Who Knew? Newspapers Are a Hot Commodity
Morton, John, American Journalism Review
All those who labor in the newspaper world and are worried about the future because of budget squeezes, layoffs and sundry other indignities associated with downsizing can take heart from one fact: Newspapers are more valuable than ever.
This is scant solace to someone already laid off, but at least the rising worth of newspapers as businesses is solid evidence that they will be allowed for a long time.
Buying a newspaper, after all, is a bet on the future. The dollar value of the bets made in recent months shows strong confidence in the future of newspapering, despite whatever threats to revenues and readership may be lurking in cyberspace.
Thus I was not surprised when the Milwaukee Journal Sentinel recently received an unsolicited offer of $1 billion for the news paper and its associated broadcast properties (see "Merged in Milwaukee," page 26). The offer was rejected by the company's management, and it remains to be seen whether the unidentified suitor, represented by a small New York investment firm, will succeed in pitching the sale directly to employee shareholders, who own 90 percent of the stock.
Other deals, though, have gone through in recent months. Late last year Gannett paid over $2 billion to acquire Multimedia owner of 11 dailies and numerous weeklies as well as broadcast stations, cable systems and entertainment companies.
Media General, parent company of newspapers in Richmond, Tampa and elsewhere, last fall paid $230 million to acquire four small dailies in Virginia owned by the Worrell family. Also last year, Knight-Ridder paid $360 million to acquire four dailies and numerous weeklies from the Lesher family in Northern California, and McClatchy Newspapers, owner of dailies in Sacramento, Fresno, Tacoma and several other cities, paid $374 million to acquire Raleigh's News & Observer.
To understand why these deals represent an increase in the relative worth of newspapers, it is necessary to delve into the arcane world of "multiples." Sale prices of newspapers are compared by calculating how many times a particular factor can be divided into the price. For example, the sale price of the News & Observer was 3.5 times higher than the newspaper's annual revenue. In other words, McClatchy paid a multiple of 3.5 times revenue.
Another way to measure a transaction is by dividing the sale price by the newspaper's average daily circulation (the sum of all the newspapers delivered in a week divided by seven). …