Newspaper Acquisitions on the Rise, but is that a Good Thing?

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By now the whole world has noticed the consolidation in media properties over the years. That consolidation could extend to smaller newspapers.

Why Smaller Newspapers?

Larger media companies find small newspapers an attractive investment for one reason: cash flow. Additionally, those newspapers have dramatically dropped in value, just like their bigger brothers. That means that they aren’t expensive. Finally, their valuations have recently stabilized.

Tribune Publishing Company, for example, recently purchased smaller newspapers in the Baltimore and Hartford areas. The company stated in a recent financial filing that continued acquisitions will represent “an important component of our business strategy.”

There are other examples as well. Famous investor and billionaire Warren Buffett made an investment in small newspapers in Iowa. Halifax Media Group has also made a number of purchases in recent years.

SEE ALSO: Jeff Bezos and the Washington Post: What Does This Mean for Newspapers?

GateHouse, a subsidiary of New Media Investment Group Inc., has shown particularly noticeable interest in small newspapers. That company, after recently emerging from bankruptcy, has been actively snapping up small papers, including The Cape Cod Times and The Times Herald-Record from Middletown, NY.

New Media itself already owns 240 weeklies, 96 shoppers, and 85 dailies. Those properties represent a combined circulation of more than a million paid and three million total.

GateHouse has issued a statement making clear its acquisition strategy:

We have created a national platform for consolidating local media businesses and have demonstrated an ability to successfully identify, acquire and integrate local media asset acquisitions. We have acquired over $1.7 billion of assets since 2006. We have acquired both traditional newspaper and directory businesses. We have a very scalable infrastructure and platform to leverage for future acquisitions.

Is This A Good Thing?

The good news for companies that invest in small newspapers is that they tend to financially outperform the larger newspapers. This is, unquestionably, why they’re so much more attractive to holding companies than larger media options.

It also should be noted that companies investing in small newspapers seem to want to take an active role in ensuring that those newspapers can compete in the digital world. GateHouse, for example, specifically says that it’s targeting papers “that have undermanaged the online opportunity.”

Overall, media mergers with small newspapers represent a forward-looking initiative that’s expected to generate cash flow and increase value with superior management. Time will tell whether or not the strategy is a successful one.

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