Are local papers past their sell-by date?

When Daily Mail & General Trust (DMGT) put regional newspaper arm Northcliffe Newspapers up for sale earlier this month, it seemed Viscount Rothermere was putting his faith in the new world of online ad revenues at the expense of an asset he believes will never again see growth.

At an estimated price of &£1.5bn, whoever buys the 105 titles, and their 16 per cent share of regional newspaper circulation (compared with Gannett’s 18 per cent and Trinity Mirror’s 21 per cent), must be confident they can make long-term profit. Figures suggest they will: Northcliffe reported recent profits of &£102m on a turnover of &£520m, amounting to about 20 per cent, twice that of DMGT’s national and flagship titles.

Yet Rupert Murdoch, Trinity Mirror, DMGT and other media owners have competed recently to acquire billions of pounds’ worth of online recruitment, property and lifestyle space in order to gobble up share in the ad revenue market of the future. DMGT extended its already strong online portfolio only last week with the &£48m acquisition of Fastcrop, the owner of the primelocation.com property website.

There has been speculation that DMGT is considering a bid for radio group GCap, whose stock-market value plummeted after a recent decision to cut advertising, but executives insist further online acquisition is key. In August, DMGT bought the companies behind websites top-consultant.com and officerecruit.co.uk in a &£4m deal. Last year it bought findaproperty.com for &£11m and Jobsite for &£35m. Andrew Hart, managing director of Associated New Ventures, part of DMGT, confirms: “We are looking to acquire more online businesses to enhance our portfolio.”

With the Guardian Media Group closing the long-running City Life magazine in Manchester and Trinity Mirror chief executive Sly Bailey outlining plans to axe 750 jobs from its 11,000-strong workforce, it seems regional press is being deserted by those who once preached its value to advertisers.

But many still believe regional newspapers have a big part to play in advertising. Despite cost-cutting, Trinity Mirror, Newsquest and two other trade buyers, Johnston and Archant, are interested in buying Northcliffe’s well-run business. The successful bidder would own about a third of the market. But to avoid likely obstruction by the Competition Commission, the groups are thinking of collaborating to buy Northcliffe, then carving up the titles later. Former Express Newspapers boss and Labour peer Lord Hollick is also said to be interested, as is David Montgomery, the former Mirror editor who recently bought Germany’s Berliner Verlag, publisher of quality newspaper Berliner Zeitung.

Numis media analyst Lorna Tilbian says: “Regional press may be a dinosaur but it has a very long tail; decline is gentle and the future looks positive, so there will be potential buyers. Other regional publishers are in the frame, but DMGT won’t want to wait for the competition implications to be untangled and may sell to venture capitalists.”

Such venture capitalists may profit from Viscount Rothermere’s belief that regional press has enjoyed its best days. A report by Mintel last week cited good prospects in terms of circulation, readership and ad revenues in print and online. This is partly due to regional publishers greatly extending their product portfolios. Not only do relaunches and additional editions contain more colour, but 400 magazines and over 600 websites, as well as radio and television stations, are proving valuable to readers and advertisers alike.

Mark Choueke