People in the newspaper industry increasingly joke about the triumvirate of Gatehouse Media LLC, Digital First Media Inc. and Gannett Co. (GCI) taking over the bulk of the country's 1,350 daily newspapers as conglomerate Gannett-Gatehouse-DFMCo. Today, those three companies own a full quarter of the nation's dailies, as family-run operations dwindle and final generations of newspaper-owning families look for the exits before the passageway becomes too narrow.
At the 25% level, we may seem like a long way away from Gannett-Gatehouse-DFMCo, but a newer phenomenon -- megaclustering -- moves the industry closer in that direction.
Take industries from pesticides to breweries to sporting goods, where consolidation of "maturing" industries has made some people lots of money. In centralizing and regionalizing every operation they can, consolidators manage to cut costs aggressively and make consistent profits. Bigger chains now embrace that strategy with more fervor as the pace of newspaper property sales has quickened.
Further, with potential-to-likely changes in federal strictures on combined broadcast and print ownership and of changes in antitrust regulation itself, the phenomenon, deemed megaclustering by major newspaper business broker Dirks, Van Essen & Murray, could become even greater. That potential increased Monday, July 24, as it was reported that House Republicans had made a priority of eliminating those cross-ownership rules, as the Federal Communications Commission begins reauthorization hearings.
Megaclustering builds on "clustering." Newspaper mogul Dean Singleton is most credited with the principle, though sharp observers believe that Thomson Newspaper CEO Stuart Garner may have been earlier responsible. (Garner, interestingly enough, made one of the great killings in newspaper sales, completing the biggest sale of its time, about $2 billion for the Thomson chain in 2000 -- at the height of newspaper company value.)
Singleton built MediaNews Group Inc. on the clustering principle, and its successor company Digital First Media still operates on that principle in both the Bay Area and Los Angeles. Early on, that meant centralizing printing, personnel and back-office functions for separate -- but usually contiguous -- newspaper properties in the '80s. Later, we saw editorial centralization as well.
Today, as many of those efficiencies have been absorbed, and chains look for ways to maintain profits as revenues continue to dive, megaclusters have swept the landscape. So a megacluster is what sounds like: putting an even bigger group of dailies over a wider geographic area.
It's a logical operational step in an industry that is half-clustered.
"In 1990, 15 percent of all daily newspapers were owned in such a cluster," said Dirks, Van Essen & Murray vice president Sara April. "By 2005, 40 percent were held in a cluster. Today, nearly 50 percent are."