printing businesses as well.  These include 63 daily and weekly titles in Virginia, North Carolina, South Carolina and Alabama.

Dare we say Buffett is back to his paper route he had as a teenager?  Mr. Buffett said, “In towns and cities where there is a strong sense of community, there is no more important institution than the local paper.  The many locales served by the newspapers we are acquiring fall firmly in this mold and we are delighted they have found a permanent home with Berkshire Hathaway.”

The move will allow Media General to focus on the broadcast television business, which accounted for some 77% of its 2011 platform cash flow in 2011.

Media General closed at $3.14 on Wednesday and its 52-week range is $1.14 to $6.84.  Its shares are indicated up about 40% around $4.75 in early indications.  With this newspaper and media outfit up so much, it may be safe to expect that other newspaper outfits could be worth more money than their battered shares indicate.

JON C. OGG

Buffett and Newspapers

Warren Buffett surprised investors when he said Berkshire Hathaway (NYSE: BRK-A) may buy more newspapers. It already owns the daily in Buffalo and recently bought the paper in Omaha, which is where his conglomerate is headquartered, for $200 million. Buffett may view newspaper ownership as an inexpensive hobby, at least inexpensive for a company the size of Berkshire Hathaway. It is just as likely that he sees a bottom in the industry. He has had a ringside view of newspapers for some time. He was an investor in the IPO of the Washington Post Company (NYSE: WPO) and sat on its board for years. Buffett also can see that revenue erosion in the industry has slowed or at some chains stopped. Cost cuts have made margins at least tolerable. Among the stocks of the largest newspaper chains, several appear to have stopped sliding. This is the case with the New York Times Company (NYSE: NYT), Gannett (NYSE: GCI) and even battered McClatchy (NYSE: MCI), which is heavily burdened with debt.

Facebook IPO Road Show

The Facebook IPO road show has begun. Based on news accounts, the most important part of the event is that CEO Mark Zuckerberg wore a hoodie, jeans and sneakers to the first large presentation to investors. The argument to set the social network company’s value at an extraordinary $96 billion must be less important. Zuckerberg and Facebook did get an early break, before their presentations even began. Stock research firms Wedbush Securities and Sterne Agee rated the shares a Buy and trumpeted Facebook’s strength — the problems of slowing growth and the lack of revenue from mobile platforms notwithstanding.

A New Lumia 900 Bug

Nokia’s (NYSE: NOK) flagship Lumia 900 had a software bug when it launched. This caused bad PR, but the problem was solved quickly. That was not the end of glitch problems. The smartphone has a second bug: its screen turns purple when its brightness is set low. The world’s second largest handset firm — which until late last year was the largest — promised to resolve the issue quickly as well. Nokia needs the product to be a success. The fortunes of the company have crumbled as Apple’s (NASDAQ: AAPL) iPhone and handsets that run Google’s (NASDAQ: GOOG) Android software have raced ahead of it in sales. The Lumia is also the first major collaboration between Nokia and its major software partner, Microsoft (NASDAQ: MSFT). Redmond has made a billion-dollar bet that Nokia’s broad distribution of handsets can push the Window mobile software into the market, where it currently has a single-digit market share.

Douglas A. McIntyre

It is just as likely that he sees a bottom in the industry. He has had a ring side view of newspapers for some time. He was an investor in the IPO of The Washington Post Company (NYSE: WPO), and sat on its board for years. Buffett can also see that revenue erosion in the industry as slowed, or at some chains, stopped. Cost cuts have made margins at least tolerable. Among the stocks of the largest newspaper chains, several appear to have stopped sliding. This is the case with The New York Times Company (NYSE: NYT), Gannett (NYSE: GCI), and even battered McClatchy (NYSE: MCI) which is heavily burdened with debt.

The “1997 Trust,” set up by members of the founding family, holds 90.3% of the company’s Class B shares, which gives them complete control over the New York Times Company.

