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Greedy Health-Insurance Vultures vs. Lowly Newspaper Heroes
A tale of two industrial profit margins that you might not expect. First, care of Barron's, our beleaguered champions of the First Amendment:
Many newspapers still have almost double the profitability of other media sectors, such as movies, music and books -- which have long struggled to achieve margins of even 10%.
Even good businesses can have bad capital structures. Many newspaper companies took on debt that could have been easily supported if profitability had been maintained. The problem is that current earnings, even if superior relative to those of other media businesses, are far below what anyone had anticipated.
For instance, McClatchy put much of its $2 billion of debt in place in early 2006, when margins still approached 30%. In 2008, it had 20% margins on almost $2 billion of revenue, but debt service consumed its profit. As a result, while its recent share price at $3. 65 is well above its July all-time-low of 40 cents, McClatchy's stock-market value is still barely $300 million -- down from a high of more than $3 billion as recently as 2005.
Second, those greedy health insurance tycoonsters, according to the Associated Press:
Quick quiz: What do these enterprises have in common? Farm and construction machinery, Tupperware, the railroads, Hershey sweets, Yum food brands and Yahoo? Answer: They're all more profitable than the health insurance industry. In the health care debate, Democrats and their allies have gone after insurance companies as rapacious profiteers making "immoral" and "obscene" returns while "the bodies pile up."
Ledgers tell a different reality. Health insurance profit margins typically run about 6 percent, give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.
Profits barely exceeded 2 percent of revenues in the latest annual measure.
Atabrat|10.26.09 @ 10:39AM|#
There are a couple of repeat sentences. There are a couple of repeat sentences.
|10.26.09 @ 10:41AM|#
If the internet has made the newspaper industry no longer a viable business, why is it that only US papers seem to be going out of business? I don't ever hear anything about UK papers having money problems.
|10.26.09 @ 10:56AM|#
Perhaps John, because papers like The UK Telegraph actually report news with a more overall balanced presentation that most of the big US newspapers (cough, NY Times, cough). They are providing a product that dispenses information is a way that generally doesn't insult the intelligence of its readers. Most US papers are sycophants to both government and its progressive agenda. And apparently, too many in our country lap it up reflexively.
DJF|10.26.09 @ 11:06AM|#
I don’t think its balance, I think that each of the major British papers has carved out its own audience with their own viewpoint and they don’t hide their viewpoint. The person who reads the Telegraph is not going to read the Guardian and vice versa but then again they aren‘t looking for balance. American papers insult anyone with intelligence by pretending they are impartial when its obvious that they are just spouting their own approved opinion, usually a weird kind of pro-government bureaucratic liberalism
Bergholt Stuttley Johnson|10.26.09 @ 11:10AM|#
Plus they (or at least some of them) have topless chicks on Page 3.
CaptainSmartass|10.26.09 @ 11:45AM|#
Yeah, cause you can't get pictures of topless chicks on the Internet.
|10.26.09 @ 11:13AM|#
UK papers are always well written and entertaining, even if you don't agree with them. American papers suck. They are just the conventional wisdom of a certain group of elite repeated over and over again. They totally lack imagination. And thus provide no reason to read them. American newspapers are dying not because of their business model but because they are the worst papers in the free world.
|10.26.09 @ 11:50AM|#
True, DJF, the UK newspapers are definitely targeted to it's core audience, but I would argue that The Telegraph and the Guardian, do present some stories with views and biases opposed to the overall tone of the paper. Unlike, 90% of US papers, they end product does not have a homogenized, "cookie cutter" feel to them. I agree with John that UK papers are more rich linguistically and more likely to be blunt, giving a feel of "authenticity".
DJF|10.26.09 @ 10:41AM|#
I read an article a couple of months ago that the problem the NYT’s had was they took on debt and had only a small ($40 million) cash reserve built up in the good times. Since they are a billion dollar plus corporation the $40 million in cash reserves were used up quickly once the good times ended. They had been making lots of money but instead of putting into reserves they paid it out in dividends and in forcing up the stock price. So they were living on the edge and counted on getting loans in bad times and getting loans these days is not like it was in the bubble times. That is why they had to sell what was left of their soul to Carlos Slim the Mexican billionaire, they followed the advice of all the other “smart people” and cut away reserves, paid out big dividends and borrowed heavily
Bergholt Stuttley Johnson|10.26.09 @ 10:50AM|#
Hey Anonymity guy, I've been meaning to ask you something for a while. Wtf is the "RT" there for?
