Expert: Projo would sell for $51M tops

Little reason for Belo to sell at that price

Ted Nesi

Updated: Tuesday, 28 Dec 2010, 2:15 PM EST

Published : Tuesday, 28 Dec 2010, 1:21 PM EST


PROVIDENCE, R.I. (WPRI) – The highest price The Providence Journal would fetch in today’s market is $51 million, according to a leading media appraiser, an enormous drop in value since Belo bought the paper a decade and a half ago.

A buyer would probably be willing to pay between $42 million and $51 million for The Journal, Kevin Kamen of Kamen & Co. Group Services in Baldwin, N.Y., told “It’s not worth a dime more than that,” he said.

The ongoing turmoil in the newspaper industry caused by readers’ migration online has led to a sea change in how investors value long-established print publications, which were reliable cash cows in decades past.

Although The Journal’s Dallas-based owner, A.H. Belo, has not expressed any interest in selling the local paper, The Boston Globe and some other major dailies have been shopped around by their parent companies in recent years.

In October, a Wellesley entrepreneur revealed he was putting together an unsolicited bid for The Globe. The news raised the question of how much it would cost a buyer to take control of Rhode Island’s statewide daily.

Howard Sutton, who has been The Journal’s publisher since 1999, did not respond to an e-mail requesting comment. The paper’s executives generally do not speak to reporters outside their organization.

In 1997, Belo paid $1.5 billion for the 168-year-old Providence Journal Co. and its nine television stations. Two years ago, the company split its TV and newspaper divisions into separate companies, with the new A.H. Belo taking The Journal and its sister papers, the Dallas Morning News and The Press-Enterprise of Riverside, Calif.

Prior to the sale, the Journal Co.’s broadcast division brought in 58 percent of its revenue. While it’s hard to say exactly how much of the $1.5 billion price tag represented the value of the actual newspaper, one-third of the total would put it at $500 million.

By that measure, Kamen’s current estimate of $51 million represents a 90 percent slump in value over 13 years. “It’s like winning the lottery and putting all the money in a pocket with a hole in it,” he said. “It’s really incredible how it has gone down in value.”

Kamen appraises the value of newspapers, magazines and other print properties for buyers and sellers. In 2008, he came within $25 million of predicting the $650 million sale price for New York Newsday.

Kamen emphasized that his estimate was only a rough one because he does not have details about The Journal’s finances beyond the information publicly disclosed by A.H. Belo. The figure excludes real estate owned by the paper such as its downtown headquarters on Fountain Street.

Few buyers for papers today

A slightly higher estimate than Kamen’s was offered by Reed Phillips, managing partner at the media investment bank DeSilva & Phillips in New York. He suggested The Journal could sell for $50 million to $75 million, adding that the information available about the paper’s finances is too limited to offer a tighter range than that.

The Journal’s current value would probably be pegged at four to five times its annual earnings before interest, taxes, depreciation and amortization, said John Morton, a veteran newspaper industry analyst. That would put the combined value of all three A.H. Belo papers at $232 million to $292 million as of last year.

But private equity investors, who are “about the only ones making bids on newspapers these days” , would probably offer even less than that for the paper, Morton said in an e-mail.

Last year, the Beverly Hills-based private-equity group Platinum Equity reportedly paid between $40 million and $50 million to buy the San Diego Union-Tribune newspaper from Copley Press.

The Union-Tribune’s circulation was 270,000 in 2008, and the deal also included valuable real estate. The Journal’s average circulation was 96,595 on weekdays in the six months ended Sept. 30, according to the Audit Bureau of Circulation.

Platinum Equity also “bid on Cox’s papers in Texas, but the bid was so low that Cox withdrew the papers from the market, and pretty much the same thing happened with The Boston Globe,” Morton said. The New York Times Co. rejected two offers for The Globe last year.

Cloudy outlook limits estimates

Kamen’s estimate of a $42 million to $51 million purchase price for The Journal “sounds reasonable,” Rick Edmonds, media business analyst at the nonprofit Poynter Institute in Florida, wrote in an e-mail.

It’s unlikely A.H. Belo would be interested in selling The Journal at that price, Edmonds said. “Valuations like that keep all but the most motivated sellers” , like the Copleys in San Diego , “from actually going through with transactions. Better to hold on and see if they can rebuild the franchise over a few years.”

The Press-Enterprise “is more the problem child among A.H. Belo properties” compared with the Providence and Dallas papers, Edmonds said. Executives say the California publication is the only one of the three that’s not making money before interest, taxes, depreciation and amortization.

The Journal’s appraised value should be based on future earnings, which are now highly uncertain for print media outlets, and therefore it could be “significantly” higher or lower than Kamen estimates, said Ken Doctor, a media analyst at the research firm Outsell and the author of “Newsonomics.”

“Pre-2000, in a steady-state industry, you could look at earnings and project a multiple,” Doctor said. “But there’s no longer any steady-state. Print revenues are still down and may well be down next year as well. Digital is growing, but still not quite enough to make up for print losses.

“So a buyer has to ask: what is the future of what I’m buying?” That cloudy outlook helps explain why Newsweek magazine recently sold for $1, he said.

‘Unbelievable’ circulation, ad losses

Concern about the health of The Journal is widespread in local political and media circles. The paper has long played an outsized role in setting the news agenda in Rhode Island, and even after multiple rounds of layoffs it still boasts the state’s largest newsroom.

Newspapers in the Northeast have been hit harder by decreases in circulation and advertising revenue than their counterparts in other parts of the United States, Kamen said, but The Journal’s declines are worse than average.

“It’s unbelievable what’s been going on there,” he said, noting that the paper’s daily circulation has fallen by 40 percent over the past decade. Nationwide, daily newspaper circulation fell 25.6 percent from 2000 to 2009, according to the Newspaper Association of America.

Kamen also said the paper risks driving away more of its remaining readers if it keeps increasing the cost of home-delivery subscriptions, which rose 14 percent to $416 a year in 2009.

The Journal’s management should “take three steps back and analyze what they’re doing and how they could more effectively rally the community, the advertising base and the readership to help grow the publication,” he said. “They can reply back and say these are tough times, everybody’s taking a loss , but very few have taken such a beating.”

“They have to take control of their destiny,” Kamen added.

Growth seen in online, iPads

The Journal increased its circulation revenue per copy from $167 in 2007 to $293 in 2009. That has likely reached a plateau at all three of Belo’s papers, making it all the more important for the paper to increase how much money it gets from digital ads and online readers, Doctor said.

Sutton recently told Journal employees the paper will debut a new version of its website,, next summer designed by ExNihilo, a firm in Providence, according to a memo obtained by The Providence Phoenix. At that point the site will no longer offer all the content in the print edition for free, he said.

The paper also plans to launch apps for Apple’s iPhone and iPad next year and has hired the local marketing agency Nail Communications to lead a rebranding effort.

Like their peers at The Journal Register Co., A.H. Belo executives will be telling investors they can increase digital revenue quickly, though those gains could be neutralized if the print business continues to shrink, Doctor said.

Meanwhile, analysts expect more than 35 million tablet computers to be sold next year, led by the iPad, presenting another opportunity , and challenge for print publications.

“Belo is among the leaders thinking through and planning that transition,” Doctor said. “So, on the curve, [it’s] well-positioned. New owners would need to make the same transition, with similar thinking, and that’s no sure thing.”

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