Not everybody is a winner in the new Net world. In fact, there are some serious losers: television, print, brokers, maybe even banks. There will be a long list of casualties when the Net is finished with its work.
Most of these casualties remain invisible to the naked eye or are under the radar screen. Let's take a look at how the Net is making roadkill of a particular industry -- media -- again as a method of understanding the phenomenal move in these stocks.
The most glaring casualty out there is your local newspaper. Take a look at the siege these companies are experiencing. First, let's look at the typical newspaper's revenue side. The most lucrative single portion of a newspaper is its classifieds. These cost very little to produce, but because of the reach of the paper, they have immense value to readers. Yet, the Net is a much more efficient way to do the classified business. That's what
is all about. This business has to be going away in spades for these guys.
Second is display advertising. But we know that the Net retailers are cutting into the budgets of the big display advertisers. (The stocks tell you that.) And big-ticket items, the kind that get the big margins, are better sold on the Net anyway, because the customer avoids the sales tax. (Looming problem there.)
Circulation? Subscription? Forget it. Nobody makes any money from these things. It is a huge expense to sign you up and make sure that the paper gets delivered to you. In fact, the cost side of the delivery is so immense and so variable -- paper, labor, gasoline for trucks -- that it is positively antediluvian vs. the Net.
So what has been the newspaper industry's response to the Net? Even more bizarre. Every paper has developed a Web site, at a cost of millions upon millions of dollars in technology and staffing, and then gives it away for free! There's a business model
would love! Some publishing entities even pay to have their stuff put on the Net by giving money to
! And very few ads are sold on the sites because it is more lucrative to have print ads. These companies are losing money hand-over-fist on the Net.
All papers are in denial about the Web. All of them. They are sitting there praying that somebody doesn't develop a wireless version of the Net that makes it so their free versions are more convenient than their paid versions. But I have bad news for these Luddites. We should have just such a product in about a year's time. Then, I ask you, why pay to get the
in smudgy chunky print for $100 when you can get the
online for free wherever you go? You can't make people pay for a version of something they can get anywhere for free.
Magazines are not much better. In the financial business right now, the monthly guys are putting the finishing touches on their March issues. Yes, their March issues. What a bunch of visionaries. The February issues were completed about 10 days ago. Hold it! How do we know what the market is going to look like in February when we don't know what it will look like today?
You know what we can do? We can pretend!! When I used to write for monthlies, I did a lot of this. I had to. It takes forever to print up a monthly and have it mailed. And it is expensive as all get out. You have to wait in the queue and pay less than the weeklies, which are sopping up every color-printing facility in the country.
What good is stale information? Beats me. The Web has made it so that it is just as cheap to deliver things
as it is a month or two months or three months from now. So what has the magazine-publishing industry done about this? It has put the hard-copy magazine on the Web and made it available for free at the same time as the print version, which it charges for, comes out. Wow, wake
I know, I know. This stuff is amazingly stupid. But did you ever wonder why Net stocks go up every day but the stocks of publishers move at quite a different clip?
: Thought I wouldn't write this for a while: See you on "Squawk"!
James J. Cramer is manager of a hedge fund and co-chairman of
At the time of publication the fund was long America Online, though positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to