Washington Post Company (WPO)

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WPO's newpaper and magazine divisions, have suffered in recent years as the growth of Internet advertising has siphoned a steady flow of advertising dollars away from traditional print media. Although WPO is seeking to recapture some of these dollars by strengthening its own online presence, overall growth rates for its print media devisions have been stagnant.

[edit] Business Overview

WPO's five main business divisions include education, newspapers, magazines, television broadcasting, and cable television. WPO's newspaper, television and magazine divisions make money from advertising and subscriptions.

WPO 2006 Annual Report^[1]

[edit] Education

Kaplan, Inc., a subsidiary of WPO, provides a range of educational services for children, students and professionals. In 2006, this was the largest division at the company, accounting for 43% of revenue.

• Test Preparation and Admissions Division - prepares students for many standardized exams such as SAT, LSAT, GMAT, MCAT, GRE, and nursing and medical boards. ^[2]

• Professional Division - offers education and preparation courses to corporations and individuals. Programs include Kaplan Financial, which has courses for financial services and insurance industry professionals and Kaplan CPA, which offers test preparation courses for the Certified Public Accounting Exam, and other professional programs. ^[3]

• Kaplan Publishing - publishes a variety of business (i.e. sales and marketing, personal finance, entrepreneurship, real estate and leadership) and educational books (i.e. test preparation and admissions). While Kaplan used to co-publish its books with Simon & Schuster, starting in June 2006, Kaplan became the sole publisher of its content. ^[4]

• Higher Education - consists of 74 schools in 22 states that provide classroom-based instruction and two institutions that specialize in distance education. The classroom-based schools offer a variety of bachelor degree, associate degree and diploma programs. The distance education schools are Kaplan University and Concord Law School, which offer various courses which students can take online. ^[5]

[edit] Newspaper Publishing

• The Washington Post a morning daily and Sunday newspaper distributed primarily in Washington, D.C., Maryland and northern Virginia. ^[6]

• Express Publications a weekday tabloid newspaper named Express, which is distributed free of charge using hawkers and news boxes near Metro stations in Washington, D.C. ^[7]

• Washingtonpost.Newsweek Interactive produces washingtonpost.com, which averaged more than 220 million page views per month during 2006. ^[8]

• Post-Newsweek Media - publishes two weekly paid-circulation, three twice-weekly paid-circulation and 34 controlled-circulation weekly community newspapers. ^[9]

• The Herald - a morning daily newspaper distributed primarily in Everett, Washington, about 30 miles north of Seattle. ^[10]

• Greater Washington Publishing - publishes several free-circulation advertising periodicals that are distributed in the greater Washington, D.C. metropolitan area. ^[11]

• El Tiempo Latino - a weekly Spanish-language newspaper that is distributed free of charge in northern Virginia, suburban Maryland and Washington, D.C. ^[12]

[edit] Television Broadcasting

WPO owns six television stations located in Houston (NBC), Detroit (NBC), Miami (ABC), Orlando (CBS), San Antonio (ABC), and Jacksonville, Florida (independent). These stations are located in the 10th, 11th, 16th, 19th, 37th and 50th largest broadcasting markets in the United States. ^[13]

[edit] Magazine Publishing

WPO owns Newsweek, a weekly news magazine published both domestically and internationally. In the US, Newsweek ranks second in circulation among the three leading weekly news magazines (Newsweek, Time and U.S. News & World Report. ^[14]

[edit] Financial Results

Revenue for 2006 was $3,905 million, up 10% compared to revenue of $3,554 million in 2005. Education division revenue in 2006 increased 19% to $1,684 million, while Newspapers revenue remained basically flat at $962 million. In recent years, print advertising revenue has seen a steady decline in recent years due in large part to the increasing popularity of the Internet and online advertising. As a result, the newspaper's website, generated over $100 million in revenue for the first time in 2006. Operating income declined slightly , primarily due to one-time increased stock compensation expense at the education division and early retirement plan buyouts at The Washington Post. ^[15]

WPO 2006 Annual Report^[16]

While education and newspapers are the company's two largest segments, they have pretty low operating margins (<10%), whereas WPO's local TV and cable TV offerings have margins in excess of 20%. ^[17]

WPO 2006 Annual Report^[18]

[edit] Trends and Forces

[edit] Impact of the Internet

WPO, along with other leading newspaper publishers such as New York Times Company (NYT) and Gannett (GCI) have been impacted tremendously by the growth of the internet. One reason the Internet has dramatically affected the newspaper industry is because it has become cheaper to reach audiences. In 2006, it was estimated that the average newspaper advertising CPM (or cost per thousand viewers) was around $25, while the comparable metric for Internet hovered around $5. In addition, Internet advertising companies such as Google (GOOG) and Yahoo! (YHOO) have implemented performance-based business models, allowing advertisers to pay only when a viewer activates a desirable action (such as clicking on a link). Readers are also increasingly turning to the internet for getting their news and newspaper circulation has decreased.

WPO 2006 Annual Report^[19]

[edit] Increases in Newsprint Prices

One of the biggest expenses for the newspaper and magazine divisions is newsprint (paper). In 2006 alone, WPO's newspapers consumed about 170,000 tons of newsprint for printing. The price of newsprint has increased over the past few years, ranging around $580 - $600/ton in 2006. As a whole, WPO spent more than $100 million in 2006 on newsprint. As seen above, WPO's newspapers and magazines are already very low margin businesses. Thus a further increase in the cost of newsprint would make it more expensive for WPO to print their publications, and this could negatively affect the company's profits. ^[20]

[edit] Growth in Standardized Testing

WPO's Kaplan division has grown tremendously over the years due to introduction of new standardized tests, for which Kaplan provides training. The No Child Left Behind Act (NCLB) has also positively impacted Kaplan. ^[21] NCLB, introduced in 2001 by President Bush, has put an increased emphasis on standardized testing in American Schools by requiring states to develop exams in various subjects to be given to all students in certain grades. Kaplan has capitalized on NCLB by offering supplemental education and training to students.

