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Tuesday, June 13, 2006

The Herald's sale price

Before Grand Forks gets saturated with election-return coverage, I want to take a minute to highlight the importance of the Herald's sale price.

To my mind, it's a very strong vote of confidence in the newspaper and in Grand Forks' prospects for growth.

Forum Communications is paying $65 million for the Herald, a number that I believe is higher than most analysts had expected. You can sense its significance when you see the price for the other paper Forum Communications bought: $70 million for the Duluth News Tribune.

Why is that important? It's important because the News-Tribune is half-again as big as the Herald, and serves an urban market nearly twice Grand Forks' size. Plus, the News-Tribune now is the monopoly paper in Duluth, having handily dispatched its local competition (in the form of the Superior, Wis., Telegram and some other, smaller papers) some time ago by buying them.

So, why are the prices for the two properties so close?

An anonymous commentator on the Grand Forks Life blog (scroll down for the comment) suggests that: "1) The Forum wanted access to the Herald's new presses, (2) The Herald's other publications, such as Prairie Business and Agweek, have a lot of value, (3) Grand Forks is perceived as having more growth potential relative to the others, (4) Herald readership is more stable and loyal, and/or (5) the Forum sees an opportunity to lay off staff (i.e. like advertising, printing) in either GF or Fargo to compensate for the higher sale price."

I'd strongly agree with No. 3, the perception of the Grand Forks market. But I suspect our new presses (Anonymous' Reason No. 1) played a more modest role in Marcil's decision. New presses mean little if the paper that the presses print is a loser. Likewise, I don't think Bill Marcil, Forum Communications' owner, plans to cut staff here or in Fargo in order to raise profits. Read this very well done Duluth News-Tribune story, and I think you'll agree.

Instead, I think Marcil simply was impressed with the Herald's business fundamentals, and somewhat less impressed with the News-Tribune's. For one thing, the News-Tribune has stronger unions than the Herald does, making it less attractive from a new owner's standpoint. For another thing, the News Tribune also had a very tough competitive situation for years before it bought those other papers. As a result, the paper currently has a weaker position in the Duluth market than the Herald has in Grand Forks.

All of that added up to the Herald's price rising in the bidding process and the News Tribune's declining or standing still, I'm guessing. By the way, I think the Duluth market has absolutely great potential, thanks to the presence of Lake Superior and Duluth's proximity to the North Shore and northwoods. So the News Tribune is well positioned to soar.

As for Grand Forks, what should local readers conclude regarding this deal?

They should take note and be proud of the fact that Bill Marcil, a longtime observer of and investor in the regional economic scene, clearly is as bullish on Grand Forks as is Leo Ledohowski of Canad Inns fame. And, I think readers should be proud of Marcil's solid confidence in the Herald, too. I know I'm reassured by the news.


Blogger Rick said...

Marcil better not fire advertising and printing people.

3:17 PM  
Blogger The Whistler said...

I would expect that five years from now there will be less people.

They may do that through attrition. I hope so.

Furthermore I would expect the reductions to come in more than just the ad and printing budgets.

1:20 PM  
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