03-31-17 | Printable Version

History of Ownership Consolidation

History of Ownership Consolidation
More than 85% of daily circulation currently owned by groups

In 1900, 90% of daily newspaper circulation was under the control of independent owners – that is, publishers operating a single newspaper. Today that trend has nearly reversed, with roughly 85% of daily newspaper circulation under the control of a group owning two or more dailies.

Consolidation of ownership is not unique to the newspaper industry but occurs in nearly every business sector over the course of its maturation. Typically, indeed, it occurs much more rapidly than it has in the newspaper industry. Think of the independently-owned corner drug stores, shoe stores, supermarkets and banks that once dominated main streets across the country. These types of businesses have almost vanished today due to rapid ownership consolidation. In their place are retail establishments that are owned by companies based elsewhere.

In comparison to retail, one might argue, the newspaper industry has seen relatively slow consolidation. There are 108 group owners of newspapers in the U.S. today and still ­­199 independent newspaper owners. Of the nation’s nearly 1,400 daily newspapers, 15% are still controlled by independent owners.

Consolidation is also more evenly distributed across the newspaper industry than other industries. Whereas the top six electronic media companies, companies like Comcast, Disney and Time Warner, control the vast majority of media in the U.S. – up to 90% by some estimates – the 10 largest newspaper companies control only 38.5% of U.S. daily newspaper circulation. Gannett – the largest newspaper group by daily circulation – reaches just 4.8% of U.S. households. Its aggregate daily circulation represents 15.3% of the total daily circulation in the country.

In the early 20th century, most cities had multiple daily newspapers. As group ownership of newspapers began to take root, however, consolidation also escalated within individual markets. In the 1920s, 500 U.S. cities had two or more daily newspapers. Not surprisingly given the fierce competition, most newspapers in this era were not very profitable. The Great Depression of the ­­early 1930s wiped many of these struggling companies out, significantly reducing the number of cities with competing daily newspapers – and that number has only continued to drop. Today, there are only 10 cities in the U.S. with two or more competing dailies.

Consolidation within markets further escalated the growth of newspaper groups. As competing newspapers were either consolidated or driven out of business, the financial returns of surviving newspapers began to improve dramatically. As their resources grew, more and more operators chose to add additional newspapers to their holdings. Companies began to recognize that they could bring economies of scale to their newly acquired newspapers and significantly improve operating margins.

The number of groups owning two or more dailies rose sharply in the wake of World War II, an expansion that continued for 20 years. Not coincidentally, the retail sector also grew rapidly throughout this era, as returning service men bought homes and started families. The new consumer culture ushered in a greater demand for advertising, which fueled a new level of prosperity for newspapers, attracting investment capital and further stimulating interest in group ownership.

One of the fastest-growing companies throughout this period was Gannett, which completed 60 daily newspaper transactions between 1945 and 1980. Another important player was Jack Knight, who parlayed his ownership of the Depression-weary, debt-ridden Akron (OH) Beacon Journal into a chain of newspapers that he would merge with Ridder Publications in 1974. By 1978, Knight-Ridder was the largest newspaper group in the U.S.

Several families also made the decision to build newspaper groups. Cowles Media, Gaylord Publishing, Harris Enterprises, Booth Newspapers, Stauffer Communications, Scripps, Ridder and Copley all got their start prior to the Great Depression and began adding newspapers as the nation’s economy recovered.

Thomson, Ottaway, Knight, Pulliam and Cox also built groups around this time. In 1963, Dow Jones became the first newspaper company to move to public ownership. Seven more companies followed in the 1960s, in large part to gain access to the capital required to fuel an acquisition strategy.

The total number of groups peaked in 1975, at 176. That year, 59% of the nearly 1,800 daily newspapers published in the U.S. were owned by groups. It should be noted that many of these groups were quite small; 67 of them owned only two daily newspapers. In many cases, these small groups were the result of a family enterprise expanding in the region as some new opportunity arose. Since 1975, the total number of groups has steadily declined, though not yet to pre-1955 levels.

