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July 30, 2014, 10:17 a.m.
Business Models
LINK:  ➚   |   Posted by: Joshua Benton   |   July 30, 2014

Not long ago — hours ago, actually — both Journal Communications and E. W. Scripps were media company models of diversification.

For many American newspaper companies in the late 20th century, diversifying into broadcast was considered the smart move for shareholders. Companies like Gannett, Belo, Scripps, Cox, and Tribune mixed newspapers and TV in ways that Wall Street thought would made them less susceptible to cyclical revenue trends and more efficient to manage. It was an age of media conglomerates.

The past decade or so has been all about anti-diversification. Belo (where I used to work) split into a newspaper company (A.H. Belo) and a TV one (Belo) in 2008, then sold the TV one to Gannett. The New York Times Co. sold off its TV properties back in 2007. News Corp split its more profitable TV and movie business into 21st Century Fox. Tribune will formally spin off its troubled newspapers next week to separate it from its still-profitable television empire. Even Gannett, the American ur-newspaper company, has been betting on TV and even been making (confusing to interpret?) noises about selling papers.

Everybody’s becoming a pure play. These sales have, broadly speaking, been about putting the print properties on an ice floe to fend for themselves. And now we have a quasi-merger, quasi-split that lets two companies handle that divide as one:

Two storied media firms, Journal Communications Inc. of Milwaukee and E.W. Scripps Co. of Cincinnati, announced Wednesday evening an agreement to merge their broadcast operations while spinning off their newspapers into a separate company.

Under the deal, the Milwaukee Journal Sentinel will serve as the flagship of a new public company, Journal Media Group, which will be headquartered in Milwaukee.

Meanwhile, Journal Communications’ broadcast assets, including WTMJ radio and television, will be folded into Scripps, with the headquarters in Cincinnati. The E.W. Scripps Co. name will be retained and the firm will remain controlled by the Scripps Family.

As in the Belo split (and not as in the more ruthless Tribune split), the newspaper company isn’t being saddled with debt: “Journal Media will get a fresh financial start in an uncertain media world. The company’s balance sheet will have $10 million in cash and no debt, while Scripps keeps substantially all of the qualified pension obligations.” Still, there’s a reason Bloomberg framed this deal as Scripps “shedding” its newspaper assets, like a layer of skin no longer needed.

The newspaper company will include papers in cities like Milwaukee, Memphis, Knoxville, Naples, Corpus Christi, Abilene, and Wichita Falls — the sort of smaller metros that have generally showed more staying power than their bigger peers. But it won’t have those more reliable, not-yet-collapsing local broadcast revenues to help support the balance sheet any more.

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