[edit] Hurricanes

WPO's Cable One subsidiary is vulnerable to extreme weather conditions, especially hurricanes. Nearly 12% of Cable One's customers live in gulf coast area, which is frequently affected by hurricanes. Following Hurricane Katrina, the cable division reported a loss of $23.7 million in damaged property and lost thousands of subscriptions. ^[22]

[edit] Market Share

USA Today, The New York Times, and Wall Street Journal combined have nearly the same circulation as the next seven largest newspapers. The Washington Post has approximately 8% market share within the Top 10 US newspapers.

Audit Bureau of Circulations^[23]

[edit] Competition

In the education segment, WPO competes with Princeton Review (REVU) and McGraw-Hill Companies (MHP), which also offer test and admission preparation services.

In the national newspaper segment, WPO faces competition from New York Times Company (NYT), Gannett (GCI), and Dow Jones (DJ).

 Washington Post Company

	Select All  |  Select None Metrics Average Sunday Circulation Newsprint Used Raw Material Costs Number of Pre-prints Operating Income Advertising Revenue Average Weekday Circulation Circulation Revenue Advertising Volume in Inches Net Income Cancel

	Select All  |  Select None Companies Belo (BLC) Daily Journal Corp. (S.C.) (DJCO) Gannett (GCI) E.W. Scripps Company (SSP) Gatehouse Media (GHS) Journal Register Company (JRC) Journal Communications (JRN) Lee Enterprises (LEE) Media General (MEG) McClatchy Company (MNI) Hollinger International (SVN) New York Times Company (NYT) Washington Post Company (WPO) Cancel

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Company	Data From	Advertising Revenue	Average Weekday Circulation	Circulation Revenue	Advertising Volume in Inches	Net Income
Belo (BLC)	2006	$1.4B[28]	748K[29]	$116M[30]	Add	$131M[31]
E.W. Scripps Company (SSP)	2006	$1.77B[32]	1.13M[33]	$123M[34]	Add	$353M[34]
Gannett (GCI)	2007	$4.94B[35]	5.25M[36]	$1.25B[37]	82.8M[38]	$975M[39]
New York Times Company (NYT)	2006	$2.08B[40]	2.18M[41]	$890M[40]	20.3M[42]	($543M)[43]
Washington Post Company (WPO)	2006	$1.36B[44]	681K[45]	$783M[44]	2.61M[45]	$324M[44]

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See all Newspapers Industry WikiData

[edit] References

1. ↑ WPO 10K 2006, Pg 49
2. ↑ WPO 10K 2006, Pg 1
3. ↑ WPO 10K 2006, Pg 2
4. ↑ WPO 10K 2006, Pg 2
5. ↑ WPO 10K 2006, Pg 3
6. ↑ WPO 10K 2006, Pg 6
7. ↑ WPO 10K 2006, Pg 6
8. ↑ WPO 10K 2006, Pg 7
9. ↑ WPO 10K 2006, Pg 7
10. ↑ WPO 10K 2006, Pg 8
11. ↑ WPO 10K 2006, Pg 8
12. ↑ WPO 10K 2006, Pg 8
13. ↑ WPO 10K 2006, Pg 9
14. ↑ WPO 10K 2006, Pg 12
15. ↑ WPO 10K 2006, Pg 37
16. ↑ WPO 10K 2006, Pg 49
17. ↑ WPO 10K 2006, Pg 68
18. ↑ WPO 10K 2006, Pg 68
19. ↑ WPO 10K 2006, Pg 6
20. ↑ WPO 10K 2006, Pg 19
21. ↑ US Department of Education
22. ↑ WPO 10K 2006, Pg 39
23. ↑ Audit Bureau of Circulations
24. ↑ NYT 10k 2006
25. ↑ DJ 10k 2006
26. ↑ GCI 10k 2006
27. ↑ WPO 10K 2006, Pg 6
28. ↑ Source: BLC form 10-k pg. 21,23
29. ↑ Source: BLC form 10-k pg. 6
30. ↑ Source: BLC form 10-k pg. 23
31. ↑ Source: BLC form 10-k pg. 18
32. ↑ Source:SSP form 10-k pg. f-27
33. ↑ Source:SSP form 10-k pg. 6,8
34. ↑ ^{34.0 34.1} Source:SSP form 10-k f-27
35. ↑ Gannett 2007 10-K page 25
36. ↑ Gannett 2007 10-K page 26
37. ↑ Gannett 2007 10-K page 25
38. ↑ Gannett 2007 10K page 25
39. ↑ Gannet 2007 10-K page 22
40. ↑ ^{40.0 40.1} Source:NYT form 10-k pg. 31
41. ↑ Source:NYT form 10-k pg. 2,4 & 5
42. ↑ Source:NYT form 10-k pg. 32
43. ↑ Source:NYT form 10-k pg. 20
44. ↑ ^{44.0 44.1 44.2} Source: WPO form 10-k pg. 49
45. ↑ ^{45.0 45.1} Source: WPO form 10-k pg. 6