Investing in Newspapers in PDF Free Download

Investing in Newspapers in 2018 Panelists: Mark Adams, CEO, Adams Publishing Group Mark Aldam, executive vice president and COO, Hearst Jeremy Halbreich, chairman and CEO, AIM Media Management Jim Moroney, chairman, president and CEO, A.H. Belo Corporation publisher and CEO, The Dallas Morning News Moderator: Penelope Muse Abernathy, Knight Chair, Digital Media Economics, UNC-Chapel Hill School of Media and Journalism

Fewer Newspapers, Fewer Readers 1383 Fewer Newspapers in 2018 Circulation Decreases Since 2004 2004 2018 2004 *may include some seven-day averages 2018 *2004 and 2018 exclude the circulation of three largest national newspapers

Where the Top 25 Companies Own Papers Source: newspaperownership.com

Jim Moroney, chairman, president and CEO, A.H. Belo Corporation publisher and CEO, The Dallas Morning News

What are you investing in? Growing paid digital subscribers 5

What else are you investing in? Growing paid digital subscribers 6

Is there anything else you are investing in? Growing more paid digital subscribers 7

Why such a focus? Marginal cost = ZERO Fastest way for publishers to build profitable revenue: Recurring monthly revenue 8

You need at least three legs on your sources of revenue stool 1. Paid digital subscriptions 2. Digital advertising 3. For us: Digital marketing services What are your three? 10

Mark Aldam, executive vice president and COO, Hearst 2.27.18

Overview DAILIES 15-24 2015 2017 COMMUNITIES 31-60 2015 2017 YP DIRECTORIES 28-35 2015 2017 WEBSITES 40-50 2015 2017 MARKETING SERVICES 103 2017 DIGITAL BUSINESSES 5-8 2015 2017 1100 JOURNALISTS 800 SALESFORCE 12

Growth Business HIGHLIGHTS Digital + Consumer = 60% 2017 Total Revenue Up 2.6% Organic Growth Top Priority for Hearst Execution Performance is Job One! Favor Bolt-on Solutions that Scale Growth through Acquisitions Secondary Expansion if Part of Cluster Strategy 2012 2013 2014 2015 2016 2017 2018 13

Long-Term - Acquisition Strategy Core EBITDA Over 22% New Cluster Assets Add Synergy Benefits Immediately Cost Savings Support Reinvestment in Local Journalism and Local Advertising Sales Resources Accretive Tuck-ins Offer 2 to 3-Year Payback Disciplined Valuations Will New Asset Earnings Produce 3 to 5-Year Payback before Synergy Value? Importing Hearst Go-to-Market Playbook Changes Revenue Curve 14

Houston Community Newspapers Independent Business Struggling 22 Weeklies and 2 Small Dailies Revenue Declines Steep Earnings Decline No Digital Revenue 17% Ad Revenue Growth ROI Less than 1 Year NORTH GROUP NORTHEAST GROUP NORTHWEST GROUP SOUTHWEST GROUP SOUTH GROUP The Woodlands Villager Spring Observer The Courier Humble Observer Atascocita Observer Lake Houston Observer East Montgomery County Observer Kingwood Observer Cleveland Advocate Eastex Advocate Dayton News Tomball Potpourri Magnolia Potpourri Cypress Creek Mirror (Cy-Fair) Cypress Creek Mirror (Klein) Examiner Memorial Examiner Katy Rancher Sugar Land Sun Pasadena Citizen Dee Park Broadcaster Bay Area Citizen Pearland Journal Friendswood Journal 15

NEW HAVEN ZONE New Haven Register Group - CT 3 Dailies and 7 Weeklies Revenue Down Double Digits & Rapidly Declining Print Circulation MIDDLESEX ZONE Invested in News Resources & Local Ad Sales Earnings Growth of 70% in First 8 Months Circulation Volume Up Q1 LITCHFIELD ZONE Digital Revenue Growth Outpacing Print Declines

Jeremy Halbreich, chairman and CEO AIM Media Management

We InvestIn Newspapers Local & Regional MarketingServices Web Sites E-Commerce Media-RelatedTechnology Shoppers 1 8

Decision toinvest New Geography: Minimum $3M-$5MEBITDA Access by Single Non-Stop Flight from DFW Characteristics of Specific CommunitiesServed Can We Make A Difference? Existing Geography: Any Size 1 9

Return on Investment 12%-15% Annual Pre-Tax Cash Distribution on Invested Capital LLC Pass-Through Structure Low Debt Leverage Principal Repayments Begin Immediately in Month 1 Business Model Reflects Continued Organic Decline in Traditional Print Business Growth Opportunities No Corporate Headquarters & No Corporate Staff 2 0

Mark Adams, CEO Adams Publishing Group

We love newspapers as an investment!! Mark Adams, CEO Adams Publishing Group

Why? a. Strong brands b. Community service c. Availability of seasoned management d. Fragmented ownership lots available for purchase e. Consolidation and integration opportunities f. Low purchase multiples = high ROI Mark Adams, CEO Adams Publishing Group

So..what s our strategy? Mark Adams, CEO Adams Publishing Group

The Purchase: a. Buy quality newspapers in solid, growing communities that are underserved by other local media. b. Buy newspapers from families, steering clear of private equity and/or public sellers that have stripped out the newsroom. c. Buy newspapers that have upside: Digital: many newspapers still haven t exploited their digital opportunities. Retail: many newspapers have cut boots in the street. More boots = more revenue. Circulation: Many newspapers don t invest in marketing and promotion. Isn t this the business we re in?? Mark Adams, CEO Adams Publishing Group

The Investment: a. Stay conservative and remember that revenue headwinds won t subside in the near future. 4x 5x trailing EBITDA. b. Evaluate the condition of the press assets. Commercial printing can be a strong revenue generator as many publishers are outsourcing printing. c. Upgrade systems and software so associates are as efficient as possible d. Invest in the pressroom? Not just yes, but heck yes!! Mark Adams, CEO Adams Publishing Group

Operating for the long term: a. Leave the newsroom alone: They know how to do it better than most owners b. Hire and upgrade the sales teams. Pay them what their worth. c. Don t live quarter to quarter. d. Manage to a reasonable operating margin: 15% e. Create efficiencies in the back office, without diminishing the local nature of the franchise. Mark Adams, CEO Adams Publishing Group Continued

Operating for the long term: Continued f. Go after strategic bolt-ons. A bigger footprint is usually a better footprint. g. Keep corporate expenses to a minimum: 1% of revenue h. Cap-Ex: 1% of revenue i. Invest in digital agency products: This is a truly long-term item Mark Adams, CEO Adams Publishing Group

What lies ahead? a. Continued choppy retail environment b. More migration of readers to digital. Let s keep them in OUR digital world. c. Continued cycling out of over-levered companies, some with untenable pension obligations. Perhaps more bankruptcies. d. What s going to happen with the remaining private-equity owned companies? Mark Adams, CEO Adams Publishing Group