With hundreds of millions of people around the world using mobile digital devices — laptops, e-readers, tablets, cell phones and smart phones — and more expected in 2011, newspapers need to compete in an environment where people switch easily from one media outlet to another and are permanently connected to the Web, wherever they are.
Remember the late 1990s? Companies like Lee and Gannett would purchase a cluster of newspapers in the same region to create synergies and find revenue opportunities.
Today, in a globalized world, with almost instantaneous trade and travel happening among countries worldwide, the same strategy can be used to meet the news demands of our interconnected globe.
Consider this: The biggest U.S. newspaper that’s likely to be sold — because its soon-to-be new creditor owners are champing at the bit to leave the industry — is the Los Angeles Times.
And once the lenders own Tribune Co., Reed Phillips III, with New York-based media investment bank DeSilva Phillips, expects them to “sell some of the properties sooner, not later.”
“If there’s an attractive offer, the creditors will look long and hard at it,” Phillips said. “There’s no magic to selling the Chicago Tribune and the Los Angeles Times together.
“In fact, the creditors would probably get more money by selling them separately,” he added.
When asked, Phillips wouldn’t offer a price for the Times, saying, “I’m not close to the situation.”
A review of the revenue documents submitted by Tribune to the U.S. Bankruptcy Court in Delaware puts the L.A. Times’ annual revenues at about $550 million.
But New York-based newspaper broker Kevin Kamen — who recently valued The Boston Globe between $75 million and $120 million — said annual revenues are no longer used to value newspapers.
“It depends on a number of factors,” he said. “It’s the number of employees, the market, the value of the real estate, advertising contracts, management contracts.”
Who, then, are the likely purchasers of the L.A. Times? And which company has the best opportunity to make this paper an integral part of its empire?
The answer requires some facts about California:
- The combined container traffic to the ports of Los Angeles and Long Beach — next to one another but separate destinations — makes the City of Angels the world’s sixth- busiest shipping port.
-Japan, China and South Korea are three of California’s five leading trade partners.
-California exports were valued at $120 billion in 2009, $48 billion of which went to the Asia-Pacific region.
-There was $1.6 trillion of trade between the United States and the 20 member countries of the Asia-Pacific Economic Cooperation association, according to the Department of Commerce’s 2009 figures.
So which media company, given its assets, is best positioned to incorporate the L.A. Times?
The New York Times? While it may make sense for the publisher to link the country’s top two cities, along with its ownership of the International Herald Tribune, the company is under enough financial pressure of its own.
How about Los Angeles philanthropist Eli Broad, music and movie producer David Geffen or — possibly — Los Angeles-based hedge fund Platinum Equity, which purchased The San Diego Union-Tribune? The first two have been rumored in the past to be interested in the Times, but none of the three own media assets to meet worldwide information demands.
Gannett? Publishing revenues are down 5 percent, meaning that CEO Craig Dubow needs to convince his board that to shore up those revenues, he needs to buy the Times —
a stretch of the imagination but always a possibility.
And other than a newspaper in Guam, Gannett has no presence in Asia.
Dean Singleton can’t bid: He’d face a possible antitrust suit because he owns the (Los Angeles) Daily News and his company just emerged from bankruptcy.
With its annual revenues off nearly 7 percent from last year and still carrying debt from its Knight Ridder acquisition, Sacramento-based McClatchy is not a bidder either.
Banking giant JPMorgan Chase, controlling Freedom Newspapers, isn’t likely to allow the company to buy an asset that it, the bank, already owns.
The only entity able to buy the L.A. Times?
With its links into Asia, allowing it to capitalize on California’s ties with the region, News Corp. is the only company positioned to cluster the L.A. Times with its international properties.
Plus The Wall Street Journal is printed at the Times, which might make this property attractive to News Corp.
By acquiring the L.A. Times and linking it to its other properties in London, Australia and Hong Kong, News Corp. borrows Google’s strategy — expanding and consolidating its digital footprint and thus becoming indispensable.
With the L.A. Times, and the content from his other media properties around the world, Murdoch can create a 24-7 news website that’s a must-read for people across four continents, Europe, Asia, Australia and North America, with a paywall to boot if he wants.
Of course, this opportunity also presents issues, says Gartner analyst Allen Weiner.
“The question is how do you integrate all of these properties so they’re using common standards,” he said. “How do you build the perfect organization so you can leverage all of these resources. These are crucial issues.”
And here’s another obstacle, according to investment banker Phillips: “Murdoch is under enormous pressure from his investors not to buy any more newspapers.”
That said, you never want to count Murdoch out. He’s a fighter and survivor, crafty enough to figure out how to pull it off, especially if he wants the L.A. Times.
As Sarah Ellison, author of the book detailing News Corp.’s purchase of Dow Jones, told News & Tech’s “The Press Room” talk show, Murdoch sees a day when people read only one newspaper.
And Murdoch wants to make sure it’s one of his — online or in print.
If he buys the L.A. Times, Murdoch will have something that perhaps he’s always sought, perhaps something that only the British could admire but something that others may well fear: a newspaper empire on which the sun never sets.