Are local papers beyond saving? A test in Ohio

"Are local papers beyond saving? A test in Ohio" by Lukas Alpert for The Wall Street Journal, July 3, 2019

"The Vindicator’s impending collapse may mark a turning point in the decline of local papers, industry watchers fear: Larger media groups that had typically snapped up such properties in the past are now weighing whether they are salvageable at all. 'We have not seen a situation like this anywhere else in at least the past 15 years,' said Penny Abernathy, in referring to the Vindicator."

"Are local papers beyond saving? A test in Ohio" by Lukas Alpert for The Wall Street Journal, July 3, 2019

"The Vindicator’s impending collapse may mark a turning point in the decline of local papers, industry watchers fear: Larger media groups that had typically snapped up such... -->

Newspaper closures increase as sales slow

The pace of newspaper closures, mergers and bankruptcies appears to be accelerating as both chains and independent newspaper owners face unrelenting economic challenges, and the largest companies shed underperforming assets.

Since publication of the 2018 report, The Expanding News Desert, UNC researchers have uncovered an additional 200 shuttered papers. Almost half of those papers have closed in recent months, according to data compiled by the UNC Center for Innovation and Sustainability in Local Media.  If the trend holds, the U.S. will have lost more than 2,000 newspapers since 2004, bringing the total number of surviving newspapers in the country to less than 7,000.

Most of the shuttered papers this year have been in the Midwest and Northeast. All are weeklies, except four small dailies under 10,000 circulation in Missouri, Arkansas and Louisiana, and the 33,000-circulation Youngstown (Ohio) Vindicator, which announced last week it planned to close at the end of August because the family-owned paper could not find a buyer.

This new information is based on UNC’s annual survey of state press associations – with more than three-quarters of the organizations reporting – as well as extensive tracking of news accounts and investment reports on sales, mergers and sales.  

While closures appear to be accelerating, the pace of acquisitions has slowed in recent months as sales prices have dropped to historic lows.  Many newspapers in small and mid-sized markets are being valued at only two times trailing annual earnings, according to investment bankers, who predict that the pace of acquisitions will pick up in the fall, as some large chains, such as such as Community Newspaper Holdings, Inc. (CNHI), begin exiting the market, and others, such as Gannett and GateHouse, contemplate merging operations.

CNHI, backed by the pension fund Retirement Systems of Alabama (RSA), announced in 2018 that it planned to sell or shutter all of its more than 100 papers, located in mostly rural communities. However, CNHI is in no rush, given the depressed market.  "This is not exactly the market you'd want to sell anything in because the prices are too low,” David Bronner, CEO of the RSA, said in an interview earlier this year with the Southern Newspaper Publishers Association. “(Community newspapers) still make money. And you have a wealth of real estate assets there. You wouldn't want to give it away at two times earnings."  CNHI did not return numerous calls, seeking further comment on the status of its papers.

In contrast, GateHouse, the largest newspaper chain with more than 450 papers, is moving ahead with either sales or closures of several dozen of its smallest papers. In a recent earnings call, company executives said they were focusing this year on assimilating the more than 100 acquisitions in recent years, and reshuffling the properties in its portfolio. In late May, GateHouse announced it would be “consolidating” its 50 remaining suburban weeklies in the Boston area, leaving only 18 titles. GateHouse has also continued selling off small individual properties in the Midwest and South, such as the daily Log Cabin Democrat to Paxton Media, while shuttering those it cannot sell, including the 150-year-old Bastrop, Louisiana, Daily Enterprise. According to news reports, GateHouse has also explored merging with Gannett, the second largest chain with more than 200 papers.

While the large chains can afford to hold out for better prices – or simply walk away from underperforming properties – some legacy family-owned newspapers and regional chains, such as Western Communication, which owns seven papers in the Pacific Northwest, are being forced to declare bankruptcy and auction off their properties at rock-bottom prices.  The 151-year-old Reading Eagle in Pennsylvania, with a circulation of 40,000, was recently picked up at auction by Digital First Media, the third largest chain with more than 100 papers in its portfolio.  This came only a couple of months after Digital First, which is owned by the hedge fund Alden Capital, made an unsuccessful hostile bid to takeover Gannett, after reportedly first asking Gannett to buy its newspapers. Meanwhile, according to news accounts, Tribune Publishing is still looking to either sell its 77 papers, including the Chicago Tribune, or merge with another chain.

All this sets up an unpredictable second half of the year.  More precise numbers on closures and sales will be available in fall, when the Center publishes its fourth annual report, tracking the threat of news deserts.