Who Will Buy The Statesman?

The bad news that has been stalking the newspaper industry recently was felt locally yesterday, when Cox Enterprises announced that they plan to sell the Austin American-Statesman. Here’s a look at what lies ahead for our local daily.

Is This A Good Time to Sell a Newspaper?
In the Statesman’s own story, industry analyst John Morton puts it quite bluntly: “This is a terrible time to be trying to sell a newspaper. The sales value of newspapers has probably dropped in half in the last five years. … There are a lot of newspapers that are up for sale and there are no takers or no one willing to pay what the sellers want.”

But Morton and fellow analyst Edward Atorino both concede that billionaires and local businessmen who like the newspaper business could emerge as potential buyers.

So clearly, it’s definitely a buyer’s market out there. The New York Times pointed out that even though some bargains may be out there, there are fewer buyers interested. Papers saddled with large debts and dwindling profits don’t make attractive targets.

Is the Statesman a Good Buy?
Cox is selling an attractive property and using the proceeds to pay down debt in the rest of its business — this is the same method the Tribune company used when it sold its papers to billionaire Sam Zell.

Cox is a privately held company, so it doesn’t disclose financial information, but Statesman publisher Mike Laosa has said the paper is profitable. Like other newspapers, the Statesman has taken a financial hit because of decreasing circulation, lost advertising revenue, and a down economy, but the hit has not been as bad as for papers in Palm Beach and San Diego, who have relied heavily on revenue from real-estate listings and see a dramatic downturn in that area.

The paper is nearing completion of a project that will expand its facilities and house new equipment, giving them more flexibility in packaging and distribution.

And from an overall perspective, the state capital, a university town, and Austin’s high-tech community provide attractive incentives for a local media company.

Who Would Buy It?
One potential suitor might be another newspaper company, but as the Times pointed out, it’s not a good time for those folks. The Sun-Times Media Group is losing money rapidly, Tribune and McClatchy are weighted down with debt, and the most avid buyers, like GateHouse and the MediaNews Group, are in no position to keep buying.

Belo owns the state’s premier paper, The Dallas Morning News, and they have a strong presence in Austin with their capitol bureau. Hearst owns both the Houston and San Antonio papers, so an Austin buy would complete a trifecta in that area of the state.

Another potential suitor might be a wealthy individual or group of investors. State senator Dan Patrick said on his radio show that he’d be interested in purchasing the paper if it makes good business sense, but it’s unclear whether he’d be a serious bidder. Would Michael Dell be interested? Or Austin Ventures?

What Happens Now?
The folks at the Statesman will go to work as usual, and it will likely take months before a buyer emerges. In the meantime, I have a few ideas of how the current company might begin to evolve, regardless of their eventual owner, so they might find themselves well-positioned in the future:

• Make the online archives free — the increased search advertising revenue and the boost in relevancy outweigh current revenue from archive fees.
• Create their own local advertising network to head off challenges from competitors like Google.
• Make deals with smaller publications and offer to sell advertising into their print or online products for a split of the revenue.
• Ensure a laser-like focus on covering stories in Austin and Central Texas, and become the definitive source on key areas: the legislature, Longhorn sports, local music. Consider offering premium content (subscription newsletters, for example) on those specialized topics.
• Provide coaching to bring current editorial employees up to speed with online tools.
• Provide news and information to customers at any time, in any location, on any device.