The puzzling ProJo purchase
When GateHouse Media, the conglomerate that owns scores of smaller daily and weekly papers across Massachusetts, entered Chapter 11 bankruptcy last year, it did so with an eye on getting bigger. Yesterday, GateHouse’s successor made its first big post-bankruptcy buy, gobbling up the Providence Journal for $46 million.
The sale of the Providence Journal is the latest in a string of recent New England newspaper sales. Red Sox owner John Henry bought the Boston Globe last year for $70 million, and recently spun off the Worcester Telegram & Gazette for a reported $19 million.
Henry, like new Washington Post owner Jeff Bezos, has described his foray into the newspaper industry as an attempt to find a sustainable business model for an industry that has been in steady decline for more than a decade. By contrast, both GateHouse 2.0 (a new publicly-traded holding company called the New Media Investment Group) and the Florida publisher that just bought the Telegram & Gazette from Henry are backed by private equity. They’re far more concerned with near-term profits than long-term sustainability. So it’s intriguing that, amid a sustained dip in industry ad revenues, they’re in aggressive growth mode.
The Boston Business Journal‘s Jon Chesto dives deep into the ProJo sale. Chesto views the ProJo acquisition as a departure from GateHouse’s normal strategy of buying up smaller dailies and weeklies. Providence is a far bigger market than Quincy and Brockton, where two of GateHouse’s larger area properties are located. Chesto also gawks at the Providence paper’s $46 million price tag, especially since the paper’s downtown headquarters isn’t part of the deal: “That’s a pretty steep sum for a once-great paper that’s now a shadow of its former self, with a daily circulation of 72,000… By way of comparison, that’s more than twice what John Henry received for selling the Telegram & Gazette to Halifax Media earlier this year, and the T&G is only somewhat smaller.”
Chesto advances two theories about why GateHouse is paying so much to acquire the Providence paper. He says the newspaper’s printing plant is a money-maker, since there are so few printers left in the area. He also reports that GateHouse sees Providence as an attractive place for its online marketing subsidiary, which executives believe is “the primary engine for growth at the company.”
Still, it’s difficult to see much positive momentum in GateHouse/New Media’s financials. The company’s 2013 revenues looked better than they did in 2012, but were still well below where they were at the depths of the recession; the company has been staying afloat by engaging in repeated rounds of cost-cutting. Absent the accounting magic from its bankruptcy, GateHouse/New Media lost $74 million last year. It lost another $6.7 million in the first three months of 2014 — an improvement from the same period last year, but still not the kind of showing that should give anyone money to burn in Providence.
— PAUL MCMORROW
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