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Ownership

Ownership

By the Project for Excellence in Journalism and Rick Edmonds of The Poynter Institute

For a fourth consecutive year, ownership changes in 2004 were infrequent and mostly involved smaller dailies or clusters of weeklies.

This slowdown in conglomeration marks a break with two huge trends of the final third of the last century that transformed the look of newspaper ownership. Starting with Dow Jones in 1967 and in gradual succession through the mid-1990s, more than a dozen newspaper companies went from private to public ownership. In turn, they used much of their Wall Street proceeds to finance a tidal wave of acquisitions and mergers. (They did not, it should be noted, use the bulk of that money for innovating their product, reaching out to new audiences, or trying to increase readership.)

Lately this concentration has slowed to a crawl. As for going public, Journal Communications, which owns the Milwaukee Journal-Sentinel along with television stations and weeklies, took the step in late 2003, but that’s it. When it comes to acquisitions, recent takeovers include smaller properties like the papers in Merced and Stockton, California (by McClatchy and Dow Jones, respectively) in late 2003. Freedom Communications and its flagship Orange County Register drew a lot of interest and a high bid from Gannett and MediaNews, but ultimately members of the Hays family, with the backing of private bankers, were allowed to buy the shares of other, dissatisfied family members who wanted out.

In early 2005, Lee Enterprises announced it had acquired Pulitzer Inc.’s 14 daily papers, which include, most notably, The St. Louis Post-Dispatch and the Arizona Daily Star. The acquisiton was priced at $1.46 billion. Also, at the end of 2004, the E.T. Rollins family sold the Durham Herald-Sun to Paxton Media, which dismissed nearly a quarter of the staff the day it took possession.1

While there are hundreds of newspaper owners, about two dozen continue to dominate both in terms of the numbers of newspapers they own as well as their percentage of the total daily and Sunday circulations.2

Percent of Daily Newspapers Owned by Largest Newspaper Groups, 2003
Design Your Own Chart
Source: Editor and Publisher Yearbook; PEJ Research
The largest groups include the 22 newspaper groups with a combined daily circulation of over 500,000.
Percent of Daily Circulation Belonging to Largest Newspaper Groups, 2003
Design Your Own Chart
Source: Editor and Publisher Yearbook; PEJ Research
The largest groups include the 22 newspaper groups with a combined daily circulation of over 500,000.
Percent of Sunday Circulation Belonging to Largest Newspaper Groups, 2003
Design Your Own Chart
Source: Editor and Publisher Yearbook; PEJ Research
The largest groups include the 22 newspaper groups with a combined daily circulation of over 500,000.

While there has been very little change in the concentration of the number of daily newspapers and daily circulation among the largest newspaper groups, Sunday circulation among the largest newspaper groups declined two percent in 2003.

Circulation concentration is even greater for the ten companies with the highest total circulation. These chains own roughly half (51%) of all daily circulation and a slightly higher percentage (57%) of Sunday circulation. These numbers are virtually the same as a year earlier.

Top Ten Groups’ Percent of Total Daily Circulation, 2003
Design Your Own Chart
Source: Editor and Publisher Yearbook; PEJ Research
The top ten groups are by combined weekday circulation.
Top Ten Groups’ Percent of Total Sunday Circulation, 2003
Design Your Own Chart
Source: Editor and Publisher Yearbook; PEJ Research
The top ten groups are by combined weekday circulation.

It is premature to declare the march of consolidation over, but might the current hiatus morph into a much slower pace of ownership changes through the decade? On the one hand, the lull of recent years gives plenty of companies available cash and borrowing power for acquisitions. In the Freedom auction, the Pulitzer offering, and smaller sale opportunities, consortiums of investment banks have also shown interest in becoming buyers. Also, there has been speculation that an eventual easing of FCC regulations would prompt a wave of acquisitions or swaps of both newspapers and local TV stations.

All this argues that over time, with shifting market conditions, the spigot may reopen. Big newspaper companies have lots of free cash flow. Buying other newspapers may seem as good a use for it as any. So the logic for further consolidation remains strong. The industry – compared to other categories like autos or consumer goods – is not among the most concentrated.

On the other hand, it is hard to escape the feeling that the action of the 1970s, 80s and 90s has left the field of prospects for acquisitions at least comparatively picked over. Gannett, the leading consolidator of the period, may be a bellwether. Its CEO, Doug McCorkindale, has frequently complained in conversations with analysts about the “funny money” multiples now being asked for newspapers and TV stations. Gannett hasn’t bought anything big since Central Newspapers in 2000. Instead it has made a series of purchases to assemble Newsquest, a Gannett-like chain of regional newspapers in England, and dramatically improved their financial performance. In 2003, Gannett bought Captivate, a small company that places advertising in elevators and other public places.

On the other hand, 2005 finds Gannett back in action with an acquisition of a chain of Home Town Communications Netwrok, a chain of 63 non-dailies in the Ohio, Michigan and Kentucky. Nor can mergers of big public companies like Tribune’s 1999 purchase of Times-Mirror be ruled out.10

At independent newspapers, smaller private chains, and even the smaller public companies protected by a special family-controlled class of stock, both financial and generational factors bear on the decision about whether to sell or continue. If younger family members lose interest in newspapering or think management is under-performing, that can prompt a sale. But by now many of the surviving independents could be characterized as rugged, determined, and even stubborn. Eased inheritance laws also make a transfer of control from one generation to the next less punishing than it used to be.

