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January 05, 2007

Newspaper worth even less than thought (updated)

Rosslyn Smith
It appears that the money-losing sale of the Tribune for $530 million included five blocks of land on the edge of downtown Minneapolis!  This fact was buried in a recent story about the Vikings plans for a new stadium.  Powerline cited some musings on the issue  found here.

The land in question is directly in the path of downtown's growth, as skyscrapers have been replacing parking lots in an eastward march. It is near the brand new light rail line running to the airport, and near the booming riverfront district where pricey condos have sprouted in former flour mills. The Guthrie Theatre arts complex has just relocated to the riverfront. This development has occurred in the last 8 years, so the Strib's land must have skyrocketed in value, masking an even more serious decline in the value of the paper as an operating business than was previously understood.

It should also be noted that in addition to real estate, many urban newspapers have a reservoir of unrealized value in a repository of historical artifacts.  I was tangentially involved in the estate of the owner of Chicago's historic black daily, The Chicago Defender. One issue in that battle became the potential worth of the paper's library of rare photographs and signed letters from famous politicians, artists and entertainers who had corresponded with the paper over the years, should such artifacts be actively managed to generate revenue.  The New York Times undoubtedly has an interesting archive of similar materials. The value of the Strib's collection is unknown, but it has been the largest newspaper in Minnesota for most of the past century.

It makes me wonder anew what a dead tree media outlet is worth as ongoing business today. 

Update:

Bruce Kessler of the Democracy Project looks at the same data and is reminded of his own experience with vulture capitalists. He makes a good case that the Strib (and down the line other newspaper properties) may well be broken up, with the news organizations reconfigured to rely mainly on the internet as a delivery system.

The purchasers of the Star are experienced vulture capitalists. (WSJ.com subscription required)
Avista mightn't be a household name, but its founders, Thompson Dean and Steven Webster, have been well known in the buyout community for more than a decade. They ran a group that generated returns of about 50% from buyout investments for Donaldson, Lufkin & Jenrette, which was acquired by Credit Suisse in 2000. The pair left Credit Suisse 18 months ago to start Avista, which they hope will manage $1.5 billion....

Mr. Dean wouldn't address whether Avista will slash costs or lay off employees. "Newspapers have to recognize that they are operating in a different environment, with different pressures, declining readership and advertising pressures," he says. "We have to get additional revenue growth and do things more efficiently, but that may not be about staff cuts."
They'll get a hefty return from an investment that may net out at only about 2 ½ times cash flow, a fraction of the cost of cash flow return from other investments.

Avista has brought in an experienced newspaper publisher, Chris Harte. (A Democrat, if anyone is wondering whether the editorial line at the Star will change. In 2001, he considered a Democrat challenge to Maine's Senator Collins.) [....]
 
If other newspapers try to go the going-private route, they'll only be throwing good money after bad, to the extent they try to hold their dead-tree monopoly. If they have any long-term future, it's in Internet delivery of news, where they have to compete with new entrepreneurs and deliver a product the readers want and view reliable.

Posted at 07:10 PM | Email |

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