Oct. 11, 1999
Vol. 11, No. 20

MEASURING THE WORTH OF A PAPER REQUIRES LOTS OF FACTORS

Pulitzer's price for Illinois newspaper surprises many in the business

What's a newspaper worth?

Last week's acquisition of The Pantagraph of Bloomington, Ill., by Pulitzer Inc. of St. Louis (detailed inside with his usual clarity by Senior Editor Pete Wetmore) startled a number of us in the business, if only because of the price.

We had known that Chronicle Publishing Co. of San Francisco had chosen to liquidate all its assets, including its flagship paper, the San Francisco Chronicle (see NewsInc., Aug. 30, 1999), so the fact that its Illinois outpost has sold wasn't the issue. The issue was the price: $180 million.

Recent newspaper sales have valued the properties at between $1500 and $2500 a subscriber. With its 50,076 daily subscribers, The Pantagraph should have fetched between $75 million and $125 million. Why such a high premium?

There are quite a few factors at work in The Pantagraph's sale, so let's try to break them down:

  • The Bloomington-Normal market is relatively isolated. There is only one network television station in the market, and no other direct newspaper competitors. Pulitzer executives, in fact, cited the lack of competition as a specific goal when making acquisitions.

  • Further, the market seems relatively stable. The paper has good penetration and, moreover, has kept its circulation fairly solid over the last decade.

  • In terms of capital equipment, the paper has well-maintained presses and a new pre-press environment. Though the paper is not yet fully paginated, the equipment to do so is in place.

  • A group of seven weeklies and shoppers is also part of the deal. The non-dailies, which have a total circulation of 10,000, portend to be a good platform to reach out beyond the perimeter of the city.

  • Apparently, there was something of a bidding war. Copley Press of La Jolla, Calif., owner of a number of Illinois newspapers including those in Springfield and Peoria, would have had a lock on the middle of the state had it acquired The Pantagraph. Aside from being able to offer combined advertising rates, there certainly could have been some production and back-office consolidation that would increase efficiencies – as well as profits. Copley's desire for The Pantagraph certainly pushed up the price.

  • As Wetmore has said, if you're buying 50,000-circulation dailies – which is the top of Pulitzer's previously announced size range – there aren't a lot out there. This is a desirably sized operation and, as such, a premium price must be paid.

  • Last, but certainly not least, is the fact that this was Pulitzer's first purchase after becoming a pure-play newspaper company last March, when it spun off its television assets and sold them to Hearst-Argyle of New York. I'm certain there was a concern at Pulitzer that it make a strategic investment the first time out, to allay any fears investors might have that the company had lost its compass during the changeover from a multimedia company to an all-newspaper company.

    Interestingly, the other Chronicle property, the Telegram & Gazette of Worcester, Mass., may also go for a high multiple. Reports have been published that the Telegram & Gazette may be sold – so soon, in fact, that it may have happened by the time you read this – for as much as $300 million. With its 107,405 morning circulation, it too would be pricey.

    The Worcester paper also is apparently desired by a number of suitors, among them MediaNews Group of Denver, Journal Register Co. of Trenton, N.J., and the New York Times Co. (which seems to be the leading contender).

    As the newspaper business becomes one of dominating a market and providing a variety of services to the community – oh, yeah, Pulitzer also got a sprightly web site as part of the deal – newspaper prices will probably continue to go up. The rules of the past may well fall by the wayside and new multiples may come to pass.

    In an era of declining circulation, declining penetration and the potential onslaught of new media on traditional print profit areas, it warms the heart to know that The Pantagraph is worth $180 million – to Pulitzer, anyway, today, anyway.

    – David M. Cole

    Inside ...

    • Pantagraph sells for $180 million; Pulitzer calls it 'blue chip'
    • Thomson simulator brings crews up to speed in shaftless era
    • Gray keeps debt load down in cash-and-shares purchase
    • E-mail, fax open new doors to letters-to-the-editor
    • While retailers scramble for help, publishers find few labor problems
    • Looking to Big Bird for on-line tips
    • Persons

    From NEWSINC., Oct. 11, 1999, Copyright © 1999, The Cole Group. All Rights Reserved.

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