While most of the acquisitions up through the peak involved groups buying independently-owned dailies, a new trend emerged in the 1970s of groups acquiring other groups. One of the earliest of these – and the largest newspaper deal ever at the time – was the acquisition of the Brush-Moore Newspapers by Thomson Newspapers for $72 million in 1967. Advance Publications, owned by Samuel I. Newhouse and family, set another high when it acquired Booth Newspapers for $305 million in 1976. In the late 1970s, Gannett acquired multiple newspapers in two transactions when it bought Combined Communications and Spiedel Newspapers. Lee Enterprises grew rapidly around this time with its acquisition of a group known as Lindsay-Schaub.

One of the most acquisition-minded of this new generation of large newspaper companies was MediaNews Group, founded by Dean Singleton and Richard Scudder in 1983. Under Singleton’s lead, MediaNews would go on to acquire 150 daily and 150 weekly newspapers with an aggregate value of more than $6 billion before merging with 21st Century Media to become Digital First Media in 2013, when Singleton retired. At one point, MediaNews was the 10th largest newspaper company in the country by circulation size.

Another notably acquisitive group was American Publishing Company, operated by Conrad Black and David Radler. The company entered the scene in 1986 with a $75 million acquisition of eight dailies and went on to make more than 50 different newspaper acquisitions. At one time, American Publishing owned more daily newspapers than any other company. It sold off most of its American properties by 2000.

Community Newspaper Holdings, another major group in this later era, was founded in 1997. A very rapid buying spree, including the acquisition of 28 dailies from American Publishing in 1999, propelled the company into the position of owning more dailies newspapers than any other company by the following year.

That year, 2000, proved a watershed for changes in newspaper ownership. The value of daily newspaper transaction activity set an all-time high of $14.3 billion, more than doubling the previous mark, thanks to several of the largest deals in the history of the newspaper industry. The Tribune Company’s acquisition of Times Mirror accounted for a little more than half of this total. The divestiture of all of the Thomson Corporation’s U.S. newspapers in several deals was another major factor, as was the sale of Central Newspapers to Gannett. All in all, 135 dailies traded hands in 2000, in 53 different transactions.

In 2006, another significant year for acquisitions, total transactional volume exceeded $10 billion, second only to the 2000 level. Also, publicly-owned companies made significant divestitures, shedding 60 of the 76 dailies that were sold that year. Of these, more than half (32 dailies) came from the sale of Knight Ridder to The McClatchy Company.

The following year set a record that is unlikely to ever be surpassed. Transaction volume for daily newspapers topped $20 billion in 2007, driven in large part by the sale of two venerable public companies: Tribune Company and Dow Jones. Since then, volume has fluctuated between $200 million and $2 billion.

And where do these trends stand today? We anticipate a continuation of the shift toward fewer groups, likely due to the groups that remain growing larger. Several of today’s most prominent groups are committed to strong acquisition strategies. The most acquisition-minded of late is New Media Investment Group, which has added more than 30 dailies in recent years. Boone Newspapers continues to add dailies. Gannett, Paxton, Hearst, Morris Multimedia and Ogden are all buying as well.

We have also observed a small but notable uptick in independent ownership, often in conjunction with high profile urban dailies. In 2013, the Boston Globe was acquired by local businessman and Boston Red Sox owner, John Henry. The same year, Amazon’s Jeff Bezos bought the Washington Post. In 2014, well-known businessman and Minnesota sports team owner Glen Taylor bought the Minneapolis Tribune and Philadelphia philanthropist Gerry Lenfest bought the Philadelphia Inquirer, later gifting it into a foundation. On a smaller scale, three local business people in northwest Massachusetts acquired their hometown Berkshire Eagle and two other nearby dailies in 2016. These transactions and a handful of similar transactions might just indicate the beginnings of a shift in the other direction, back toward independent ownership.

That said, the undeniable trend of decline in the number of independent family owners continues. A number of high profile, long-owned, family newspaper companies have sold their papers in the past few years, including seven that had been held by the same family for more than 100 years. In March, the Randall family announced the sale of the Frederick (MD) News-Post, owned by members of the Randall family since 1883. Despite these departures, however, 82 daily newspapers remain that have been owned for more than 100 years.