No Substantial Offers for the Statesman. Now What?

Four groups have made bids to buy the Austin American-Statesman, but none offered more than $50 million, Nicholas Carlson reported yesterday at Silicon Alley Insider.

To illustrate what a poor situation that is, let’s go back to September, where media analyst John Morton told the Statesman’s Dan Zehr that “a rule of thumb for valuing a newspaper is $2,000 multiplied by the average daily circulation over a week. For the Statesman, that comes out to roughly $350 million.”

In that same September story, Zehr writes that “Five years ago, a newspaper typically sold at 12 or 13 times its earnings before taking out taxes, interest and other accounting-related items. That’s down in the 5- to 7-times range now. The Statesman likely would go at the upper end of that range.”

The Statesman is owned by a private company, Cox Enterprises, so we don’t know what its earnings before taxes are, but I would bet it’s a lot more than $8-10 million. And Morton’s rule of thumb would now be $300 per average daily circulation, down from $2000.

If that much has changed in the past six months, then the market for a profitable newspaper, with no other daily competition and a growing web presence, has bottomed out. The land that the Statesman sits on is worth $32 million on its own, according to Travis Central Appraisal District records.

So what does Cox do now? The company said it wouldn’t rule out selling the paper and the land separately. They can either sell one of their well-performing papers for one of these low-ball offers, or hold on to it and see what’s around the corner. It’s a depressing situation to be in for the newspaper’s owners, and for those who work there.