You would not know it, judging by the angst that dominates any discussion of the news industry, but the number of public companies focused on newspapers and magazines is rapidly increasing.
How could this be? Declines in advertising and circulation have hit print publications in the US and Europe and a new generation of younger people is unused to paying (and unwilling to pay) for news.
Yet in the past 12 months several print groups have hit the public markets, part of a great unbundling by media companies that are untethering higher-margin television divisions from low-growth publishing businesses.
The trend seems to have been started in 2007 by Belo, a Dallas-based media group, when it announced plans to spin off its newspapers from its 20 television stations. E.W. Scripps, another local US newspaper owner, followed with a similar plan.
There was little activity for several years until 2012, when News Corp, and then Time Warner the following year, unveiled plans to separate their own print assets.
The trickle has since become a flood. Last month, Journal Communications, which publishes local titles in the US such as the Milwaukee Journal Sentinel, announced plans to merge with E.W. Scripps’ newspapers and merge its TV stations with those owned by Scripps’ TV company. This week Tribune Publishing, owner of the Los Angeles Times and Chicago Tribune among others, made its debut as a public company in New York after it was split off from Tribune’s TV business.
Finally, Gannett, publisher of USA Today, joined the party, spinning off its publishing arm from its broadcast and digital operations.
What is going on? Unfortunately for fans of newspapers, the great unbundling is no cause for celebration. These independent newspaper groups lack the cash cushion of the higher growth businesses with which they were once integrated. In the case of Time Inc and Tribune, the print groups have also been saddled with a considerable amount of debt.
The independent print companies now have to stand by themselves in an unforgiving environment of diminishing advertising returns and falling circulation. Ken Doctor, a media analyst with Outsell, says newspapers have been hit by revenue falls every year since 2006. He sees no sign of this trend ending.
But despite revenue declines, newspapers continue to generate profits by cutting costs – scaling back newsrooms and cutting pagination. “Newspapers have proven that they can manage decline profitably,” says Mr Doctor.
In the absence of new revenues, print companies will have to keep cutting – a grim prospect for staff and readers, who may resent their favourite newspaper or magazine shrinking every few months
It is unclear how much longer they will be able to do this. Revenue growth is essential and without it, newspapers will eventually run out of costs to cut. Across the sector, different titles are experimenting with new business models to improve top-line performance: trying paywalls, new digital initiatives, video and advertorial-style content (or “native advertising”) with varying degrees of success. None has yet found the Holy Grail.
In the absence of new revenues, print companies will have to keep cutting – a grim prospect for staff and readers, who may resent their favourite newspaper or magazine shrinking every few months.
With so many independent publishing companies, consolidation is an option, particularly in the hunt for efficiencies. More savings could be found by combining back-office functions, technology platforms and sales departments.
The industry’s true salvation may lie with deep-pocketed owners, such as Jeff Bezos, the Amazon founder who last year acquired the Washington Post. The billionaire Mr Bezos has the resources to ensure that the Post does not have to endure painful rounds of cost cutting to survive. He has spoken publicly about helping the Post find a sustainable business model and has said that he believes in supporting public interest journalism.
Recent deals suggest there are other wealthy buyers out there, particularly for newspapers in large metropolitan markets. John Henry, who owns the Boston Red Sox and Liverpool Football Club, last year acquired the Boston Globe. Meanwhile, in Los Angeles, a consortium led by Austin Beutner, a former Blackstone partner, and backed by the likes of Eli Broad, a real estate and insurance billionaire, has expressed interest in the Los Angeles Times.
The players in the new newspaper sector are eager to prove that they can survive independently. But without a benevolent owner, they must find new sources of revenue to last the next five years, says Mr Doctor. The clock is ticking.
Matthew Garrahan is the FT’s global media editor