Newspaper Alliance p. 16

By: Dorothy Giobbe Four major newspaper companies join together to acquire
one of the country's largest providers of computerized
information services to the real estate industry sp.

AN ALLIANCE OF four major newspaper companies will acquire one of the country's largest providers of multiple-listing information systems for the real estate industry.
Cox Newspapers Inc., Knight-Ridder Inc., Advance Publications, and Tribune Co. will be equal partners in the approximately $60-million purchase of PRC Realty Systems Inc., a subsidiary of the Black & Decker Corp.
The acquisition, expected to be finalized next month, will cap nearly a year of planning and discussion with PRC, based in McLean, Va.
PRC's core business is the development and sales of multiple-listing hardware and software systems to real estate boards and brokers nationwide.
Real estate brokers and boards use PRC products to pool their listings so that all members of the board have access to the total inventory of homes for sale in the market.
In addition to the newspaper alliance, at least one Bell operating company ? US West ? showed interest in acquiring PRC Realty.
That would be a logical step for US West, which recently created an alliance with Minneapolis-based Edina Realty, one of the nation's largest real estate brokers. The two partners have begun testing new interactive technology, called AgentEdge, and, according to a Jan. 23 report in DM News, are investing "multimillions of dollars" in the system.
AgentEdge will allow real estate agents to tap into a database of homes for sale and view detailed information about properties and neighborhoods. US West and Edina have plans to market AgentEdge nationally to realtors.
Perhaps facilitating PRC's deal with the newspaper alliance was the fact that Tribune has an established relationship with PRC.
In 1992, Tribune and PRC formed a joint venture called the Real Estate Information Connection (REIC). The venture supplies real estate brokers with online access to Chicago-area public records. REIC also provides brokers with an advertising management system that enables them to create their own newspaper ads and buyer guides.
One of REIC's largest clients is Coldwell Banker, and REIC's system helps to facilitate placing Coldwell's advertising in newspapers, including the Chicago Tribune.
"We were convinced that, based on our experience in Chicago with REIC, that there were ways that local-market-focused newspaper companies could bring additional value to PRC's products and services," said David Hiller, senior vice president of development for Tribune Co.
The four alliance partners operate 79 newspapers in 23 states, including some of the largest in the country. Combined annual revenues for the four partners in 1994 was about $12 billion.
Another large newspaper organization, Gannett Co., which last year formed a subsidiary, Gannett Media Technologies Inc., to develop and sell software for newspapers, was not asked to participate in the alliance.
One reason could be the fact that the subsidiary's first product, AdLink, automates the creation and flow of advertising between real-estate brokers' offices and newspapers (see related story on p. 17).
However, Peter Winter, vice president/market development for Cox Newspapers, said that while some of AdLink's features are similar to those that PRC offers, discussions with Gannett were not held because its "market focus" is different from that of the other partners.
According to representatives from the alliance, PRC will retain its current management and operational structure. A five-member board, comprised of representatives from each newspaper company and PRC's president, will guide the company's overall budget, strategy and direction.
While PRC has customers across the country, its strength lies in relationships with local real estate boards and agents. About 40% of the real estate associations, or over 200 representing more than 220,000 agents nationwide and in Canada, have access to PRC's multiple online listing systems and broker books.
"What makes PRC's business thrive is the focus on the local markets," Hiller said. "We expect [the company] will continue to build good, strong local market business with its real-estate board and broker clients."
For Black & Decker, the sale is the latest move in the company's efforts to sell its noncore businesses.
PRC reaps an immediate windfall from the deal. The vast resources of the newspaper alliance will permit the company to develop and market its product lines aggressively, while also allowing for needed investment in technology and systems development.
The acquisition gives the newspaper alliance an opportunity to strengthen relationships with the real estate community, a critical core newspaper customer.
"PRC has a terrific business in meeting the needs of its customers, who primarily are the realty boards and brokers, who are historically also very important customers of newspapers," Hiller said.
Also, the purchase awards the newspaper partners equal share in a successful company that specializes in developing systems that are changing the way real estate information is disseminated throughout the marketplace.
Changing market conditions are of major concern to newspapers. In fact, the four newspaper companies already had informally explored possible partnerships when PRC approached each company individually with the news that Black & Decker intended to sell the subsidiary.
"We had been for some time talking about ways where we might venture together," said Winter. "It had become clear to all of us independently that the time had come . . . for collective action rather than independent action.
"It's difficult to say why these four companies have come together, and why they're looking at acquisitions like this," Winter added, "but . . . there's real similarity in business perspective and sort of a broad understanding of what it's going to take to move the newspaper's business aggressively forward in a much-changed market environment."
The deal is also notable because newspaper companies, often suspicious of one another, have been reluctant to form partnerships with other newspaper companies.
But Winter said none of that mattered to the alliance partners.
"All of the parties involved share the recognition that the marketplace has changed dramatically in the last 10 years, and we can no longer be hobbled by that individual and highly parochial point of view about our properties," Winter said.
"PRC is a separately run, separately managed business, conducting its own affairs with, yes, board oversight but not day-to-day operation," Winter added.
As such, the alliance does not fear charges of anti-competitiveness.
"We're prepared, keeping antitrust issues firmly in mind, to take a look at how we can actually work collectively," Winter said.
"We are advised that the ownership and the conduct of PRC's business does not present difficulties from an antitrust perspective," Hiller said. "It will be commonly owned, but PRC has the responsibility and the freedom to conduct its business successfully in all of its markets."
PRC's strategy will continue to be that of cultivating various partners in new markets. Hiller said that potential PRC partners might include newspapers ? either those that are part of the alliance companies, or otherwise.
PRC will go into "any and every market that it can," Hiller said. "If one of the [newspaper alliance] owners has an entity in the local market, then that entity will presumably do whatever it can to help PRC in its business.
"If there's no owner entity in the area, then we would expect PRC to look around and see if there are other good local partners, including other newspaper companies," Hiller said.
A newspaper partnership with PRC works like this: If brokers in a given market want to create additional advertising products through newspapers, PRC helps them develop special sections, or a separate homes' book, in partnership with the local newspaper.
"We can no longer be bound by traditional newspaper thinking," Winter said. "Entities of the same company are competing with each other in the same markets. It's a fact of life."
Winter likened the situation to Cox's relationship with the direct-mail company Val-Pak, and with Trader Publishing, its joint venture with Landmark Communications.
While owned by Cox, Val-Pak has complete autonomy over markets it chooses to enter and with whom it chooses to enter them. Also, Val-Pak "competes strenuously" with Cox newspapers for local ad dollars, Winter noted.
Trader Publishing puts out Auto Trader and Boat Trader publications in the Atlanta market where Cox owns the Journal and Constitution.
The newspaper alliance will explore other acquisitions and partnerships, Winter added, although he said it is premature to speculate on what might come next.
"Once you get these kinds of relationships and this kind of trust built up, it's only natural that . . . we would take a look at other categories of business and other distribution opportunities to see what we could leverage collectively," Winter said.
?( We had been for some time talking about ways where we might venture together. It had become clear to all of us independently that the time had come... for collective action rather than independent action." [Caption]
?(-Peter Winter, vice president/market development for Cox Newspapers) [Photo & Caption]