Media: GateHouse’s ‘hyperlocal’ a new word for ‘monopoly’

November 17, 2007
By Billy Dennis

Here is an interesting read in the Boston Globe about how GateHouse Media was once a Wall Street darling because of its ‘hyperlocal’ strategy. While the stock has fallen on hard times, the Street still likes the hyperlocal stratgegy.

Gatehouse executives tell investors their company can withstand forces buffeting the rest of the newspaper industry (read: Internet) and thrive thanks to a “hyper-local” strategy employed by all their small hometown papers. The idea: Less competition and better protection against elements of the Web that have been sapping newspaper revenue, especially sites that turn cash-cow classified advertising into free services.

But the hyperlocal story isn’t holding up as well as some investors hoped. Gatehouse’s third-quarter revenue declined about 1.7 percent on a “same-store” basis. Advertising revenue was a little worse, down 3.3 percent. That performance was better than the overall industry, but hyper-local didn’t provide the kind of insurance some people expected.

GateHouse’s business model isn’t just to swallow up all the newspapers in a given area. Its strategy is to swallow up all the newspapers in an area, AND keep the coming Internet news revolution at bay by offering its print offerings for free. GateHouse isn’t investing in the future with all their hyperlocal news sites. It’s all about protecting the value of their printing presses. They will have about as much success as did the buggy whip manufacturers.

This tends to confirm what I’ve said before: Mainstream Media isn’t putting it’s stuff on the Web for free because of some alotruistic urge, or because it wants to rake in all that online ad revenue. They want to keep on-line only start ups from coming along and offering their wares for free or even for a small registration fee.

In other words: They are enfgaging in anti-competitive business practices. But then, so is GateHouse when it buys up most of the newspapers in west-central Illinois. No worries, though, because there’s no one in in government these days with the slightest interest if fighting monopolies.

But in the end, ‘hyperlocal’ will fail. There’s just too much money to be saved by delivering new via Web, rather than by charging people for the high honor of once-a-day hand delivery of 12-to-24-hour old news. This is the business plan GateHouse and and the others need to follow.

Hat tip:  The Turner Report.

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4 Responses to “ Media: GateHouse’s ‘hyperlocal’ a new word for ‘monopoly’ ”

  1. Guffawing Gatter on November 17, 2007 at 3:34 pm

    So people would rather have news from a blogger who can’t spell, use grammar correctly or who has to frequently correct him or herself?

    Makes sense to me.

  2. Billy Dennis on November 17, 2007 at 3:55 pm

    … and sometimes they prefer to get their news from me.

    Thanks for the input.

  3. Billy Dennis on November 17, 2007 at 4:05 pm

    … and didn’t you call yourself “Guffawing Gaffer” at one point? What is a “Gatter” anyway?

  4. newsbacker on November 19, 2007 at 4:16 pm

    The battle between electronic and print is overstated. Community information must come from somewhere. News channels like GHS offer reliable and accessible content necessary to sell product advertising (like those lined along your blog). News will not be destroyed, but eventually subsumed or merged into symbiotic arrangements with the Goggle-like powerhouses of the net.
    As for valuation, remember, Wall Street prices like a pack of hyenas(AOL a buy at $250? AAA RMBSs and CDOs based on 2nd holder of sub prime?) it takes nerve to be a contrarian.