Providence Journal Sold to GateHouse, Sources Tell GoLocal
Friday, June 13, 2014
The sale of the Providence Journal is almost complete.
Unless the deal collapses, GateHouse Media, which recently emerged from bankruptcy in late 2013 as a part of New Media Investment Group, will be the new owner of the Providence Journal in a transaction estimated between $50 million and $60 million. The Providence Journal and affiliated TV stations sold in 1997 to Belo for $1.5 billion.
A.H. Belo, the parent company of the Providence Journal, has been marketing the Providence Journal since January and at least three groups demonstrated serious interest and are believed to have submitted bids last week: GateHouse Media, Halifax Media Group, and a group of local investors led by former Hasbro CEO Alan Hassenfeld, developer Buff Chace, and local newspaper publisher Barry Fain.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe purchase of the Providence Journal by GateHouse would be part of their post-bankruptcy strategy to purchase newspapers and consolidate functions.
GateHouse's acquisition of the Providence Journal may be as much about the printing as the paper. According to sources close to the deal, the Providence Journal recently signed two new contracts and executed an agreement to assume the distribution of various national andregional newspapers from Fall River News, which is expected to generate $4 million of revenue in 2014. Overall, printing and distribution revenue are expected to increase to $16.9 million - an increase of more than $10 million in revenue over the past few years.
In contrast, advertising revenue at the Providence Journal has dropped dramatically - according to SEC documents, first disclosed by WPRI, advertising revenue fell 70% from 2005 to 2013. In 2005, the Providence Journal earned $137 million in ad revenue and by 2013, it had dropped to just $41 million.
GateHouse's Model
GateHouse Media describes itself as a,"business model is to be the preeminent provider of local content and advertising in the small and midsize markets."
The company, which went in and out of bankruptcy in 2013, includes 404 community publications and more than 350 related websites and six yellow page directories
According to their Web site, GateHouse owns 78 daily newspapers with total paid circulation of approximately 547,000 - an average circulation of just over 7,000 daily subscribers. The company also claims:
- 235 weekly newspapers with total paid circulation of approximately 282,000 and total free circulation of approximately 706,000
- 91 "shoppers" (generally advertising-only publications) with total circulation of approximately 1.5 million
- Over 350 Web sites (the company did not disclose traffic to its digital properties
- Six yellow page directories, with a distribution of approximately 489,000, that covers a population of approximately 1.3 million people.
Bankrupt in 2013
GateHouse Media has gone through a series of reorganizations during the past 12 months including a bankruptcy that shed about a billion dollars in debt that was piled on during its first acquisition program mainly occurring between 2006-2007.
As Boston Business Journal reported, "So private equity backer Fortress Investment Group heaved GateHouse into bankruptcy court last September to shake off roughly $1 billion in debt. But the acquisitions resumed: Fortress used one of its real estate investment trusts to buy the Dow Jones local media group, a chain that includes the Cape Cod Times and Standard-Times of New Bedford, for $82 million and joined that group with GateHouse in a new venture.
After the acquisition of Dow Jones local media, the newspapers were hit with significant layoffs. One paper in the Dow Jones deal, the Cape Cod Times, saw massive layoffs. According to the Facebook group created by former employees, Keep Local News Local: Save the Cape Cod Times:
SUMMARY: Thirty-one people, including 26 newsroom employees (writers, editors, designers, photographers) have lost their jobs at the Cape Cod Times since the paper was purchased last fall by GateHouse Media. In March 2014, GateHouse announced that 14 Cape Cod Times newsroom positions in copy editing and design would be shifted to its design facility in Austin, Texas. LOCAL NEWS MUST BE PRODUCED LOCALLY if it is to maintain a high level of accuracy, timeliness, depth and quality. PLEASE SHOW YOUR SUPPORT ON THIS PAGE, SHARE IT, AND SPREAD THE WORD. Stop the outsourcing at The Cape Cod Times.
At the beginning of 2014, the company announced it was going to go on an acquisition spree. GateHouse (a subsidiary of New Media Investment Group) announced it was looking to buy up to $300 million in newspapers across the country. The Providence Journal would be the first major deal after this pronouncement.
Impact on Providence Journal, Staff and City Could be Significant
This sale will impact the Providence Journal differently than previous rounds of layoffs. The purchase of the Providence Journal is about deconstructing some of the core assets of the company. GateHouse has created a new "Center for News & Design" in Austin, Texas, and it is an important part of GateHouse's business model. It is reported that, "as many as 150 people could work there by mid-2015, designing and laying out pages (and editing news copy) for papers across the country, instead of copy editors at individual newspaper locations," reports Boston Business Journal.
The Providence Journal that presently employs 377 FTE of which 160 are assigned to the newsroom and are members of the Union - the Providence Newspaper Guild are likely to see staffing reductions.
Worcester May be a Clue
According to one leading newspaper executive in Boston, the model of 1 newsroom staffer per $1 million in revenue is becoming an agreed upon model.
Dirks, Van Essen & Murray, a consulting firm in media who worked with the Boston Globe on the sale of the Worcester Telegram, outlined a comparison with other newsrooms of newspapers based on circulation, specifically tying newsroom staffing to 1 to 1.5 per $1 million in ad revenue. With the Providence Journal overall revenue at $90 million (ad revenue now down to just above $40 million) in 2013, staff reductions in the newsroom could be very significant from 160 FTEs to less than than 100 FTEs.
Just days after purchasing the Worcester Telegram, Halifax Media Group cut 28 from the 81 FTE newsroom. The Telegram has total revenue of about $40 million.
Real Estate Being Dumped by Newspapers
With advertising revenue falling, many of the newspaper groups around the country are selling off their valuable real estate. A.H. Belo has been trying to sell the Providence Journal's downtown office for a number of years. The property on 75 Fountain Street is estimated to be valued at $10.5 million. RINPR had reported in 2013 that there was a deal in principle to sell the building and then lease back a portion of the building.
At this stage it is unclear the fate of the 75 Fountain Street building. The Boston Globe has announced it is selling its Morrissey Boulevard 700,000 square foot headquarters. The Worcester Telegram surrendered their headquarters about two years ago.
Timeline
The deal is on a fast track and is expected to be finalized in the next 30 to 45 days. Officials at A.H. Belo and Gatehouse Media refused comment.
Related Slideshow: Changing Newspaper Industry
In a column entitled, The smartest guys in media give up on print, Alan Mutter, the former editor of San Francisco Chronicle, writes "For all the corporate-speak accompanying the dramatic restructurings of Twenty-First Century Fox, Time Warner and Tribune Co., the simple reason these diversified media giants are jettisoning their publishing assets is that their leaders fear for the future of print."
Throughout New England and across the country there is a dramatic decline in the print newspaper business.
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