It seems the sleeping bear has awakened with today's acquisition by Gannett of Journal Media. The newspaper industry has been in a downturn for a decade if you look at historic prices for publicly traded newspaper companies. Today, Gannet Co Inc. ($GCI) paid $280M for Journal Media ($JMG) – a +40% premium – which surprised many market watchers who continue to undervalue media assets.
Gannett CEO Robert J. Dickey says that the move is a step toward becoming a more investor-focused company through consolidation moves. "This transaction is an excellent first step in the industry consolidation strategy we have communicated to our shareholders, and is a good example of the value-creating opportunities we believe are available".
Journal Media has only been public since March 2015, and is really a regional player operating in Milwaukee, Memphis and places like Wichita Falls. You can compare the regional nature of JMG like you would a regional airline that specializes in shorter routes and caters to middle America. I find this purchase incredibly exciting for the industry. It speaks to the undervalued nature of media assets as print merges fully with online publishing.
Time for Repuilding in the Newspaper Business
In the age of big data analysis and online product sales and related product placement opportunities, the newspaper business has other revenue opportunities to be realized in the years to come. The thing that shocked me a bit was the soft numbers for JMG reported in August. Revenue was $116 million for the second quarter, down 11%, led by a 13% decline in advertising and marketing services. Pullbacks in display advertising from larger accounts and reduced preprint advertising also contributed to a decline in advertising revenue.
Subscription revenue of $39.3 million declined six percent, as volume declines more than offset price increases, and circulation revenue was down four percent. Turnover in commercial printing customers and volume losses in the distribution business led to a decline of 17% in other revenue.
Normally, industries break down and rebuild – they did it in telecom, banking and the brokerage industry, so I expect the same to happen in the newspaper business. The consumer has an insatiable appetite for content. Media assets will be the continued beneficiary of this, as big data plays a larger role in the way the consumers buy products, and even slow performers with a regional slant like JMG will get snapped up.
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