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Bigger and Bigger They Grow
Consolidation of the newspaper industry, which places the ownership of many media properties into the hands of a few large corporations, shifts editorial and business decisions to people without a strong stake in the local communities where their papers are located.
The largest owners: The top 25 companies that own the most newspapers control the fate of nearly one-third of all papers, up from 20 percent in 2004. This included two-thirds of all dailies – 812 – and almost a fourth of all weeklies – 1,376. The largest company, New Media/GateHouse, owns 451 newspapers in 34 states.
The turnover in ownership has been dizzying. Roughly half of all newspapers in the country changed ownership over the past 15 years, some multiple times. Since 2014, most of the 1,200 papers sold have been either family-owned enterprises or small private regional chains. The most active purchasers of newspapers in recent years have been New Media/GateHouse, Adams Publishing and AIM Media. Over the past four years, these three chains have purchased nearly a third of the papers that were sold.
Economic pressures on the industry have prompted the largest companies to establish regional hubs, built around newspapers they already own. The majority of transactions in recent years involve a chain purchasing newspapers in adjacent markets. The purchaser then consolidates printing and back-office functions, as well as some sales and newsroom functions, significantly reducing the cost of operations.
Fewer and fewer independently owned newspapers survive. As more and more family-owned newspapers sell to corporate chains, the number of independent weeklies is steadily declining. By 2018, fewer than one-third of the country’s 5,829 weeklies with circulations under 15,000 were locally owned. Survival of the remaining independent newspapers depends in large measure on the ability of the publisher to generate new revenue to replace print revenue and to be very disciplined in managing costs.
The Largest Owners
Even as the country loses papers, journalists and readers, consolidation in the industry continues apace. In 2018, the country’s 7,100 papers were owned by only 2,600 firms. That is a decrease of 1,400 since 2004, and 400 since 2014 – or an average annual decrease of 100 newspaper companies a year. As the number of owners has decreased, consolidation – especially among the largest companies – has ballooned.
The largest 25 companies in 20181 owned nearly one-third of all papers, up from 20 percent in 2004. This included two-thirds of all dailies – 812 – and almost a fourth of all weeklies – 1,376. The largest 25 companies ranged in size from the 30 papers owned by Morris Multimedia to the 451 papers owned by New Media/GateHouse. The number of papers owned by the next largest group of owners – 26 through 50 – fell off dramatically. This group owned only 956 papers in total. Nevertheless, the largest 50 companies owned almost half – 45 percent – of all papers.
Ownership of the country’s daily newspapers was concentrated among the largest 10 companies. Altogether, the largest 10 companies owned 1,500 papers, including almost half – 572 – of the country’s 1,283 dailies. At the beginning of 2018, two of the 10 largest companies were publicly traded – Gannett and Lee Enterprises – and three were privately held – Adams Publishing, Ogden and Shaw.
The other five large newspaper companies – New Media/Gatehouse, Digital First, CNHI/Raycom, tronc/Tribune and BH Media – were owned by investment entities, such as hedge and pension funds and private equity firms. Together, these five investment entities own 875 newspapers – or 60 percent of the 1,500 papers owned by the 10 largest owners. However, over the summer of 2018, both BH Media and CNHI announced plans to step back from newspaper ownership. The pension fund that owns CNHI announced plans to sell or close its 114 papers, and BH Media turned over day-to-day management of its 75 papers to Lee Enterprises. Additionally, tronc/Tribune is currently seeking new investors for its 77 papers. Therefore, the number of papers owned and operated by these large investment entities could shift significantly in the coming year. For more information on the current status of these media barons, click here.
The Dizzying Turnover
Roughly half of all newspapers in the country changed ownership over the past 15 years. In the years immediately after the 2008 recession, many of the transactions involved the purchase of large chains that were filing for bankruptcy, such as the Journal Register Company with 151 papers. However, since 2014, as the economy has picked up, most of the 1,200 papers sold have been either family-owned enterprises or small private regional chains. According to Dirks, Van Essen, Murray & April, there were 31 separate transactions involving daily newspapers and affiliated weeklies in 2017, the highest number of deals in a year since the turn of the 21st century. This year is on pace to exceed 2017. There have been 30 transactions through July 1, 2018. Newspapers sold over the last few years have gone for between two to five times annual earnings, down from historic highs of 13 times earnings before the 2008 recession. Therefore, despite the quickening pace, the dollar amount involved in these transactions remains far below the record levels reached in 2007. 2
Most of the deals involved the sale of five or fewer papers. Even when large companies exited the market, their papers were sold to multiple owners in separate transactions. For example, Civitas, the seventh-largest newspaper chain in 2016, sold 86 of its papers to nine separate buyers. This included sales to such large privately held chains as AIM Media, which purchased 36; Adams, which purchased six; and Boone Newspapers, which bought three.3
Similarly, in 2016, 10/13 Communications, the 20th-largest newspaper chain, sold 42 of its papers to three separate buyers, Hearst in Houston, S.A.W. Advisors in Dallas, and Independent Newsmedia in Arizona.4
The most active purchasers of newspapers in recent years have been New Media/GateHouse, the country’s largest chain with 451 papers; Gannett, the second largest with 216 papers; Adams Publishing, the fourth-largest with 144 papers; and AIM Media, the 16th- largest with 50 papers. Over the past four years, these four chains have purchased 340 papers – or 30 percent of the papers that were sold. The privately held Adams, which was formed in 2013, and AIM, which was founded in 2012, are the new kids on the block, although their CEOs have extensive newspaper experience. Before founding these newspaper companies, the CEO of Adams was an investment banker specializing in media, and the CEO of AIM has held multiple executive positions in newspaper companies the last three decades, including CEO of Sun-Times Media.
