Newspapers, Writing's on the Wall

Every time I think that my business is challenging, I think of what the newspapers face. The newspaper game, for the last decade, has been one of cost cuts and mergers. There's been no growth in the business.

Now, with regulatory authorities frowning on any further mergers, with the cost cuts already in place to the point where you might just as well run Associated Press copy throughout if you make more job eliminations and with newsprint and delivery costs through the roof, a bleaker situation looks, alas, even more bleak than I thought.

Nobody controls costs as well as Knight-Ridder (KRI - commentary - Cramer's Take). But its negative announcement this morning reveals these newspapers as the ultimate value trap. They are losing on every line item. Now it's auto classifieds; they are down big.

That can only be explained as a share-take by the Web, because last I looked, the auto companies were advertising up a storm.

These newspaper companies are in dire need of something, but, frankly, I don't know what it is. They missed the Web, mostly because they were so intent on developing their own versions of the Web that they left everything ungated. That strategy made Google (GOOG - commentary - Cramer's Take) and Yahoo! (YHOO - commentary - Cramer's Take) the only newspapers you needed. They missed cable, except for Scripps (SSP - commentary - Cramer's Take). They seem incapable of being anything other than public services, and even there, they are falling down on the job.

Sure, they have cash flow. But who can monetize it? To me, they are just declining assets, call options with some dividend money thrown in. With no one available to take them out. Or, with boards that actually don't want to be taken over, a la The New York Times (NYT - commentary - Cramer's Take) and Dow Jones.

In other words, stay away.

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At the time of publication, Cramer was long Yahoo!.

James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for ActionAlertsPLUS. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." Cramer appreciates your feedback and invites you to send him an email by clicking here.