NYT Hosts Media Fire Sale

[Valin]

Via Meadia:

John Ellis

8/10/12

 

Long recessions are great for rich companies; everything’s cheaper and there’s a lot for sale. Long recessions are hell on weak companies; they become sellers in a buyer’s market and liquidity “issues” require that they sell their best assets first.

 

Combine a massively disruptive technology (the Internet), a weakened company (The New York Times Co.), and a brutal recession, and what you get is a kind of slow-motion fire-sale.

 

First went the real estate. Then went the NYT’s stake in the Boston Red Sox and NESN (a regional sports cable network). Then went 16 regional newspapers for $143 million. Next (probably) goes About.com, which the NYT purchased for $410 million years ago and is now desperate to sell for $270 million.

 

Next (after About.com is unloaded) goes the “New England Media Group,” which is to say: The Boston Globe, The Worcester Telegram and some printing operations in Massachusetts. The sale of the New England Media Group won’t fetch much because it carries on its books large under-funded liabilities (retiree health and pension plans). No sane investment group will take on those liabilities unless they are somehow diminished or at least ring-fenced.

 

Finally, there’s the International Herald Tribune. It’s a pointless publication, since with one click of the mouse one can change the online edition of the New York Times into the international online edition of the New York Times. Sadly, labor laws and handcuff regulations in Europe make it all but impossible to shut the IHT down. So it will continue to bleed money until someone figures out a way to separate it from the New York Times and take it into bankruptcy.

 

Once all that happens—and it will happen—what will The New York Times Company look like?

 

It will not look like a growth stock. For the foreseeable future, and probably beyond, advertising revenue will remain flat (at best). Subscription revenue might increase a bit; many people would be willing to pay $,1000 annually for a complete (paper + online access) NYT package, but a wave of baby boom journalists and editors will be retiring, so the company’s pension and retiree health costs will consequently spike. Those costs will increase with each passing year as more boomer journalists reach retirement age, thus making the Times’ margin for error even smaller than it already is, which is very small. The New York Times Company will look, in a word, vulnerable.

 

The options that remain, then, are two......(Snip)