The philosophy of the purchasers of newspapers is determined by their expectations about return on investment. The two largest investment firms – New Media/GateHouse and Digital First – actively manage their portfolio of properties, selling or closing underperforming papers. Since 2013, GateHouse has spent more than $1 billion purchasing 200 papers at an average of 4.1 times annual earnings,5 while also selling or closing nearly 50. In the same time period, Digital First has shed 46 papers while purchasing 29, including the Boston Herald in 2018. In contrast, both AIM and Adams say that they buy and hold. While both have recently purchased papers owned by private equity firms, both prefer family-owned enterprises, since those typically have strong ties to both local readers and advertisers. To date, neither Adams nor AIM has sold any of the almost 200 papers in their portfolios, though they have cut costs at the papers they purchase by centralizing printing, distribution and administrative functions. Both have a very lean corporate staff. In contrast to Gatehouse and Digital First, they both maintain a very low debt level and typically pay less than four times earnings. The lower purchase price leaves room for investment in the news and sales staff, they contend.6
The decision to sell a family-owned newspaper is an agonizing one, according to two owners who sold in 2016. Charles Broadwell, publisher of the 200-year-old Fayetteville Observer in Fayetteville, North Carolina, sold his 38,000-circulation paper to the GateHouse chain, ending four generations of family ownership. "Now, it's time to hand over the reins to a bigger company with national resources that, as a small family-owned entity, we just don't have,” he said in announcing the sale. However, as GateHouse moved to quickly make cuts to newsroom staffing and replace Broadwell as publisher, he conceded the following year, “It was like walking around at my own funeral.”7
Gregg Jones, CEO of Jones Media, received offers from a variety of other private chains as well as hedge-fund and private-equity chains when he decided to sell his fourth-generation family-owned company, which had a dozen small newspapers in Tennessee and western North Carolina. “I wanted to find the best buyers possible, and I thank God for the Adams family every day. . . . ” Jones said in 2017. “The Adams family run their holdings efficiently. They are engaged in the community. They have no exit strategy.” After purchasing Jones, Adams Publishing kept Jones on board as publisher of his own group of papers, plus appointed him as executive vice president responsible for almost all of its papers east of the Mississippi. Since then, Adams has added significantly to the papers it owns east of the Mississippi, purchasing 14 papers in North Carolina in two separate transactions and 13 in Florida.8
The Push Toward Regional Hubs
The economics of the newspaper industry is driving newspaper sales across the country, forcing the sale of smaller, independent companies and prompting the largest companies to establish regional hubs, built around newspapers they already own. The majority of transactions in 2017 – 70 percent – involved a newspaper chain purchasing a single daily newspaper or a small cluster of dailies and weeklies in an adjacent market. The purchaser could then consolidate printing and back-office functions, as well as some sales and newsroom functions, thereby significantly cutting costs. “The sale to non-strategic buyers is becoming the exception rather than the rule.” according to Dirks, Van Essen, Murray and April.9
For example, Hearst, which owns 66 papers, including more than 50 weekly papers, made strategic purchases in both Connecticut and Texas in 2017. The company purchased three dailies and eight weeklies from Digital First Media in Connecticut10 to add to its existing portfolio of eight papers there. This brought Hearst’s total weekly circulation in that state to more than 400,000. In Texas, it purchased more than 20 community newspapers located in the Houston suburbs from 10/13 Investments. These papers – including one daily in Conroe – were then converted into zoned editions of the 240,000-circulation Houston Chronicle, Texas’ largest newspaper. This brought Hearst’s total weekly circulation in the Houston area to more than 520,00 and its digital reach to more than 4 million.11
The holdings of the largest chains are concentrated in the eastern part of the country and along the Pacific coast. With the exception of GateHouse and Gannett, both of which own papers in 34 states, the other large companies have tended to focus their acquisitions on specific states. For example, all of the papers owned by AIM Media are located in four states. Likewise; all papers owned by Advance are in 11 states.12
Perhaps in no state has the move toward regional consolidation been more feverish than in Ohio. Since 2014, more than 30 percent of the state’s papers have changed ownership. Five of the nation’s largest newspaper chains –GateHouse, Gannett, Adams, AIM and Ogden – own nearly 120 papers in Ohio. GateHouse and AIM have been the most aggressive purchasers. AIM purchased 36 papers – including 16 small dailies – in the western and central part of the state from Civitas Media when it liquidated its Ohio holdings in 2017. It also owns eight papers in the adjacent state of Indiana.
