Paddock purchase a sign of newspapers' need to diversify

  • Scott Ray, left, director of Town Square Publications, and Scott Stone, executive vice president and chief operating officer of Paddock Publications in Arlington Heights, look over some of Town Square's chamber of commerce publications.

      Scott Ray, left, director of Town Square Publications, and Scott Stone, executive vice president and chief operating officer of Paddock Publications in Arlington Heights, look over some of Town Square's chamber of commerce publications. Joe Lewnard | Staff Photographer

  • Jon Ridler, executive director of the Arlington Heights Chamber of Commerce.

    Jon Ridler, executive director of the Arlington Heights Chamber of Commerce.

 
Daily Herald Staff Report
Updated 10/22/2014 7:13 PM

Arlington Heights-based Paddock Publications Inc., owners of the Daily Herald, made news of its own last week with the announcement that its Town Square Publications subsidiary had acquired chief rival Village Profile.

The story seemed straight forward enough: One company that publishes chamber of commerce guides bought another that does largely the same thing.

                                                                                                                                                                                                                       
 

But it's a story with deeper implications. On one level, it represents an upstart overtaking a onetime market leader. On another, it represents the power of relationships, with a newspaper company leveraging its institutional familiarity and relationships with community businesses. On yet another, it represents the increasing diversification of newspaper companies at a time when traditional business models have come under relentless assault.

Ultimately, it's an example of transformation in an age when the ability to change rapidly is essential to business viability and success.

With the acquisition of the Elgin-based Village Profile, Paddock's Town Square intends to further expand a niche it began carving out in 2009, building on business and community contacts across the area to offer chamber of commerce specialty publications, which includes chamber directories, regional resource guides with listings and marketing for geographic areas, maps and other publications, said Scott Ray, director of Town Square Publications.

"We started with one chamber and have grown to 50 chambers now," including virtually all of the chambers in the Northwest, West and Northern suburbs and others in different states, he said.

Acquiring Village Profile will help Paddock Publications grow the subsidiary's business nationwide and boost revenue, said Scott Stone, Paddock's chief operating officer and executive vice president as well as president of Town Square.

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"We've been competing with Village Profile since we started our publishing business for chamber directories," Stone said. "We were in Illinois, then Wisconsin and then expanded elsewhere. This year, we expanded in the Midwest and California, so we were going outside our core newspaper business. This acquisition was a natural fit."

It has been especially important for Paddock Publications to diversify within the framework of its core business -- developing content and providing marketing and advertising solutions, said Douglas K. Ray, chairman, publisher, president and CEO of Paddock Publications.

"The newspaper industry, at least those committed to the community -- and I put Paddock front and center in this regard -- has an unprecedented opportunity to transform itself in this new day of information and marketing delivery because the newspaper remains the foundation of the community, the trusted source for information and customer needs, in advertising, marketing and news," he said. "Creating the specialty publication is simply another way to reach out to the community through the chambers, satisfying the marketing and information needs for all."

Expanding in different directions is crucial to today's newspaper companies, analysts said.

Total revenue for the U.S. newspaper media businesses amounted to $37.59 billion in 2013, a slight decline from $38.6 billion in 2012, according to a study by the Newspaper Association of America, based in Arlington, Va. Advertising represented 46 percent of total revenue in 2013, compared to 81 percent in 2007, before the recession hit. In fact, newspapers saw a shift in all areas of revenue since that earlier period. In 2007, circulation accounted for 16 percent of revenue, compared to 29 percent in 2013.

                                                                                                                                                                                                                       
 

"Proceeds grew in several other categories -- digital advertising, direct marketing, and other, newly developing sources -- while income from traditional print advertising channels declined. This trend reflects an industry evolving its business model in a significant way, taking advantage of developments in technology, consumer behavior, and advertiser interest to grow audience and diversify its revenue stream," the NAA study said.

Besides economic pressures, the Internet played a major role in how newspaper changed. NAA president and CEO Caroline Little said as Internet use exploded in more recent years, businesses had more choices on where to advertise and how to promote themselves. As a result, advertising revenue plummeted for print newspapers.

"Revenue was down over the last 10 years to about half," Little said. "That forced newspapers to look at their revenue streams."

Successful newspapers emerged by developing special reader events, the creation of digital agencies to help businesses, online subscriptions and paywalls, niche publications, contract printing and other lines of business, she said. Those accounted for 3 percent of revenue in 2007, compared to 8 percent in 2013.

"There's no silver bullet in this transformation for newspapers," Little said. "Some things will work. Some won't work. It's hard to predict the future."

The Daily Herald has expanded with dailyherald.com, Town Square. and niche publications including the Daily Herald Business Ledger, a business-to-business trade magazine, and Reflejos, a weekly bilingual publication for the suburban Hispanic community. Also under the Daily Herald Media Group umbrella is a growing Events division; Dhigital, a digital marketing consulting service; and a major contract printing operation.

Douglas Ray said Village Profile's portfolio was "impressive" and talks to acquire the assets began "some time ago."

"The owner and I first negotiated for the purchase of the Village Profile's Chicago area assets," he said, "but this summer we broadened the talks to include Village Profile's nationwide book of business and came to an agreement last week."

Village Profile had a broad range of relationships that had been developed over the years, and it was especially appealing to Paddock, he said.

"Through our own experience with Town Square and the Daily Herald, we appreciate the importance of local business and the value of creating a connection to the community at large through the chamber of commerce organizations," Douglas Ray said. "If we can help connect the dots, through information and marketing, we will be an essential partner with the chambers and that is our goal. I am especially pleased with the positive feedback from our current chamber partners and I am confident we will have the same with the Village Profile chambers we will now do business with."

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