What's a newspaper company worth?

The general lack of enthusiasm for buying Knight-Ridder, either the whole company or the individual papers, is making me wonder whether the company’s stock is properly priced after all.
To justify the cost of buying the company for more its current price, you’d have to either cut costs or increase revenue. No big newspaper company is going to achieve any special cost-cutting advantages without dramatically changing their business model. For another media company (or any other company) to do this would be to incur huge risk of failure with little upside potential.
The market seems to be saying that newspaper companies are doing a pretty good job of managing the decline of their core products. Keeping these companies as pure plays may be the best way for us to manage our portfolios.
The big question remains. Can newspaper companies create the next-generation news services that the Internet audience demands, or will they remain cash cows for someone else’s big ideas?
Originally published on my blog at JupiterResearch.