Wednesday, 29 October 2008

Should you the NYT Company be dismantled?

"At some point, you start to dismantle the companies"

Media (Forbes)
Selling Papers
James Erik Abels, 10.27.08, 6:00 AM ET
There's nothing like bad news to sell newspapers. Unless there are no newspapers left to sell.
Many people are wondering if this may soon be a reality. Revenues were in free-fall last week at many of the country's largest newspaper companies. "The only hope is that as we get through the spring, the rate of [the advertising] decline starts to ease up," says newspaper analyst Edward Atorino of The Benchmark Co.
On Friday, Gannett Co. reported that third-quarter revenue fell 9% from the same quarter last year to $1.64 billion. Other companies fared no better: The New York Times Company said total revenues fell 8.9% in the third quarter year over year to $687 million. And McClatchy posted third-quarter revenues of $451.6 million, down 16.4% over the same quarter last year.
Last week, the question on everyone's mind was whether the newspaper industry has hit bottom. Now they're wondering if these businesses can possibly rebound.
"[Newspapers] draw most of their advertising from the local economy," says John Puchella, a newspaper analyst with Moody's. As recession sinks in across the country, many of the local businesses that constitute newspapers' biggest ad buyers could disappear, he says--and an industry can't rebound if its market ceases to exist.
Where does that leave the papers? "At some point, you start to dismantle the companies," says Atorino. The newspaper industry's cost structure, staffing and share price are based on an outdated business model that continues to define financial expectations. So the goal would be to slough off enough costs to let younger, more nimble newspaper businesses live without the artificial market pressure of year-over-year comparisons.
Essentially, modern newspaper companies are the final legacies of an industry given life as a rich man's toy. The model was built in an era when high distribution and production costs kept new types of competitors at bay, anointing the dynastic fortunes of families like the Hearsts, Sulzbergers and Bancrofts.
Certainly, newspapers are being battered by massive declines in advertising due to a bad economy. Yet that decline is merely accelerating an ongoing and devastating trend of the newspaper business being destroyed by the Internet. The financial expectations on a younger company--and the staffing and business costs it agrees to build into its organization--may be more manageable than they are for today's behemoths.
Some industry observers have suggested that industry giants should go private. Take The New York Times Co.: With a market cap of $1.3 billion and roughly $1.1 billion of debt, buying the company out of the public market might be a steal--if someone could find the credit to consider a bid.
Sure, the Sulzbergers are often said to be uninterested in selling, and supposedly have an iron-clad stock-ownership plan that virtually ensures their grip on the Grey Lady. But the Bancrofts were said to have similar dreams last year, before they sold the Wall Street Journal to Rupert Murdoch and News Corp., a move that, in retrospect, may have saved the paper.
There may also be plenty of buyers for local newspapers. "In small markets, newspapers continue to be the dominant ad platform," says Philip Murray. His firm, Dirks, Van Essen & Murray, is currently involved in several deals with private equity firms and individuals looking to buy newspapers. Prospective buyers are betting that better days lie ahead for a business that sells information, a valuable commodity in any market. In fact, Murray says that while many local papers are experiencing single-digit year-over-year advertising declines, some of those serving farming communities or energy boomtowns are actually growing.
Uh oh, an argument in favor of the newspaper industry? Not likely. The big papers, at least, will be making headlines with lay-offs and dwindling revenues for some time to come.
Gotta sell those papers, after all.


"Books about cosmopolitan urbanites discovering the joys of country life are two a penny, but this one is worth a second glance. Walthew's vivid description of the moral stress induced by his job as a high-flying executive with the International Herald Tribune newspaper is worth the cover price alone…. Highly recommended."
The Oxford Times

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