Stephens Capital Partners is the principal investment arm for Warren Stephens and his family. They have been making equity investments in private firms for more than 50 years and have completed more than 200 investments. Currently, there are approximately 70 different investments in the portfolio, ranging across a wide variety of industries, and in about 25 states and five countries.
Earlier this year Stephens Capital Partners led an investment group in the purchase of the Daytona Beach (FL) News-Journal. In addition, its company Stephens Media owns newspapers in nine states, which include the Las Vegas (NV) Review-Journal.
Dirks, Van Essen & Murray asked Warren Stephens, CEO of both Stephens Capital Partners and its affiliate Stephens Inc., about the newspaper industry and his recent investment.
Stephens Capital Partners recently made a significant investment in the newspaper industry. What makes you bullish on the future of the industry? We have had significant holdings in the newspaper industry since our acquisition of Donrey Media (now known as Stephens Media) in 1993 and have experienced both the industry highs of 2005-2006 as well as the subsequent declines. Despite the recent industry performance, we believe that newspapers will remain an essential medium for the local markets they serve. A news source that gathers, interprets and publishes the happenings relevant to a local community will continue to attract subscribers and advertisers, providing the opportunity for a successful newspaper business.
How is it going in Daytona Beach so far? Our publisher in Daytona Beach, Michael Redding, has been very busy these past couple of months. In addition to filling out his management team, Michael has been engaging with the community on some of the changes he has implemented. The responses from subscribers and advertisers have been encouraging. Overall, the change in ownership of the News-Journal has been well received.
How do you see the business model of the industry changing over the next five to 10 years? We think that for newspapers to be successful in the future they will have to provide valuable local content to their subscribers as well as protect the investment made in producing that content. In particular, we think internet pay walls will become far more common and newspapers will develop alternative subscription models such as device applications.
What is your view on erecting pay walls? Do you think subscribers will make up a larger percentage of a newspapers’ revenue in the future? Newspapers can no longer afford to offer their content free of charge on the internet. Many home delivery subscribers have realized that it can be more convenient to get the news they want from the internet. In addition, online ad sales don’t seem sufficient to support the technology investment for digital delivery, much less the news gathering organization. Good content is valuable and we think consumers will be willing to pay for it whether it comes in print or digital form.
Stephens has had a long-term investment in newspapers in Stephens Media. Is your investment philosophy different from many other private equity firms? Stephens Capital Partners doesn’t manage money on behalf of outsiders like most private equity firms. Therefore, we have far more flexibility in how we approach transactions. For example, we don’t have a fund life or a requirement to return capital to limited partners which enables us to hold investments for the long term. We aren’t focused on just making a high rate of return over a short time frame, rather we want to create equity value over the long term.