EJM|10.26.09 @ 10:48AM|#
It's not just the newspaper industry: If Clear Channel or Citadel Broadcasting goes under soon, it'll be because of their debt.
The Editor of Comments|10.26.09 @ 1:26PM|#
The following comment involves a leading sarcastic remark, followed by commentary about the newspaper industry. Please note that the commenter is, in fact, a known libertarian, advocate of free markets, and hater of threaded comments.
Reader discretion is advised.
|10.26.09 @ 10:54AM|#
When will you libertarian wackos at Reason understand that all profits are bad?
What's interesting to me about all of this is that newspapers could've done okay if they'd understood that the market was changing. Like it wasn't bleeding obvious when the Internet began to take off as a content source in the 90s.
Worse yet, the traditional press has been, in recent years especially, throwing away the one thing that might have fended off the purely web-based sources indefinitely--credibility. People will pay a premium for information from a reliable source. It's very frustrating to hear a story and wonder what the heck is really going on. However, very few seem interested in having a reputation for credibility. They'd rather ask for special treatment from the government than compete in any way.
CaptainSmartass|10.26.09 @ 11:47AM|#
Can we get an ignore feature? Would be a great way to handle trolls like this.
BakedPenguin|10.26.09 @ 3:23PM|#
It would have worked better if he'd put "New York Times chief editor" in the name field.
Abdul|10.26.09 @ 11:04AM|#
Missing from the seconds photo is the insurance industry guy lighting the cigar with a $100 bill, or better yet, an application from an uninsured orphan that's getting rejected because he has a pre-existing condition like a planter's wart.
jtuf|10.26.09 @ 11:17AM|#
Newspapers make a product that most people can live without, so no one fights to get it for free. Health insurance provides a product that many people want, so people start believing the claims that justify them getting free health insurance. Build a better mouse trap, and people will beat down your door to steal it from you.
|10.26.09 @ 11:26AM|#
Well maybe newspapers are "struggling" because they're not publishing any reports of how people are getting legitimate claims denied left and right by insurance companies. Everyone keeps telling me they deny everything for profit but I would think that would be big news and there's be some evidence to support that theory. Yet that's not somehow fit to print? Hmm.
Citizen Nothing|10.26.09 @ 11:37AM|#
A lot of newspaper editors view their product as if it were spinach -- and they're gonna force what's good for readers down their throats.
Tim Cavanaugh|10.26.09 @ 11:47AM|#
I like UK newspapers better than US newspapers too, but I think the reason we don't hear about them rapidly losing circulation and going out of business is that we don't live in the UK. Print is not as good as digital no matter what country you go to.
|10.26.09 @ 11:57AM|#
Thanks for the links Tim. It would be nice if our government lackeys would take note of the proper way to handle a failed business model, like those in Wales: do not prop it up with subsidies.
John Berger|10.26.09 @ 12:08PM|#
Generally I've found the mainstream UK press does a lot more investigative journalism rather than the "he said, she said, here's what they said" the mainstream journalism in the states does. I could really care less what someone says or even less about what the polls say, give me facts, give me figures.
That's not to say that there isn't some degree of bias in UK media, there is; however, I'd rather know the facts upon which a faulty global warming story is based upon than hear that some congressmen thinks corporations are all evil, evil, exploiting bastards and never get any empirical information to base my own opinion on.
EJM|10.26.09 @ 11:58AM|#
FWIW, I forgot to mention earlier that the latest ABC figures for U.S. newspaper circulation have just been released.
Citizen Nothing|10.26.09 @ 12:06PM|#
Thanks for the link, EJM. I see my paper is down 4.75% Could be worse.
@|10.26.09 @ 12:15PM|#
Health insurance profit margins typically run about 6 percent
The dirty little secret in the health care debate isn't even about health care. It's about whether individuals of any profession have a right to profit from their work. It's about whether certain professions should be vilified if they even mention a profit motive. Health care is being discussed as if access to doctors is a natural right, indisputable, irrefutable. From that flawed premise, all subsequent debate is tainted. It can't result in anything that an honest, rational, self-reliant individual would consider uncorrupted and equitable. But then, "reform" isn't being marketed to persons with self respect and dignity.
|10.26.09 @ 2:31PM|#
I have to say that it does occur to me that legal services could be argued to be just as much a "right" as healthcare. This prospect frightens and confuses me.
BakedPenguin|10.26.09 @ 3:30PM|#
Pro Lib - the people who would write such a "right" into law are in legislative bodies composed of by 90% lawyers.
I wouldn't worry about it happening anytime soon.
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