What Projo Desperately Needs in Sale: Local Buyer, Low Price
Thursday, May 08, 2014
Here is a paper that is still generating $90 million or so annually in revenue. It has been cut to the bone, so expenses are in line. It still is the largest news organization in the market, despite everything. And one analyst estimates that it is at least “modestly profitable.”
The fact is, modestly profitable, while nothing like the glory days of newspapers, is pretty good. Here is an eye-opening graphic from Pew Research:
Sure, it’s not 25 percent or 30 percent, which these days is Google territory, but mid-teens beats a sharp stick in the eye. Compare that to your passbook savings account, Bunky.
To do some back-of-the-envelope math, if the Projo is making 15 percent on its $90 million in revenue (and it’s probably not), that’s $13 million. Let’s say it’s half that, which is more in line with the rest of Belo. Warren Buffett paid four times operating profit (technically, EBITDA ) for his fairly recent string of newspaper acquisitions, so we’re looking at a price of $25 million to $50 million.
Let’s all hope it’s on the low end. Why?
First of all, proceeds of the sale go A.H. Belo, the Projo’s Dallas-based parent, its shareholders, and management, and really, who cares about them?
Management is already loaded, having sprinkled its executives with unhealthy bonuses, while presiding over a decline that is truly shocking, even by today’s mind-blowing standards.
Only one thing matters
And all Rhode Islanders should care about is a healthy news ecosystem, period.
Indeed, it is difficult to find a franchise that was once so dominant—one of the highest market penetrations in the country, in fact – and that has underperformed the national averages by such a wide margin. Here’s that circulation graphic again, updated. And look what’s happened the last couple of years.
That is correct. Newspapers have stabilized, and the Projo continues to decline in the high single digits! Pardon the exclamation point, but, come on!
And the bad news just keeps on coming. Just this last quarter, we learn that circulation of the Sunday paper– also known as a main cash generator – is now under 100,000.
Look, I understand the Rhode Island economy is tough. Its unemployment rate is, yes, the worst in the nation.
So, okay, that accounts for some of the underperformance. But, still the unemployment rate has been improving (for the most part) in the last three years, and still there’s been no moderation in the Projo’s decline.
And there is a reason for this beyond the economy, and here it is:
That’s a decline of 57 percent of unionizied employees in the decade, from 600 to just 258. And when we talk about cutting unionized employees, the point is not that they’re unionized. Those are the headcounts disclosed in the company’s financial statements, but they also happen to represent the editorial and advertising departments of the newspaper, that is to say, the department that produces the product, and the one that sells it – in other words, the heart and soul of the business. And, as you can see in the graph, yes, Belo cut the Projo at a much faster rate than the national average.
No one will seriously argue that Belo, in response to difficult times that were in part only temporary, cut beyond fat into the muscle of the enterprise, seriously undermining the quality of product and materially impairing its value.
The brain drain continued this week with the departure of longtime healthcare reporter, Felice Freyer, who decamped for the Globe, where an air of experimentation and investment is making life interesting.
And of course, in keeping with an unimaginative strategy, while it was cutting the content, the Projo, all together now, raised prices for the subscribers that chose to remain, the one group you really don’t want to antagonize.
But that’s all bay water over the hurricane barrier.
Belo now has a fiduciary duty to its shareholders get the highest price possible. It has engaged a Little Rock, AR, investment bank, Stephens Inc., to make sure that happens.
Stephens isn’t talking but the process is dragging out. Belo in February said it hoped to have the deal done by April or May. Late last month, Belo said it was “midway” through the process, whatever that means.
But really, at this point, we should be giving Belo a medal for doing everything possible to drive the price down, and it should be low. This will not be a turnkey operation.
Opportunity for someone
The Projo is a fixer-upper. Rebuilding it will require serious capital. For one thing, the size of the newsroom is now too small to support the kind of operation on which a profitable operation can be built for the digital age, when content isn’t the main thing, it’s the only thing. For another, the paper’s digital game needs to be stepped up, big time. In the latest quarter, the paper’s digital revenue ticked up less then 1 percent compared to a year earlier to a still-small $1.27 million. Digital growth is slowing everywhere, but again this is an area of underperformance – and, mostly, opportunity.
