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The Associated Press February 7, 2011, 6:48PM ET

Newspaper stocks jump on content hopes

Newspaper stocks jumped Monday after AOL agreed to buy online news site Huffington Post for $315 million, the latest in a string of deals that show investors are interested in companies that cover the news and websites that carry news.

Last month, online content publisher Demand Media saw its shares jump 33.2 percent in its first day of trading after offering its stock at $17. The company's freelancers produce articles for its site and other publishers.

Last week, News Corp. stock rose 2.6 percent the day it launched the first iPad-only newspaper. That was despite a 0.3 percent drop in the S&P 500 index.

The New York Times is also set to begin charging readers for access to its website, saying it will soon release the details of when and how.

"All of a sudden, people are looking for ways to play content for the iPad and for the Internet and for Web audience growth," said Doug Arthur, an equity analyst with Evercore Partners. "And they're looking at the newspapers for having that content."

Content drives people to websites, where ads are sold.

Gannett Co.'s stock rose 46 cents, or 2.8 percent, to $17.12 Monday. It had climbed as high as $18.93, or 14 percent, earlier in the day. Gannett publishes USA Today and local newspapers across the country. The New York Times Co. rose 29 cents, or 2.7 percent, to $10.90. Media General Inc., publisher of The Tampa Tribune, jumped 58 cents, or nearly 11 percent, to $6.01. Lee Enterprises Inc., whose newspapers include the St. Louis Post Dispatch, gained 10 cents, or 3.6 percent, to $2.92.

"The (AOL-Huffington Post) deal raised the value on leading branded digital properties," said John Eade, chief executive of Argus Research.

Newspaper stocks have been struggling because of declines in print advertising, the main source of revenue, as advertisers turn to free or cheaper alternatives on the Web. Although online ad revenue has been growing at newspapers, it's not enough to make up for the losses in print. From 2005 to 2010, Gannett, Lee Enterprises, Media General and The New York Times did worse than the S&P 500 index every year except 2009.

But compelling news stories will draw readers, whether online or in print, said Douglas Lane, whose Douglas C. Lane & Associates investment advisory firm is one of Gannett's biggest shareholders. "Local newspapers are going to be here for a very long time. The strength of this company is in all their local companies, and they're digital."

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