Finance Finance News Rupert Murdoch is stuck between a rock and hard place with regional newspapers

Rupert Murdoch is stuck between a rock and hard place with regional newspapers

Rupert Murdoch must decide whether to unchain his regional dailies. Photo: TND
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Rupert Murdoch’s News Corporation is caught between a rock and a hard place in its attempts to sell more than 100 regional and community newspapers.

Mr Murdoch wants to offload the papers as he sees no future in them, but the leading suitor is rival Antony Catalano’s Australian Community Media – a serious enemy for News because of its long-term strategy.

News CEO Robert Thomson told the third-quarter results briefing on Friday that “the structural review of regional and community [newspapers] is well advanced”.

Mr Catalano, a former Fairfax advertising executive who earned $107 million selling media startup Metro Media to Fairfax in 2015, is the premier bidder for what News wants to sell.

But ACM’s success would undermine one of News’ major Australian assets: REA Group.

Can News see through Mr Catalano’s strategy? Photo: Getty

News has about half the regional and community newspaper market with more than 100 titles focused on Queensland.

Mr Catalano and Pratt family member Alex Waislitz essentially have the other half after buying ACM from Nine for $115 million after the TV group swallowed Fairfax last year.

There’s life in the regions

News Corp’s portfolio is attractive, according to independent media analyst Steve Allen of Fusion Strategies.

“News’ regional papers are all in strong markets. About 50 per cent of Queenslanders live in regional areas so the daily papers in towns up the east coast are stronger than those in the south east,” Mr Allen said.

News’ Queensland operations cover about 35 per cent of Australia’s population.

Although virtually all newspaper circulations are falling, those in regional Queensland are falling much slower.

“Our most recent research showed that circulations were generally falling at about 7 per cent a year, while in those regional Queensland markets, it was 4 or 5 per cent. Some were not as much as that,” Mr Allen said.

However, nearly all took a big fall at the start of the coronavirus crash. But management is hopeful of an uptick when conditions lift.

News is interested in cashing out its regional and community portfolio because “they don’t see a long-term future. They don’t want to put expensive management resources into businesses with dwindling revenues and audiences,” Mr Allen said.

However, News is in a bind when it comes to dealing with ACM.

News gets significant revenues from its 62 per cent-owned property listings outfit REA group, which operates and several other property websites.

The real estate listings in its community newspapers feed into REA revenues and that is a valuable growth area for Mr Murdoch’s Australian media group.

“There are papers like the Wentworth Courier group [in eastern Sydney] that News paid $70 million for five or so years ago that are an important part of the retail strategy,” Mr Allen said.

Cat’s eyes on the prize

Mr Catalano has his eyes on the online real estate market, which he helped create at Fairfax offshoot Domain.

In early February, just before the coronavirus hit, Mr Catalano joined the board of Realestateview after gaining a 26 per cent stake in what is the third online property outfit behind Domain and REA.

News wants to get out because it sees [its regional outlets] as a dying business. But News faces the problem of how to sell its Queensland regional outlets without killing REA,” said independent media analyst Roger Coleman.

If ACM manages to put together a deal, Mr Catalano will make it work for Realestateview.

“He will turn the marketing budget for the Queensland outlets into revenue for Realestateview,” Mr Coleman said.

“Catalano is smarter than the incumbents. He’s not a loser,” Mr Coleman said.

So if he can prise the Queensland businesses loose from News, he will parlay it into his latest online property venture.

Regulators will investigate

A successful deal would not lessen competition in a particular market because the two companies don’t have geographical overlap in their operations.

But the Australian Competition and Consumer Commission would have to look at any potential deal, because “it could give [ACM] a dominant position in the national advertising market,” said an experienced regulator, who declined to be named.

However, Mr Coleman said the ACCC would ultimately wave it through.

“There are monopolies in the media markets in Adelaide, Brisbane and Perth and they haven’t stopped that,” Mr Coleman said.

Reports have suggested that the negotiations are in a rocky patch with News not wanting to give up all the assets that ACM wants.

There are suggestions that Darwin’s NT News is a sticking point.

Mr Allen suggested that News might want to hang on to the community titles, which act as real estate funnels, while giving up the regional dailies to ACM.