The New York Times Company continues to shrink, selling off one asset after another in an attempt to delay the inevitable–a significant restructuring of its flagship newspaper.
The company’s digital business is thriving–it’s one of the best news sites in the world–but the digital business cannot carry the weight of NYTCO’s dying print product forever.
And it was that product, the print product, that once made owning the New York Times not just a major status symbol for the Ochs-Sulzberger family, but an enormous cash cow as well.
Eight years ago, in its heyday, the New York Times Company was worth $7 billion and paid a dividend of more than $100 million a year.
Now, it’s worth $1 billion and pays no dividend.
The company still owes more cash than it has–net out cash and debt, and NYTCo’s $300 million in the hole–and its pension plan and debt service payments continue to consume a huge amount of the cash its shrinking businesses generate.
In the past three years–recovery years for the economy–the New York Times’s free cash flow (the cash left over when all the bills are paid) has shrunk as follows:
2009: $196 million
2010: $113 million
2011: $29 million
At that rate of decline, the company will soon be consuming cash.
Meanwhile, after the firing of the company’s CEO last fall, the New York Times Company has no one at the helm. No one, that is, except for Arthur Sulzberger Jr., who is the company’s CEO in everything but name–a fact that will continue to make it challenging for NYTCo to hire a talented CEO. Talented CEOs, the kind who might be willing to make the hard decisions necessary to get the company headed in the right direction again, do not like being lackeys. And whoever takes the CEO job will be Arthur Sulzberger’s lackey.
Also meanwhile, the many members of the Ochs-Sulzberger family, who collectively still control the New York Times Company, are said to be getting restless about the loss of the fat dividend that funded the lifestyle to which they had become accustomed, as well as the collapse in their equity wealth due to the company’s clobbered stock price.
And, by now, it has presumably become obvious to everyone involved, including the Ochs-Sulzberger clan, that there is no magic wand to wave that will miraculously restore the paper’s lost glory and the family’s lost wealth.
All of which means, as Joe Hagan observes in this excellent New York Magazine article about the sacking of former CEO Janet Robinson, that the time is right for someone to make an aggressive play for the New York Times.
A few years ago, before Rupert Murdoch made his extremely aggressive offer for the newspaper he had coveted for decades, The Wall Street Journal was emphatically not for sale.
Like the Ochs-Suzlbergers, the Bancroft family that controlled Dow Jones considered owning the Wall Street Journal et al as part of their family identity. Thus, when Murdoch made his pre-emptive $5 billion offer for the company, the initial reaction of the Bancroft family was to tell him to get lost.
But then personal self-interest kicked in.
And some members of the Bancroft family began to realize the following:
- Nothing is forever
- Taking Murdoch’s offer would suddenly restore much of the wealth they had lost
- Refusing Murdoch’s offer would open the family up to years of litigation from other Dow Jones shareholders who viewed the offer as a once-in-a-lifetime ego-fueled bonanza
And, gradually, over the course of a few months, the family’s will softened, and Murdoch claimed his prize.
And, although they lost their source of family identity, the Bancroft family, unlike the Ochs-Sulzbergers and other newspaper-dynasty families, got to watch the implosion of the newspaper industry from safe atop humongous mountains of cash. It was the shareholders of News Corp. who took the hit from the collapse in the value of the Wall Street Journal, not the Bancrofts. And the family now looks brilliant for letting go of its dynasty at precisely the right time.
Not so, the Ochs-Sulzbergers.
They’ve ridden the value of their paper down with the industry.
But an aggressive offer from a dynastically wealthy megalomaniac like Murdoch, for whom the paper’s financial future is inconsequential, could, in an instant, fix all that.
Instead of having to preside over several more years of painful shrinking and restructuring, fighting with the paper’s various unions, and shoveling cash into the company’s bottomless pension plan–all the while being quietly ridiculed by the press, friends, and acquaintances for driving the family’s glorious enterprise right into the ground–the Ochs-Sulzbergers could exit, gloriously, stage left. Not at the top–that opportunity is long gone. But at least far from the inevitable bottom.
All it would take would be a nice, fat cash offer from someone for whom money is no object and some assurances of ongoing commitment to journalistic integrity–the latter to make it easier for the family to save face.
And who is ideally equipped to make an offer like that?
As Joe Hagan points out, New York Mayor Michael Bloomberg’s name is always near the top of the list.
Bloomberg’s company, Bloomberg LLC, is the second most powerful media company in the world (the first is Google).
The company is said to spin off some ~$6 billion or more of cash flow each year, and Michael Bloomberg owns more than 70% of it.
Bloomberg LLC could make a huge, preemptive offer for the New York Times Company with only 4-6 months of cash flow.
And it could then own one of the most prestigious and influential media properties in the world, one that fits nicely in its growing global media empire.
For many reasons that we’ll go into later, acquiring dying media properties like the New York Times is a logical step in the evolution of Bloomberg LLC, one that will accelerate the company’s goal of becoming an enormous consumer media organization, in addition to a globally ubiquitous professional one. And buying the New York Times Company would be a great place to start.
SEE ALSO: The Incredible Shrinking New York Times
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