The board member most likely to press for an independent CEO is Ellen Marram, the company’s presiding director since 2006. She is the president of the Barnegat Group, a small business advisory firm. But Marram is hardly in a position to exercise what would normally be the role of presiding director because of the lock that the Sulzberger family and its relatives have on the board’s decisions. Marram’s position is largely ceremonial.

In most cases, shareholders would be upset that a company like the Times has not replaced its CEO. But those who own the stock should count themselves as lucky. Robinson did not have the power that a CEO traditionally does. That means that the Times had two leaders — Robinson in name and Sulzberger in reality. Each was paid at the level a CEO might be. Sulzberger made $5.9 million last year. Robinson made $11.2 million, some of which was her “retirement” package.

The New York Times is not a large company. Among media firms, it is actually a small one. Its revenue last year was a little over $2.3 billion. Its profits have been very modest recently. The Times’ market cap is down to less than $1 billion, and the stock trades barely one million shares most days.

The Times does not need a new CEO because it already has one. Until recently, it paid two. Now the company can save some money because of the “1997 Trust” and its control over how the the New York Times Company is run.

Douglas A. McIntyre

The search company reported:

Today we announced plans to create a new class of non-voting capital stock, which will be listed on NASDAQ. These shares will be distributed via a stock dividend to all existing stockholders: the owner of each existing share will receive one new share of the non-voting stock, giving investors twice the number of shares they had before. It’s effectively a two-for-one stock split — something many of our investors have long asked us for. These non-voting shares will be available for corporate uses, like equity-based employee compensation, that might otherwise dilute our governance structure.

Larry Page and cofounder Sergey Brin admitted the structure is unusual and perhaps even objectionable to some stockholders: “We recognize that some people, particularly those who opposed this structure at the start, won’t support this change — and we understand that other companies have been very successful with more traditional governance models.” The plan, the two believe, shields Google from short-term pressure because of decisions that might take away some of the firm’s independence. The other side of that argument is that the two men are essentially dictators.

There is nothing new about a dual-share structure, particularly at media companies. Family controlled firms, including the New York Times (NYSE: NYT), Viacom (NASDAQ: VIA) and News Corp. (NASDAQ: NWS), have used such measures to keep family or founder control. There is no evidence that the structure has hurt shareholders. As a matter of fact, public corporations controlled by Sumner Redstone, Rupert Murdoch and Warren Buffett have done relatively well.

The decision by investors to keep Google’s shares is one that weighs corporate control against remarkable results and share performance. Google reported revenues of $10.65 billion for the quarter ended March 31, 2012, an increase of 24% compared to the first quarter of 2011. GAAP net income in the first quarter of 2012 was $2.89 billion, compared to $1.80 billion in the first quarter of 2011. Google still relies too much on its search advertising business, but it claims its diversification into mobile platforms will change that.

Brin and Page can argue that shareholders have done well despite the firm’s share structure. Google’s stock is up almost 40% in the past five years while the S&P 500 is down slightly. Peeved investors can give up those kind of results. Then they have to figure out where else to put their money to get similar returns.

Douglas A. McIntyre

Though financial details were not disclosed, Letterman will not have to accept a lower salary, according to “The New York Times” Media Decoder. Meanwhile, according to earlier media reports, Ferguson may have doubled his current estimated $12.7 million annual salary as a result. The move would make him one of the highest-paid hosts in late night – almost as rich as Letterman’s estimated $28 million annual package.

Based on figures from multiple media sources, 24/7 Wall St. reviewed the estimated salaries of television’s late night hosts to identify the highest-paid entertainer in the business.

Read: The Highest-Paid Hosts on Late Night TV

According to Nielsen, while salaries continue to increase, viewership is shrinking. In fact, with the exception of ABC’s “Jimmy Kimmel Live!,” the viewership of every late-night show has fallen from last year. David Letterman and Jay Leno, the most popular and highest-paid hosts in the late night circuit, have together lost nearly half a million viewers. Still, their shows remain the two most popular on nighttime television. And at the end of the day, while not the only indicator of pay, popularity is the biggest factor in determining how much these hosts are going to make.

