Suddenly news media and information-based start-ups are breaking through to Silicon Valley’s legendary unicorn status, with billion-dollar buyouts by old media organisations struggling to find their footing in the digital age.
Last week continental Europe’s largest purveyor of old media, publishing house Axel Springer, was reported as paying one unicorn — $US1 billion — for Washington-based news site Politico and its associated digital titles. (“Unicorn” was coined in 2013 to describe those rare digital start-ups that end up being worth $US1 billion or more.)
It’s a key play by Springer, positioning the German company in the increasingly competitive battle to be one of the handful of 20th-century news and information oligopolists to build a global footprint in the Internet age — along with News Corp, The New York Times and, indeed, The Guardian.
Springer is Germany’s News Corp, built off a similar populist tabloid grounding, particularly through the country’s largest daily, Bild. And like News Corp, it has recognised it needs to shift ground by shopping for higher-end journalism and information products.
It was already in a joint venture with Politico for a European edition. In 2015, it jumped into the US business-reporting market (and into competition with News Corp’s Wall Street Journal) with a controlling stake in Business Insider (launched in 2007), which valued that company at about US$440 billion. Last year it absorbed financial newsletter start-up Morning Brew for a reported US$75 million.
The Politico deal came after News Corp made its own unicorn-sized billion-dollar play for digital information services, with its US$1.15 billion takeover of the Oil Price Information Service, the “global industry standard for benchmark and reference pricing and news and analytics for the oil, natural gas liquids and biofuels industries” (according to the company statement).
News says this will be consolidated into its Dow Jones information services to “further its goal of building the leading global business news and information platform for professionals”.
It’s not the first foray by the Murdochs into digital start-ups. In 2005, it bought social-media platform MySpace for about half a unicorn — US$580 million — before on-selling for US$35 million. Rupert Murdoch has been reported to have tossed an early US$125 million into health industry start-up fiasco Theranos before it transitioned from a US$4.5 billion superstar to the era’s cautionary tale.
More successful was News’ early controlling stake in realestate.com.au, now the most valuable part of its Australian operations.
Politico was launched in 2007 as a news and information platform — a digital trade magazine for political insiders. It’s been a strong influence on political reporting, growing the value of insider tips dependent on access, forcing all Washington-based media to sharpen their reporting in real time. It’s deepened the trend of analysing politics as the horserace between competing parties, rather than accountability and policy development.
It’s birthed a new political reporting ecosystem, with staff splintering off to found Axios in 2017 (famous here as the home of Australia’s Jonathan Swan) and Punchbowl News just this past January.
Meanwhile, the most recent big newspaper deal was hedge fund Alden Capital’s purchase of the US Tribune group for US$630 million in May. (The US group is similar to News Corp’s Australian News and Media segment, less The Australian: same revenues, same mix of big city and regional mastheads.)
Seems a lot, until you remember that the core of the group, the Chicago Tribune, sold at the industry peak of December 2007 for more than US$8 billion (that’s billion, with a B!) just in time for the industry’s advertising collapse the following year.
The price difference between digital and print is a warning that old media are running out of time. The decade-long trick has been to milk the remaining printing revenues (thanks, Harvey Norman!) by cutting costs until digital revenues gush up to save the day.
News Corp, for example, reports that it’s spent about A$440 million on “restructuring” its newspapers in the past four years (primarily for employee termination costs) to keep costs within its ever-declining income. Yet printed papers still bring about two-thirds of its News and Media revenues.
No wonder they’re hoping unicorns will magic up a rescue.
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