Analyst: Wave of Media Consolidation in Response to Internet

By: The wave of consolidation sweeping over the newspaper business, including a proposed sale of the Akron Beacon Journal and other former Knight Ridder Inc. papers, is an unprecedented response to the Internet and other changes in media, a top newspaper industry analyst said Thursday.

Lauren Rich Fine, an analyst with Merrill Lynch who has been studying the industry for 18 years, said newspapers are looking to find ways to remain relevant and still earn healthy profits as advertisers follow readers online and to cable television.

"I've never seen these kinds of changes before," she said before speaking to the Akron Roundtable, a forum of community and business leaders.

Fine said that before the Web and cable television, most media coexisted without eating into each other's ad dollars. But now advertisers are drawn to the Internet's ability to reach both wide audiences and also target specific groups of people. What's more, the Web is also threatening newspapers' bread and butter, classified ads.

Newspapers on average have a profit margin of about 21.5 percent. That is expected to drop to about 16.5 percent by 2011, she said.

"Newspapers won't be as profitable, but they can still be profitable. They will no longer be a growth market," Fine said.

In order for the papers to cut costs, she said analysts expect more of the consolidation like the recent sale of Knight Ridder's 32 newspapers to McClatchy Co., which in turn put 12 papers -- including the Beacon Journal -- up for sale. The Akron newspaper, the largest of the remaining six papers to be sold, once was the flagship of Knight Newspapers, a predecessor to Knight Ridder.

Advance Publications in New York, parent company of the Beacon Journal's biggest competitor and Ohio's largest newspaper, The (Cleveland) Plain Dealer, was believed to be among the possible bidders for the Akron newspaper. The papers are located 40 miles apart and compete in some of the faster growing Cleveland and Akron suburbs.

Other possible Beacon Journal bidders are Yucaipa Cos. of Los Angeles, which is working with a newspaper union; Black Press Ltd. of Vancouver, British Columbia; and HM Capital Partners of Dallas.

The other McClatchy papers for sale were the American News in Aberdeen, S.D.; the Duluth News Tribune in Minnesota; the Grand Forks Herald in North Dakota; The News-Sentinel in Fort Wayne, Ind.; and the Times Leader in Wilkes-Barre, Pa.

Scott Lynett, publisher of The Citizens' Voice, a family-owned newspaper also in Wilkes-Barre, said: "We can't confirm or deny our interest in the Times Leader, but we are always interested in growth opportunities for our businesses."

McClatchy, Advance and another possible bidder, Community Newspaper Holdings Inc. in Birmingham, Ala., didn't return messages seeking comment Thursday or declined to comment. The Times Leader's publisher, Patrick McHugh, said he hadn't heard anything about bids for his newspaper. Some possible bidders said confidentiality agreements ruled out all comment.