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Believe it or not, there are investors who still want to buy local newspapers.
Our favourite person of this stripe is an investor who has already plunked millions into the industry and is in the process of spending much more.
“I might be running head first into the buggy-whip business, but I’m not sold on the death of print quite yet,” he tells us. (He’s asked us to keep him anonymous because many of those deals remain under non-disclosure agreements.)
So what does this investor see in the newspaper industry that the rest of us don’t? Lots of room for improvement, for one thing.
- For most of their existence, newspapers were steady sources of revenue that required little management — “cash cows that you put your brother in charge of.”
- This led to bloat at the large, public congolmerates that now own many of our best local newspapers.
- Then came the Internet. It brought some competition yes, but more devastatingly it brought the preception of a paradigm shift. Suddenly, the bloat-tolerant managers at the top of the newspaper chains couldn’t turn left without hearing from an equity analyst threatening to slap their company with a “sell” rating if it didn’t invest enough in the Internet.
- After a decade of investing in the Internet — but doing little to fight the bloat — the conglomerates are collapsing under a weight of debt.
- This debt remains and online ad revenues aren’t helping reduce it. The LA Times claims its online ad revenues pay for its newsroom, but our source doesn’t buy it. “You had to pull out the duct tape and rubber hoses to make [their formula] work,” he says.
Our guy is convinced that underneath the mess, there are plenty of local newspapers that, after cutting newsroom bloat and R&D costs, would be plenty profitable. He says these local newspapers just need to stop “spending on trying to find their way out” and “instead run their current good business.”
What does our source think of newspapers on the Web? Not much. He says local papers should have a Web site run by two people that links to international and national news and keeps all local content behind a pay wall or off the Internet entirely.
He named 10 newspapers worth acquiring.