John Rogers' Ariel Capital Management Increases its Stake in McClatchy, the Wichita Eagle's Owner

John Rodgers is an old and savvy investor. Media Daily News reports that his investment company has raised its ownership stake in the McClatchy Company to 15.5 percent. The Chicago Tribune reports, "'Our firm is based on contrarianism. We often find that's where opportunity is,' said Ariel founder John Rogers."

The McClatchy family owns about 30% of the outstanding shares and has super shares to allow it control. Hedge fund Citadel Investment Group also has accumulated 3.2 million McClatchy Class A shares.

Newspapers have always been great cash generators. John Rodgers, Citadel, Rupert Murdoch, and Sam Zell all seem to think they are worth investing in. Everyone else is avoiding them like the plague. At least in Murdoch’s case we know that his strategic insight is that he who controls the content commands the audiences.

Ft.com has an interview with Zell that provides a view of the business that he back up with a very large bet.

The Decline in Newspaper Ad Revenue is Accelerating.

The Wall Street Journal reports today that "The downturn in the newspaper industry is getting worse.

"Last fall, newspaper executives and analysts were caught by surprise by the severity of a slump that took hold last summer. Since the beginning of this year, the rate of decline in advertising revenue has accelerated. Total print and online ad revenue was down 4.8% to $10.6 billion in the first quarter from a year earlier, according to the Newspaper Association of America, compared with its full-year decline in 2006 of 0.3%." You can see the acceleration in the chart from the Journal on the right.

Newspapers continue to increase their internet revenues: their 2006 online ad revenue was up 31.5 per cent. However, at only 5 percent of the total, the internet revenues are no where ner enough to offset the losses.

Direct mail spending continue to grow, but faces a strategic problem. While newspapers are rich in content, they are increasingly poor in ad revenues. Direct mail revenues grow, but the medium is increasingly poor in content.

Coen’s Midyear Forecast for Direct Mail: Up 5%

Robert J. Coen’s midyear forecast for Direct Mail is for a five percent growth in spending to $61.6 billion during the current year. That compares with a growth of only 3.1 percent for total advertising spending. If these figures hold up through the end of the eyear, Direct Mail will have a 21.2 percent market share of the ad market.

Robert J. Coen of Universal McCann is the world's leading authority on advertizing expenditures.