Newsprint Tariffs Will Cost Major Chains Tens Of Millions Of Dollars

The Tampa Bay Times laid off 50 people last week. Management blamed the action on tariffs levied against newsprint imported from Canada to the U.S. That bump in prices will cost Tampa $3 million a year.  Major newspaper chains face expenses that will be much higher, although these expenses are weighed against larger revenue

Several large newspaper chains will face the largest increases in newsprint prices in absolute dollars. These are Gannett (NYSE: GCI), tronc (NASDAQ: TRNC), hedge fund owned Digital First Media, which just laid off dozens of people in Denver and on the West Coast, Hearst, Advance Media, McClatchy (NYSE: MNI) and Gatehouse Media. Among them, they own most of the large newspapers in America and hundreds of newspapers in aggregate. Each of these companies has newsprint demand much larger than that of The Tampa Bay Times.

These companies operate on razor-thin margins, often less than 5% based on net income. McClatchy, for example, had net income before taxes of $4 million in the fourth quarter on $245 million in revenue.

Newspapers, with the exception of a few which can charge large sums for digital subscriptions, have run out of options to increase revenue. Print ad revenue has fallen quickly over the last decade. So have numbers of print subscribers. Digital advertising seemed like a promising offset. However, in many cases, that growth has flattened.

The only U.S. papers which have been able to buck these trends are The New York Times (NYSE: NYT), the Jeff Bezos-owned Washington Post, and The Wall Street Journal, each of which produces content that appeals to enough people that they have created large digital subscription bases. At the end of the last reported quarter, The New York Times had over 2.6 million digital-only subscriptions. No other newspaper has a number which is even close.

Papers have already cut to skeleton staffs. Some newsrooms are less than half of what they were at the turn of the century. Papers have also cut the number of papers they print. Additionally, they have chopped the number of pages in each edition.

Recently, newspaper executives have found themselves in an ever-shrinking box. Their options, in most cases, are down to zero. Higher newsprint costs put those options into negative numbers if that math is even possible.

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