Nine regional papers

Australian Community Media (ACM) has attracted a list of prospective buyers that do not bode well for the group’s 170 regional and community papers.

Prime Media Group (Seven West’s regional TV affiliate), a series of private equity firms and former Domain executive Antony Catalano are all reportedly in the race, following Nine CEO Hugh Marks’ confirmation of the impending sale in an email sent to staff last week. The remarks were released alongside the company’s first half-yearly results since last year’s historic merger with Fairfax Media.

“We are talking to interested parties who see the future potential of each [asset], who are prepared to invest, to realise the potential in a way that Nine could not, due to limitations as a public company,” Marks wrote.

Closures around the corner?

Senior lecturer in journalism at the University of Adelaide Dr Kathryn Bowd says that, regardless of who buys ACM, the closure and consolidation of some local newspapers is almost certain.

“Inevitably in any big group there are going to be newspapers that aren’t doing particularly well financially and aren’t particularly strong performers. It’s a natural progression to look for the low hanging fruit,” Bowd tells Crikey.

A spokesperson for Nine declined to comment on whether the sale was likely to result in closures or consolidation. The Country Press Association also declined to speculate on the consequences of the sale.

Private equity ownership of local media might be a new concept in Australia, but it has been increasingly commonplace in the US over the last 10 years to mixed results. The firms tend to implement aggressive cost-cutting measures to turn the business around, regardless of the resources required in the unprofitable reportage of hyper-local news.

In 2010, US company Digital First (a chain encompassing more than 90 local newspapers) was bought out by hedge fund Alden Global Capital. The extent of the hedge fund’s buy-and-purge cost-cutting measures was so devastating in some areas that the editorial board of The Denver Post asked to be sold. Their 250-employee newsroom had been stripped to 75.

Senior lecturer in journalism at Deakin University Dr Kristy Hess says that local news can’t afford any more draining of resources. “They are operating with very thin staff ratios and the most important aspect relevant to their survival is retaining local knowledge and knowing the needs and wants of the communities they serve. This does not suit a massification model,” she tells Crikey.

Allegro Funds, Anchorage Capital and Platinum Equity have all expressed interest in ACM. The first two are Australian operations specialising in struggling businesses; the latter is a Beverly Hills-based firm focused on large-scale leveraged buyouts.

“I would totally embrace an Australian private equity firm that respects what is required and the importance of local media and was prepared to invest in the sector,” Hess says.

Presently, it is difficult to see a private equity firm with a fiduciary obligation to limited partners placing value in maintaining local resources and local knowledge. Ideally, Hess and Bowd agree that local ownership with strong links to the community they serve is ideal for local newspapers’ civic function.

“Whether it’s sustainable in the current environment is a different question,” Bowd says.

How this affects communities

Significant and varied research from the US shows that the closure and consolidation of local newspapers can have a ruinous effect on the local communities they serve. Civic and political engagement, public finance and local accountability have all seen dramatic declines in the wake of local newspaper closures across hundreds of US municipalities since 1995.

Bowd says there has been a delayed mirror of the US market because of market scaling; the US has far more newspapers, with far more tiers of population to cater to. “For a long time, regional news in Australia really held their own pretty well. They had a strong base in local advertising, a lot of community support and they managed to make money at a time when money was being shed left, right and centre from the major metro publications. That’s changed and I think a lot of publications are struggling.”

If a small circulation town is robbed of its local rag, what turns up in its place? According to Bowd, hyper-local not-for-profit social media operations have increasingly filled the void left by weakened local papers in Australia. Bowd points to former bureau chief of The Australian, Carol Altmann, who set up The Terrier in Warrnambool to “speak up for the environment, social justice and transparency in government”, according to her website.

A screenshot of The Terrier.

“It’s not the traditional model of local journalism because it has a really strong focus on advocacy, but nonetheless she’s a journalist who is doing the work of a journalist,” Bowd says.

Though these pages can hold local government to account and fulfill a civic or social function, Bowd says there are sustainability and journalistic issues with unchecked local advocacy. “In a lot of communities there are newspapers that have been there for 100 or more years. A Facebook page, no matter how enthusiastic the local community, is probably not going to be financially sustainable in the same way,” Bowd says.

“Where we’re seeing a shift away from traditional journalists, we are not necessarily going to see all of the sides of a particular issue canvassed.”

The ACM sale will propel media consolidation and potential closures of local newspapers in Australia — already one of the world’s most concentrated media markets. As financiers don’t have an obligation to provide local journalism to small-circulation towns, the worst could be to come for regional Australia.

What would you like to see happen to Nine’s regional papers? Send your thoughts to [email protected]ey.com.au.