April 28, 2016

Is consolidation the future of the newspaper industry?

The newspaper industry faces hard times due to digitization and failing revenue streams.

As the age of digitization continues, the print newspaper industry has faced, weathered and folded under some of the hardest blows. Since around 2009, many small to medium-sized newspaper outlets across the country have forever shuttered their doors due to failing profits and an inability to effectively compete with online news sources.

Meanwhile, in the past few years, iconic media conglomerates such as Freedom Communications, Sun-Times Media Group, the Journal Register Company and Tribune Company have all declared bankruptcy and suffered large amounts of layoffs. Despite the push for web-based subscription services, many modern consumers simply prefer to read their news for free, rather than pay for print or online viewing privileges, leading to massive industry wide losses in profits.

Long history of mergers: Journal Media Group
The vast majority of newspaper outlets across the country are no longer independently owned and operated. The Gannet Company is a media holding company that owns around 128 local media organizations across the country, as well as USA Today. Gannett has a long history of mergers and acquisitions, adding each of these news outlets to its extensive portfolio. One of its last notable acquisitions was Journal Media Group in a deal estimated at $280 million.

Through this deal, Gannet gained covered in nine states through its acquisition of 18 weeklies and 15 dailies in 14 local markets. The move added around $450 million to its yearly revenue streams.

"This transaction marks a critical next step in the transformation of our industry as we build local media brands that matter at a time when operational scale is a competitive advantage," Tim Stautberg, president and chief executive officer of Journal Media Group, explained. "Both Journal Media Group and Gannett are guided by a vision of strengthening lives and communities, and we'll be better stewards in our local markets by sharing ideas, content and best practices among our new and larger family."

Possible acquisition of the day: Tribune Publishing Company
Most recently, Gannett announced its intentions to acquire the Tribune Publishing Company, which operates notable newspapers such as the Chicago Tribune, Los Angeles Times and the Baltimore Sun, for $815 million. Along with acquiring each of the organization's media groups, niche publications and digital services, Gannet would also take on the company's $390 million in outstanding debt.

According to a Tribune Publishing press release, "The Board is now engaged, with the assistance of its advisors, in a thorough review. The Board is committed to acting in the best interests of shareholders and will respond to Gannett as quickly as feasible." While the board is taking this offer seriously, the Chicago Tribune reported that inside sources remarked that by making the deal public, Gannett is rushing them to make a quick decision. Meanwhile, the $12.25 per-share offer is far below what the organization was trading for last year, but above what is trading for currently.

"The combined company would also benefit greatly from the combined experience and expertise of Tribune's talented employees and our own valued team members," Robert J. Dickey, president and chief executive officer of Gannett, said. "The combined organization would offer Tribune employees a broad range of advancement opportunities within a larger organization with the financial strength to meet the industry challenges we all face. We are confident that as an even stronger organization, we would have an enhanced ability to empower our employees to do their best work, and maintain the same high journalistic standards and integrity for which each organization is known."

Despite widespread concern in the newspaper industry regarding layoffs, job stability and creative freedom, these mergers provide an opportunity for news outlets to continue reporting without constant fear of bankruptcy or closure.