IBT: Once A Moneymaker, Kaplan Is Now A Burden For The Washington Post Co
By Roland Li | 3 August 2012
The pressures on the Washington Post Co. (NYSE: WPO), the sixth-largest U.S. newspaper group by circulation, are twofold: the erosion in advertising and circulation revenue of its print properties, and the plunging profit of Kaplan, its for-profit education division, as the federal government enacts more regulations.
The Washington-based company reported Friday net income of $51.8 million ($6.84 per share) in the second quarter, as its net income from operations dropped 28 percent. Meanwhile, Kaplan’s revenue dipped by 9 percent, to $558.4 million; its total student enrollments dropped by 14 percent; and its operating profit sharply fell by 84 percent.
Kaplan was previously a huge asset for the Washington Post Co., even prompting it to begin describing itself as an education and media company. But investigations revealed there were an array of unethical practices at the subsidiary, including deceptive marketing and improper spending, as noted by Accuracy in Media. The Post spent $5 million after taxes to restructure its Kaplan division. The credit-rating agencies Standard & Poor’s and Moody’s have also moved to lower the company’s outlook because of Kaplan’s woes.
Its flagship newspaper isn’t faring much better. During the second quarter, daily circulation fell 9.3 percent and Sunday circulation fell 6.1 percent, year on year. Online advertising at the Post, its affiliated website Slate, and other sites increased 8 percent, to $26.3 million, compared with the previous year. Unlike holdings of its major competitors — the New York Times Co. (NYSE: NYT), Gannett Co. Inc. (NYSE: GCI), and the Dow Jones unit of the News Corp. (Nasdaq: NWS) — the Washington Post has not established online pay walls.
The Post has retrenched under executive editor Marcus Brauchli, the former top editor at the Wall Street Journal. It has closed its foreign and national bureaus to cut costs, and it now focuses on the Washington metro area, ceding national coverage to rival publications in New York. But without the education business subsidizing news and with the ceaseless declines of print, the company is in dire need of additional revenue streams.
Shares of the Washington Post Co. fell 46 cents, or 0.14 percent, to $330.29 at Friday’s market close.
Originally published at: http://www.ibtimes.com/articles/370305/20120803/washington-post-kaplan-2q-burden.htm