Media Watch: Anybody Want to Buy the Bat Cave?
Read all about it – 'Statesman' goes up on the block
Now that the Austin American-Statesman is officially for sale, tossed on the market with all the panache of a Craigslist ad, conventional wisdom suggests dark days are ahead for the paper. Layoffs and cutbacks in coverage are the typical fallout for newspapers in play, especially for companies primping their balance sheets for a possible sale.
But Statesman Associate Publisher Michael Vivio insists there's no scorched-earth policy in the paper's future. "We're being sold because we are a valuable asset," said Vivio, who will formally take over as publisher on Oct. 1, replacing the retiring Michael Laosa. Primarily through attrition, the paper has already shaved about 10% of its work force in the last two years, Vivio said, and is down to about 925 employees, 160 in the newsroom. In contrast, the Statesman's sister paper in Palm Beach, Fla., sliced 300 employees in the last two years just to get down to 1,000, he said.
"We've always been a lean company," he said. "We're a lot closer to a good size for this market to maintain a profit than many other newspaper companies." That said, staffers should be afraid, very afraid.
Management assurances aside, there's no mistaking the tide of the industry, with papers slashing employees and services to compensate for slumping revenue and circulation – a phenomenon sure to invade the Statesman's protective bubble, sooner or later. Even if Cox execs make good on their promise to hold steady, new owners will almost certainly scramble to bump the return on investment to pay off their newly incurred debt, a now-familiar scenario.
Family-owned Cox Enterprises is trying to sell 29 newspapers in Texas, Colorado, and North Carolina, including the Statesman and Waco Tribune-Herald, but it's keeping the flagship Atlanta Journal-Constitution, as well as papers in Palm Beach, Fla., and Dayton, Ohio (the company was founded in Dayton in 1898). A diversified company with interests in cable, television, and radio, Cox generated about $15 billion in revenue last year and a healthy $4 billion in profit, but it carries a consolidated debt of about $13.5 billion, according to the Fitch Ratings service. Cox says it is jettisoning newspapers, which make up less than 10% of the company's revenue, in order to help pay down the debt.
"Cox is another media company that, while originally newspaper-based, is transforming into a different kind of information company, where newspapers play a smaller role," said longtime industry analyst Miles Groves. "What is not clear, from a business perspective, is why they are not selling them all."
Equally unclear is who might be interested in buying a newspaper these days. "The market for selling is pretty thin right now," said Mike Simonton, a senior analyst with Fitch. By some accounts, public newspaper companies have lost half their value in recent years, shedding billions as investors scurry from the sinking behemoths. Compounding the challenge, there are already several newspapers for sale, including The San Diego Union-Tribune and Landmark Communications' papers in Virginia and North Carolina.
The most likely buyers, the large public media companies, are in full retreat. The McClatchy Co., for example, has announced plans to cut 10% of its work force; just last week Gannett, owner of USA Today, said it would cut 1,000 jobs. Of the traditional media companies, Hearst Corp., owners of the San Antonio Express-News and Houston Chronicle (which already share their Capitol bureau) seems a likely candidate. Two weeks ago, Hearst paid $155 million to buy the Connecticut Post and seven weekly newspapers from MediaNews Group Inc. Another possibility is a wild card, a nonmedia company like Cablevision, which recently paid $650 million for Newsday in New York.
Then there's always the sugar daddy (or mama), a wealthy individual who might want to buy a newspaper. But rich buyers are no guarantee of good times ahead. The most famous example of the sugar mama scenario is rich divorcee Wendy McCaw, who bought the Santa Barbara News-Press and turned it into an outlet for her own petty interests. "I worry about the duplication of the Santa Barbara experience, when a rich person buys the paper and controls the news side and editorial pages," said retiring Texas Monthly Publisher Mike Levy.
As recently as two years ago, suitors might have been lining up for the Statesman. But the litany of industry woes – based on the underlying disintegration of the advertising market – is dramatically exacerbated by the well-chronicled "credit crunch." It's hard enough to get financing for any corporate purchase these days, let alone a business steadily losing revenue. "There are not any good stories to tell about recent newspaper acquisitions," Simonton notes.
By all accounts, the Statesman is weathering the storm better than most, but "better than most" remains a tough sell. Vivio won't talk revenue, but the paper's circulation has gradually slid from about 184,000 in 2006 to 170,000, according to the Audit Bureau of Circulations. And the Internet may help the paper build readership – Statesman execs like to tout a 63% readership penetration in Austin, thanks to its websites – but media companies are still struggling to generate significant online revenue. In recent days, the Tribune Co., Lee Enterprises, and E.W. Scripps all reported declines in online advertising, an ominous trend.
But the Statesman is more than just the paper, Vivio argues. The company's assets include the land along Lady Bird Lake that serves as its corporate headquarters, as well as its community papers, including the Round Rock Leader, which continue to perform well. And its commercial printing and distribution business has been increasing at a steady rate, he said. The paper expanded its print operation in 2001 and now prints The New York Times and The Austin Chronicle, among other publications. It's currently building a new facility for its packaging operation. "We're investing in the Statesman," Vivio said. "The Statesman as a company is changing. We're not just a one-trick pony."
Management hopes to conclude a sale by the first quarter of 2009, but if the Statesman doesn't "bring in the value" or attract the "right buyer," Cox will continue to operate the papers, Cox Newspapers president Sandy Schwartz told Editor & Publisher. There won't be "a fire sale," he stressed.
If it doesn't sell, the paper will move forward in a strange corporate limbo – owned, but unwanted. Whatever the scenario, "our journalists will put the paper out, and it will be business as usual," Vivio said.