• AP, Thursday, March 9, 2006 10:04 AM

Everyone with a stake in the newspaper industry will be observing with keen interest the final phases of bidding this week for the assets of San Jose, Calif.-based based Knight Ridder. While many big newspaper companies are still highly profitable, the general sense among investors is that newspapers may soon be hobbled by the seemingly unstoppable growth of the Internet, which in a variety of ways appears to be a better economic model for distributing content and advertising. "If big newspaper owners such as Gannett Co. don't step up and make what investors believe to be a strong bid, pessimists might take it as a sign of waning confidence in the future prospects of an industry that many already believe to be in decline," writes Associated Press media reporter Seth Sutel. "On the other hand, paying a rich price could also lead investors to punish the acquiring company. 'It's a Catch-22,' says Merrill Lynch newspaper analyst Lauren Rich Fine." Morgan Stanley analyst Doug Arthur is more sanguine about the outcome of the Knight Ridder sale. Whatever happens, he says, should not be taken as a sign of the industry's future. Newspapers, he believes, just happen to be going through an especially challenging period at this time, but that may change as newspapers better adapt to their new hypercompetitive environment.

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