Falling Circulations & Revenues and Plunging Regional Newspaper Profits & Valuations Pose Regulatory Dilemmas
In late June 2016, APN News & Media Limited announced that it was selling its Australian regional newspaper operations to News Corp for $36.6 million, an amount which was 97% less than a $1.1 billion independent expert valuation which had been placed on the business only nine years before.
This report examines some of the major structural issues which have led to the substantial reduction in value at both ARM, as well as at most other newspaper publishers throughout the developed world, over the past decade and which may even result in the demise of newspapers in the printed format in the not-too-distant future.
The phenomenal reduction in value at APN’s Australian Regional Media (“ARM”) operation starkly highlights the severe financial challenges which have been confronting most newspaper publishers, not only in Australia, but also in most developing countries, over the past decade and it therefore represents a very interesting industry case study in relation to the future commercial viability of both newspapers in print format and perhaps also other forms of traditional commercial media.
Since 2007, and in line with the experiences of most of its local and international industry peers, there has been a severe deterioration in many of ARM’s key performance indicators with: daily print circulation numbers down by just under 40%; total revenues off by a slightly lesser 37%, and operating profits tumbling by a much greater 82%, given the capital-intensive and fixed cost characteristics of the sector.
Those adverse results occurred despite the fact that for more a decade APN has invested considerable time, effort and financial resources, as well canvassing considerable external expertise, in a determined, but ultimately unsuccessful, effort to preserve the financial viability under its ownership of an important and highly valued regional media business.
With an approval of the ARM sale to News reducing the number of major Australian newspaper publishers down to only three, it will be interesting to scrutinise the criteria which the Australian Competition and Consumer Commission (“ACCC”), the local competition regulator, applies to its assessment of the proposed transaction, especially as the on-going adverse trends in most financial metrics suggest that the Australian market may soon be able to sustain only one, or at best two, large and even modestly financially viable, publishers of newspapers in the print format.
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