Monday, January 19, 2009

NYT’s Current $$ Problems & the Boston Globe

In the conclusion of this article, the WSJ provides an information-filled, thumbnail profile of the NY Times Company’s current financial problems. I follow below the star line with information and commentary regarding the Times’ 1993 purchase of the Boston Globe.

The WSJ concludes - - -

Like all newspaper publishers, the Times Co. has had to slash costs to compensate for steep revenue declines as readers and advertisers have departed print for the Web. Last year the company cut jobs at its flagship paper, merged sections of the Times and Boston Globe to reduce printing costs and consolidated New York area printing plants.

But the global economic crisis has pushed advertising to unforeseen depths, forcing publishers to take even more drastic moves. In November the Times Co. cut its quarterly dividend by three-quarters, ending a tradition of enriching shareholders even as the stock fell.

The dividend is a weighty issue for the Times because it has long been a chief source of income for many members of the Ochs-Sulzberger family, which controls the company through its majority ownership of a special class of super-voting shares.

The dividend cut reduced family members' annual payout to less than $7 million from about $25 million.

While the family said it supported the cut and has no intention of selling the paper, the dwindling return could test its members' commitment to the paper as economic pressures squeeze profits. In the third quarter the Times Co. posted net income of $6.5 million, down 51% from the same period a year earlier.

Ad revenue declines are accelerating. In November, ad revenue fell 21% from a year ago, after a 16.2% drop in October and a 13% decline in September. Times Co. Chief Executive Janet Robinson said in December she expects 2009 will be "among the most challenging years we have faced."

The Times Co. has taken steps to sell properties it previously said were off limits in an effort to fortify its core assets. The Times Co. since November has been pursuing potential buyers of its 17.5% stake in New England Sports Ventures, which owns the Boston Red Sox, the fabled Fenway Park and most of the network that airs the team's games, according to people familiar with the discussions.

One option under discussion is to package the NESV stake with the Globe, which the Times Co. has written down by $980 million after purchasing the paper for $1.1 billion in 1993.

The entire WSJ story’s here.


My comments:

The NYT Co. purchased the Globe in 1993 for $1.1 billion and now values it at $120 million. ($1.1 billion - $980 million = $120 million)

The $120 million valuation is almost certainly on the high side.

But even if it’s “on the money,” it represents almost a 90% drop in value in constant dollars, and about a 95% drop in inflation adjusted dollars.

During most years since 1993, the Boston region has experienced significant population growth and a strong economy.

But for most of those years the Globe’s been losing print readers and, in recent years even before the current recession, its ad revenues have been declining sharply.

The following is part of Seeking Alpha’s Oct. 19, 2006 summary of a WSJ article, “Boston Globe Doesn’t Deliver For the Times.”(sub. req’d)

… NYT's rationale in purchasing the Globe for $1.1 billion in 1993 centered on the affluent Boston population.

This affluence has resulted in Boston's having the third highest broadband penetration in the U.S., and a quick migration from traditional print media.

The Globe's division ad revenues are in a tailspin, falling 7.2% in Q1 and 10.4% in Q2, and falling 11.7% and 15.7% in July and August respectively.

Its Sunday circulation has fallen 25% since the acquisition, compared to industry Sunday circulation declines of 12%. ….
A great book could be written about how the NYT decided to purchase the Globe and how iy's managed the paper in the years since.

I don’t know a great deal about the NYT Company’s history so the following are not rhetorical questions:

1) Was the NYT’s Globe purchase one of the fvie worst decisions in the company’s history?

2) What did the NYT Co. fail to do that it could have done to limit the damage from its Globe purchase?

3) What lessons can be learned from the Times’ Globe purchase and management?

4) What’s the Globe’s future?