At the same time, the highest-paid host does not necessarily spell success for a network. Some of the most lucrative contracts in the late-night scene are for shows that are clearly not pulling their weight, and are based on expectations, rather than performance. After picking up estranged long-time NBC host Conan O’Brien and paying him an estimated $12 million a year, TBS has failed to see a return on investment. Compared to the same nine-month period a year ago, “Conan” has lost an average of more than 600,000 nightly viewers.

The case of O’Brien and TBS illustrates another major factor networks consider when determining hosts’ pay. O’Brien was expected to be the late night beachhead of TBS, much the same way that Comedy Central’s Jon Stewart and E! Network’s Chelsea Handler are for their networks. In many ways, they are more valuable to their respective networks because they disproportionately contribute to the network’s total viewership. This is one of the reasons Handler is paid more than double Jimmy Kimmel, despite the fact that she draws less than half the audience.

Another major factor in a host’s pay is highlighted by the Ferguson’s current salary and contract negotiation: length of service. Regardless of the final outcome, Ferguson already makes well more than Jimmy Fallon, who shares the same time slot. Fallon has only been a host since 2009, when he took over for O’Brien as the host of “Late Night.” Ferguson has been a host since 2005. Fallon’s viewership is well more than Ferguson’s, and his audience has declined less than “The Late Late Show,” which lost more than 300,000 average viewers last year. Despite all of this, Fallon makes $5 million per year, much less than Ferguson.

24/7 Wall St. examined a variety of sources, including TV Guide’s annual salary review, Forbes, the New York Times and the Wall Street Journal, to identify the salaries of the biggest late-night hosts on television. Average nightly viewership also was considered, along with the primetime ratings of their networks, as provided by ratings agency, Nielsen. 24/7 Wall St. excluded programs that do not feature year-round programing, and only included programs that air between 11:00 PM and 1:30 AM.

Pruitt became the CEO of McClatchy in 1996. The chain took on about $2 billion in debt, a great deal of it to buy rival Knight Ridder for $4.6 billion in 2006. In 2009, it teetered close to bankruptcy. A restructuring of obligations saved it, for a while at least. McClatchy is in financial trouble again. Pruitt leaves for the AP just in time to avoid leading McClatchy as it heads toward a new crisis.

McClatchy suffered the fate of many other chains. Its revenue, adjusted for the KR deal and the sale of one of its large papers, was almost $2.6 billion in 2007. Last year, the figure fell to just over $1.3 billion. The company had a tiny profit of $54 million in 2011. But the interest expense on its long-term debt load was $139 million. McClatchy’s long-term debt is still nearly $1.6 billion. Among the firm’s risk factors, according to its 10-K, is this: “This level of debt increases the Company’s vulnerability to general adverse economic and industry conditions.”

All newspaper stocks have fallen over the past five years as the industry has struggled with costs and a decline in print advertising. That drop has not been offset by a rise in digital revenue. But the market has been more disappointed with management at McClatchy than at other large chains. Its shares are down much more sharply than those of The New York Times (NYSE: NYT) or Gannett (NYSE: GCI). Pruitt’s poor decisions have badly hurt shareholders.

The biggest surprise about Pruitt’s appointment is that the AP board should be more aware of his shortcomings than anyone else. The board includes Michael Golden of the New York Times, Katharine Weymouth of the Washington Post (NYSE: WPO) and Craig A. Dubow of Gannett.

Pruitt has decided to leave his company, and its shareholders, at a time when they are in great peril, again. After his AP appointment, Pruitt said, “The Associated Press is the most important news organization in the world and an essential force in democracy.’ That it true. As such, it deserves a better leader.

Douglas A. McIntyre

A new study by the Pew Research Center’s Project for Excellence in Journalism shows that excellence in journalism in the news business is terribly threatened. News organizations have been unable to keep up with much of the rest of the content industry online in terms of growth, because their sites fail to provide good targeting for advertisers who spend the most money — brand marketers. As Pew puts it:

Yet how much of that growth will go to underwrite news remains in doubt and throws into question the financial future of journalism as audience continue to migrate online. What will happen pivots in part on whether the news industry can move into the more lucrative areas of digital advertising, particularly using consumer data to target ads, persuading major legacy advertisers to also advertise online and moving into new revenue areas.

