October 31, 2017

Cox Media Group's decision, announced today, to halve its newspaper holdings by selling properties in Austin and Palm Beach fits with a number of trends in a busy year of newspaper properties changing hands.

WHY SELL? A dispersed group of four newspapers and their digital sites doesn't yield much benefit of scale — either in shared services to help control expenses or in audience reach to interest advertisers.

As the expense of keeping current in content management systems and other technology continues to grow and developing new revenue streams requires start-up investment, being  relatively small carries significant disadvantages. Doubly so in an unforgiving financial climate as sharp print advertising losses show no sign of steadying out.

Cox is pulling back to the core markets of founder James Cox, first in Dayton, then in Atlanta.  The New York Times did the same when it sold the Boston Globe and its regional papers. And A.H. Belo has chosen to focus on the Dallas Morning News and the nearby Denton Chronicle, selling off the Providence Journal and Riverside (Ca.) Press Enterprise.

When times were flush,newspaper companies added properties as a diversification strategy.  But times are emphatically not flush any more.

WHO ARE PROSPECTIVE BUYERS? Well, there are plenty of them. A decade ago I would have said that Austin was about the perfect newspaper market — a big state capital, a university town, a fast-growing tech economy and a great music and culture scene to boot.  Austin is still a strong horse in a weak field. Cox put the American-Statesman up for sale once before, but the timing, coming out of the 2006-2008 recession was bad.

Gannett and New Media Investment/GateHouse have consolidation strategies in place and are sure to take a look. Gannett doesn't have much of a presence in Texas, nor does GateHouse but its nationwide editing and layout hub is in Austin.

Privately held Hearst is a choosy buyer, but it has the needed financial clout and could add the American-Statesman to round out a Texas family with the Houston Chronicle and San Antonio Express-News. Hearst has bought two groups of newspapers in the past two years to build a strong statewide position in Connecticut.

West Palm Beach and the rest of Palm Beach County may not be quite as attractive as Austin.  But both Gannett and GateHouse have a number of holdings already in Florida. Tronc seems to have moved on from acquisitions to a Los Angeles-centered digital growth strategy. Still, the Post would pair nicely with Tronc's Sun-Sentinel in Fort Lauderdale.

In either market, sale to a wealthy local individual who wants to get into the news game is a possibility. And the two properties do not necessarily need to go together to the same buyer.

By announcing, rather than confidentially arranging, a sale, Cox seems to be positioning for an auction that might push up the tepid sales price these days for newspaper properties.

ARE TV AND PRINT REMARRYING? Cox put together its newspaper, TV and digital holdings in Dayton nearly a decade ago and subsequently in Atlanta.

This strategy would seem to run counter to the recent trend of splitting companies in two with big holdings of both newspapers and local stations (Gannett, Tribune, Belo and Media General). But perhaps not. Those four are public companies, and the rationale for the spinoffs was that revenue declines and the falling valuation of newspapers and their digital outlets dragged down the stock price of the broadcast half.

However, if Wall Street is taken out as an issue, the thinking seems to be that local TV stations need to get their digital act together. Newspaper-centric enterprises need to get better at video. And the two can increase the chances for success if they work together.

In a transaction earlier this year that did not get a lot of attention, Raycom broadcasting merged with Community Newspaper Holdings Inc. (CNHI).  Both are based is Montgomery and have a common main owner, the Alabama public employees pension fund.

PRIVATE = FLEXIBLE. As I wrote last week, family-owned Adams Publications Group has assembled 100 properties in more than a dozen transactions. It finds plenty of owners of other single papers or chains in its target group of small dailies and weeklies who want out.

But mid-sized family groups like Morris Communications and Calkins Media have also rather surprisingly chosen to exit the business this year. Fair to say that any private company now has the option of being a buyer or seller, and those who choose to sell do not have cumbersome regulations and a big group of shareholders to satisfy.

A GOOD OMEN OR BAD FOR LOCAL COVERAGE? Of course that all depends on the buyer. Both Gannett and GateHouse have tended to reduce local news staff at titles they acquire. So I would guess that cuts are in the offing — and for sure the familiar newsroom anxiety over who will own the place next and what they will do with it.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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