Two other ownership possibilities remain mostly theoretical. Except for the four or five largest public companies, others could go private, getting out from under Wall Street demands, should they choose to. None have to date. Also, extremely wealthy individuals could become owners of individual papers, just as many own sports franchises. Wendy McCaw used some of the proceeds of her divorce from the telecommunications billionaire Craig McCaw to buy the Santa Barbara News-Press in 2000. Forbes 400 regular Phillip Anschutz, acquired the battered San Francisco Examiner franchise in 2004, later bought several suburban weeklies outside Washington D.C., and has announced plans to publish free papers under the Examiner name in other cities.

Cross-Ownership Rule Changes to Remain on Hold Until 2005

A ruling by the Third U.S. Circuit Court of Appeals in 2004 halted changes made by the Federal Communications Commission in the laws governing media ownership. The rule changes would have made it legal for newspaper companies to buy local television stations in many markets. The companies were pushing for the changes in order to expand into local television and to bring about convergence between the paper, the television channel, and in many instances, the paper’s online property. The judges, whose decision was upheld by the full court on appeal, required that the FCC produce better evidence in support of the rule changes. The battle over the rules was expected to stretch into 2005. (click here for more information on local televison FCC developments)

Private Companies

Revenues, earnings and profit margins are generally not available for private newspaper companies. But they are among the biggest chain owners in the industry – by circulation, four of the top 12, 9 of the top 20. The largest (with circulation rank) are11:

*Advance (4). The company, controlled by the Newhouse family, operates 26 dailies, including The Star-Ledger of Newark, The Plain Dealer of Cleveland and The Oregonian of Portland. Advance has a reputation for relatively generous news spending and markedly improving most of its properties over the last 20 years. Business-side operations are relatively informal, relying more on periodic visits from headquarters than rigid budgeting. A separate Newhouse company publishes The New Yorker and Vanity Fair.

*Hearst (7). Has 12 dailies, and some big-city presence – the Houston Chronicle, the San Francisco Chronicle and the San Antonio Express-News. Drove under its competitors in those three cities and is hanging on in Seattle (where its Post-Intelligencer is enmeshed in a legal fight with its joint-operating partner, The Seattle Times). Also a successful operator of magazines.

*MediaNews Group (8). A large empire built of 45 papers over a period of 30 years by William Dean Singleton. Runs many distressed franchises no one else wanted, with bare-bones staffs. Singleton has compared himself to a surgeon who takes radical steps with very sick patients. He was a surprising proponent of news investment during his recent tenure as president of the Newspaper Association of America (2002-2003), and has a stated ambition to build the flagship Denver Post into a great regional paper. Because of its volume of semi-public debt, MediaNews reports most results as a public company would.

*Cox Newspapers (11): Atlanta-based, and The Atlanta Journal-Constitution is the flagship among its 17 papers. Others include the Austin American-Statesman, The Palm Beach Post and the Dayton Daily News. Like Advance, has a reputation for above-average news investment and quality.

*Freedom Communications (13): Consists of The Orange County Register and 27 smaller papers. As discussed above, the company was up for auction in 2003, but the upshot was that members of the Hays family who wanted to continue, with the backing of investment bankers, bought out family members who were dissatisfied and had pushed for a sale.

*Community Newspaper Holdings Inc. (14): Based in Alabama and owned by the state employees’ pension fund, the company owns 96 small newspapers.

*Daily News, New York (18): A one-newspaper company but a big one, it is owned by Mort Zuckerman and also owns U.S. News & World Report.

*Morris Communications (19): A chain of 27 mid-sized and small papers, mostly in the South, known for tight operations and high profit margins. Reports financial results. Its Savannah Morning News is credited with having greatly improved in recent years, and the company is a relatively active explorer of advanced online applications.

*Copley Press (20): Consists of The San Diego Union-Tribune and eight smaller papers.

Footnotes

1. David Ranii and Michael Biesecker, “Herald-Sun fires executives, others.” Newsobserver.com, January 4, 2005. Available online at: http://www.newsobserver.com/business/story/1983511p-8364366c.html.

2. These numbers do not reflect Lee’s acquisition of Pulitzer’s 14 daily newspapers in January 2005.

3. Journal Register Company press release, “Journal Register Company to Acquire 21st Century Newspapers.” July 6, 2004. Available on line at: http://www.journalregister.com/press/07062004.html

4. Leon Lazaroff, “Green Bay paper’s battle ends; owner sells to Gannett.” Chicago Tribune Online, July 24, 2004.

5. Associated Press Wire, “McClatchy snaps up Merced paper for $40.5 million.” December 5, 2003.

6. David Ranii, “Local weekly newspapers to be sold to Florida group.” The News & Observer, April 8, 2004, page D3.

7. Jim Kirk, “For sale sign off Sun-times.” Chicago Tribune Online, May 28, 2004.

8. Elizabeth M. Gillespie for the Associated Press. “Seattle Times rejects Hearst’s Offers in JOA Discussions.” July 2, 2004.

9. Dan Richman, “Justices to hear Seattle newspapers’ dispute.” Seattle Post-Intelligencer, December 1, 2004.

10. Gannett press release, “Gannett to acquire Home Town Communications Network.” November 19, 2004. Available online at: http://www.gannett.com/go/press/pr111904.htm.

11. Rankings of private companies by can be found in the following report: Deutsche Bank Securities (New York, New York). “Keeping cash in circulation.” Paul Ginocchio et al. Published August 11, 2003.