Gannett (NYSE: GCI), the largest newspaper company in the U.S., recently said it will seek to buy out 665 employees. That does not seem like many people, but it is one more hit in a long line of layoffs. The Washington Post (NYSE: WPO) said it will offer another round of buyouts. If two of the most well-financed newspapers in the U.S. cannot afford to keep staff at current levels, what will happen to the rest of the industry?

Many newspapers and broadcasters that are part of public companies posted weak online figures in 2011. Internet revenue was supposed to cover the drop in traditional revenue. It has not. Even The New York Times (NYSE: NYT) has managed only very modest growth in its internet operations, and it is owns the largest news sites in America, based on number of visitors.

Perhaps the most troubling sign for any online site is the presence of “house ads.” These are ads for a news site’s own services, whether they are subscriptions or T-shirts with the content firm’s logo. Pew reports that 21% of online ads on major news sites fall into this category. Finance industry advertising is not far behind. Mortgage and credit card companies usually pay low rates for their marketing messages.

The news media considers its content more valuable than entertainment or social media content. That makes sense. News is essential to the public’s understanding of the world, but it is expensive to collect. The trouble is, advertisers do not care about the future of news media, no matter how important it might be.

Methodology: The study examined advertisements on the homepage and key inside landing pages (from the top five stories on the homepage) for a cross-section of 22 different news operations. Researchers analyzed 5,381 ads. They examined the industry placing the ad, the style of ad and the relevant importance of discount programs.

Douglas A. McIntyre

Fed president Richard Fisher says there is no need for QE3. (Reuters)

Panasonic posts a quarterly loss of $2.6 billion. (Reuters)

Martha Stewart Omnimedia (NYSE: MSO) says a provision in its deal with Macy’s (NYSE: M) would let it move ahead with its new JCPenney (NYSE: JCP) deal. (Reuters)

The U.S. plans to spend $2.8 billion to upgrade the F-16. (Reuters)

The Senate will pass a bill that makes it illegal for members of Congress to engage in insider trading. (WSJ)

Glencore and Xstrata may merge because of the rise in value of natural resources. (WSJ)

Bank “rainy day” funds may be run down by a need to boost earnings. (WSJ)

PetroChina (NYSE: PTR) will buy into Canadian shale assets to ensure future supply. (WSJ)

Corporate profits have risen but the portion paid out in taxes has fallen. (WSJ)

The Government Accountability Office says many hospitals overpay for devices. (WSJ)

The Obama Administration will accelerate the approval of wind farms off the East Coast. (WSJ)

Facebook will push advertisers to use its Sponsored Stories to increase its revenue. (WSJ)

Google (NASDAQ: GOOG) will try to add to the security of its Android mobile-device software to combat hackers. (WSJ)

The head of Dow Chemical (NYSE: DOW) says Europe is in a recession. (WSJ)

New York Times (NYSE: NYT) profits fall as digital revenue fails to grow enough to offset print. (WSJ)

CME Group (NASDAQ: CME) will set an insurance program to help farmers after the collapse of MF Global. (WSJ)

A St. Louis Federal Reserve report shows that startup growth has slowed. (WSJ)

Excess natural gas supplies could cause a price crash in the spring. (WSJ)

The Securities and Exchange Commission allows big banks to avoid some sanctions. (NYT)

The National Institute of Economic and Social Research says the UK will be in recession this year. (NYT)

Greek tax reform has not overcome the nation’s inability to collect taxes. (NYT)

China may put money into the European Stability Mechanism/European Financial Stability Facility to help the region. (FT)

In testimony before Congress, Bernanke expresses concern about the growth of the economy. (FT)

Greece faces more trouble in its effort to remain in the eurozone as its rescue falters. (Bloomberg)

Deutsche Bank will not take European Central Bank loans in a move to protect its reputation. (Bloomberg)

Douglas A. McIntyre