IN THE NEWS
Newspaper market in upheaval
John T. Cribb - May 06, 2008
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The newspaper marketplace is in a state of unprecedented upheaval. In particular the large metro dailies and publicly-traded newspaper groups have lost up to 75% of their value between 2007 and the first half of 2008. This free-fall in market value may be coming to an end, but appears to be stabilizing at a much lower value level than in the past. Where metro papers may have sold for an 11x to 14x EBITDA valuation these values are now in the 5x to 8x EBITDA range.
Small dailies (10,000 to 50,000 circulation) have still sold in the double-digit EBITDA multiple range, but this appears to be coming down as well, into the 7x to 10x area. Large weeklies and weekly clusters can be 5x to 8x EBITDA. Strategic purchases can always drive these multiples up, and lower-than-typical profit margins can lead to higher EBITDA multiples. This means the current market situation presents the best time to buy newspaper companies in years. However, the strategy of buying newspapers can be very frightening, and we are not sure that a plan to acquire large metros is sensible right now. The metros have taken the hardest beating in classified and national advertising, and continue to face the worst competition from digital media. These large papers don't have the luxury of any time to react to changing conditions. Smaller market papers |
are doing better because they don't have as much national advertising to lose, and have had more time to prepare an Internet defense and offense.
Buyers who are committed to the future of the newspaper industry (who believe that newspapers will still originate and package information and find a revenue stream to support it) would do well to acquire more properties now. Using debt in a conservative manner will likely pay off in a big way - once our industry makes it through this period of digital turmoil and economic downturn. Newspaper owners who don't believe the industry has a future should sell now. The market and values do not look to improve in the near term, and owners not fully committed to weathering this storm should market their papers. This is not a criticism - but is an observation. Making the leap from past business methods to compete in the current and future markets will take creativity, diligence, energy, motivation, and money. The change our industry is experiencing requires commitment and a strong desire to learn new ways to conduct the business of informing the public. |
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