And that bring us to a buyer. Right now the Projo needs only a few things:
–Someone local, maybe even an East Sider and a Brown grad.
–Someone extremely rich, preferably a billionaire.
–Someone who is public spirited.
–And finally, someone who is an expert in media, with a proven track record in investing in media properties both digital and otherwise, in the United States and all over the world.
A tall order. There’s no such person, you say?
Oh, but there is:
Jonathan Nelson, #342 on the Forbes 400, with a personal net worth of $1.8 billion, runs Providence Equity Partners, which began in 1989 investing in media and now manages a portfolio of media and other properties worth $40 billion. He works right downtown, in Kennedy Plaza.
I asked his representatives if he’s interested, and will let you know if I hear back.
But why not him?
Related Slideshow: Rhode Island’s Changing Media Landscape
Radio, print, television and digital - the faces in Rhode Islands's media has changed drastically over the past months... Let's take a look at some of the biggest moves:
The long-time publisher was Belo's man in Providence. Howard Sutton was the man that implemented the changes that Dallas wanted to try and make the company more efficient and more profitable.
The results were dismal. Maybe no newspaper in the country lost a higher precentage of ad revenue than the Projo over the past decade.
He was the face of the paper in the community.
Rick Daniels has joined GoLocal24 as Chief Operating Officer.
Daniels is the former President of the Boston Globe. He also served as CEO of Gatehouse Media for New England and led a consortium of investors who attempted to purchase the Boston Globe from the New York Times Company in 2013.
Daniels then went on to play a key role at Empirical Media Advisors based in New York, focused mainly on Tribune Publishing, where Emprical’s co-founder and CEO, Jack Griffin, recently took the role of CEO.
WLNE-TV has fired anchor Karen Meyers. She had been with the station since 2011.
Meyers had anchored the 6 p.m. and 11 p.m. news with John DeLuca. Sources say station management opted not to renew her contract and decided to go in another direction.
Before Meyers joined ABC6, she was a reporter/anchor with New England Cable News and was a reporter in Washington, DC.
According to RIPR reporter Ian Donnis, Providence Journal's Health Reporter is leaving. Felice Freyer has been the sole reporter covering Rhode Island's largest businss sector.
Freyer leaves for the Boston Globe.
Her departure follows Phil Marcelo who recently left the Projo for AP in Boston.
Editor's note: An earlier version incorrectly had RIPR reporter Scott MacKay as breaking the story.
Veteran radio reporter Flo Jonic recently was fired by RINPR after she filed complaints against the station for gender-based pay discrimination.
Jonic is a 30 year veteran of New England news radio.
In her charge filed in February, Jonic wrote, "I believe that I have been discriminated against based on my sex by my employer," and referred to the difference in her pay and that of RIPR reporter Ian Donnis.
"Currently, [reporter] Ian Donnis earns at least $75,000 a year, while I make $51,000 per year. We perform the same duties, and I have 32 more years experience than he does," wrote Jonic in her complaint.
After a seven year stint reporting for the Providence Journal's state house bureau, Phil Marcelo left the paper to take a reporting gig with the Boston office of the Associated Press.
Hailing from Long Island, New York, Marcelo came to ProJo in 2006, and covered everything from regional news, to Providence City Hall and the Statehouse. Marcelo's departure was first reported by WRNI's Ian Donnis.
Formerly a nightly news reporter for WJAR, Tremmel was fired from the "Team You Trust" after two clips, one of her performing on-air handstands, and the other offering tips on what to do during a bear attack, went viral.
The video became an internet sensation, but long-time Channel 10 newsman Jim Taricani called Tremmel’s antics “a smudge on our station's reputation.”
A long-time staple of Channel 10’s news team, Taricani announced plans to retire after over three decades with the station.
Taricani has won 5 regional Emmy awards, an Edward R. Murrow award for investigative journalism and a Prestigious Yankee Quill Award from the New England Newspaper Association.
He was convicted to six months in prison in 2004 for refusing to reveal a source, and is the youngest person ever to be inducted into the Rhode Island Hall of Fame.