Jun 16, 2019 - Economy

Private equity's less-than-stellar track record in the legacy media industry

A grave for a newspaper.

Illustration: Aïda Amer/Axios

The legacy media business hasn't seen an IPO for a very long time. Instead the big trend is the other way around: public companies being taken private.

The big success story is the Washington Post, which traded under the ticker symbol WPO before it was bought by Jeff Bezos for $250 million. Under his aegis, investments no longer need to generate an immediate improvement in the bottom line. The result is a revitalized property that's almost certainly worth much more than Bezos paid for it — were he to want to sell it, which he doesn't.

Private equity has a less-than-stellar track record in the industry. In 2011, KKR exited a previous media acquisition vehicle, Primedia; the New York Times called it "the firm’s longest investment ever — and one of its least successful." After iHeartMedia was taken private by Bain Capital and Thomas H. Lee in a $17.9 billion deal in 2008, it ended up filing for bankruptcy protection in 2018. And Univision's private-equity owners are still struggling with their albatross after buying the broadcaster for $12.3 billion in 2006.

KKR is returning to the industry with an agreed bid to take German publisher Axel Springer private at a valuation of $7.7 billion. The news came after hedge fund Elliott Associates agreed to buy Barnes & Noble for $683 million.

  • Springer's acquisition announcement coincided with a profit warning. CEO Mathias Döpfner said that as a public company, such bad news would normally be met with cuts, even though "over the long term this is not the right thing to do."

Between the lines: Under private equity ownership, journalism is rarely valued as an end in itself. If it can't drive reach or revenues, it tends to get cut.

  • Springer is merging its U.S. business intelligence unit, eMarketer, with its Business Insider journalism brand, putting them both under the helm of Business Insider founder Henry Blodget. Terry Chabrowe, eMarketer's founder, is joining the board of Insider Inc., the U.S. subsidiary.
  • Blackstone, controlled by "China whisperer" Stephen Schwarzman, bought control of the Thomson Reuters information business unit in October. The business, now known as Refinitiv, is blockingReuters news stories about Tiananmen Square from appearing on its terminals. (Reuters is independent of Refinitiv, but gets mosts of its revenue from its sister company.)
  • Univision's struggles have resulted in massive cuts to its news division.

Our thought bubble, from Axios' Sara Fischer: Most private equity firms understand a lot about execution, finance and markets, but are less steeped in technology trends. As a result, some firms have struggled to deal with the outcome of market trends they didn't anticipate in industries that have been completely upended by technology.

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