While AIM and Adams focus on acquiring papers in small and mid-sized markets, GateHouse has increasingly turned its attention toward larger metro markets. In 2015, GateHouse, which owned a handful of papers in the towns in the northeastern part of Ohio, purchased 20 papers – including the Columbus Dispatch, with a circulation of 124,000 – from the family-owned and -operated Dix Communications. In 2018, it added to its collection of 50 papers in central and northeastern Ohio by purchasing the Akron Beacon Journal. "The Akron Beacon Journal is a great addition to our large Ohio footprint of properties," said CEO Michael Reed. "In addition to being a long-standing dominant source of award-winning journalism, its proximity to our properties in Wooster, Canton and Columbus is very exciting as we see many opportunities for growth.”13
Staying Alive: The Surviving Independents
As consolidation has increased, more and more small family-owned chains and independently operated newspapers are selling out to corporate chains. In 1997, half of all weeklies in the country were independent.14
By 2018, fewer than one-third of the weeklies in the UNC database with circulation under 15,000 were independent or locally owned.
Survival of the remaining independent newspapers depends in large measure on the ability of the publisher to generate new revenue to replace print revenue. As profit margins on newspapers have dipped into the single digits in recent years, independent newspapers have very little room for error because they measure annual revenue in the low millions or hundreds of thousands of dollars. A slip-up in projecting revenue or expenses can lead to bankruptcy. Despite falling to record low levels, print advertising revenue still accounts for the majority of revenue and profit at most newspapers.
Complicating matters, in even the smallest markets, as much as 75 percent of the digital advertising dollars are going to Facebook and Google.15 While some large national and metro papers have been able to diversify away from print advertising by raising the price they charge their readers, papers in smaller markets have little flexibility. Both print and digital consumers of news are especially price-sensitive in low-income markets. Even the wealthiest of the country’s 3,143 counties have pockets of low-income neighborhoods or communities. Roughly two-thirds of counties where the remaining independents are located have overall poverty rates that exceed the national average. So publishers must be especially creative in coming up with ways to diversify their revenue, often looking outside their own geographic markets to find additional income.
Moore County, in the Sandhills region of eastern North Carolina, is home not only to the affluent resort and retirement communities of Pinehurst and Southern Pines, but also to a number of economically struggling communities that have lost their textile and furniture manufacturing base. As a result, the poverty rate for the county is 2 percentage points higher than the national average. The Pilot, a 100-year-old, family-owned community paper (with 13,000 circulation) published twice a week in Southern Pines, has aggressively sought new revenue from a variety of sources, even venturing outside Moore County to get it. Over the last several years, the company has introduced two state magazines – one focused on business and the other on the arts — three lifestyle magazines targeting North Carolina cities in different parts of the state, a series of electronic newsletters targeting subscribers and nonsubscribers, and three telephone directories for surrounding counties. In addition, the paper has established a digital media services agency that produces online and video content, and it has purchased an independent bookstore that hosts almost 200 author and community events a year. All the various ventures are ultimately aimed at building a strong sense of community among current and potential readers and advertisers of The Pilot. Currently only about a third of the revenue produced by the newspaper company comes from the newspaper itself. Because the company is able to spread the cost of operations over multiple publications and products, all the ventures are profitable.
In affluent Suffolk County at the tip end of New York’s Long Island, Publisher Andrew Olsen is pursuing a similar diversification strategy with his three weekly newspapers, which have a combined circulation of 15,000. The oldest was founded 160 years ago. Until 2010, almost all revenue came from the print papers – with a disproportionate amount of advertising in the peak summer season – and a Shelter Island phone book that helped shore up the bottom line in the lean winter months when the tourists were gone. In a strategic pivot, Olsen began targeting lifestyle and digital products for growth. In 2013, the paper launched northforker.com, a digital news site covering food, drink, real estate and other activities in the area. Its online success inspired management in 2017 to create a print Northforker magazine, published 10 times a year. More and more, the Suffolk County papers are melding both their news and lifestyle coverage, as well as their print and digital distribution. Recent projects include an investigative piece about a murder, “Gone,” which ran as a 10,000-word special section in the print papers and as a three-part documentary video, streamed online and screened at a local retirement village. “The Work We Do,” a series of 300 video segments on blue-collar workers, is underwritten by local businesses. In addition, the papers are looking to partnerships that will allow their newsrooms to provide in-depth coverage of pressing issues. The East End News Project, organized by the editor, is a consortium of Suffolk County newspapers pooling their news resources to cover the opioid crisis. “We’re a little mom-and- pop business,” says Olsen. “So we have to blend creativity and financial discipline, and then ask, ‘How are we going to get it done?’”16