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Sunday, November 16, 2008

Is the NY Times Bankrupt?

The Iceberg Awaiting The New York Times
From BNET Industries

Over the past few months, we’ve frequently speculated here that The New York Times Co. may be in worse financial condition than it was admitting. Evidence is emerging that we were right. The Silicon Alley Insider has been digging through the company’s latest SEC filings to find that the Times owes its creditors a huge $400 million payment next May, but it only has $46 million in cash on hand with six bleak months to go.

Its stock closed today at a historic low — $7.34/share — a two-thirds drop from its high point over the past year. Layoffs — some announced, some not — have been regularly shrinking the newsroom, even as other executive talent walks out the door. For example, Vivian Schiller, the General Manager of, is leaving the Times on December 1st to become the President and CEO of NPR.

According to its latest 10-Q, the Times has short-term cash and collectibles totaling $412 million and debt payments and accounts payable totaling $865 million, including long-term debt payments and rent of $50 million. The long-term picture is no better, with $1.501 billion in assets (according to the company’s internal valuation methodology) and $1.468 billion oflong-term debt and other liabilities.

Add in the steady fall in advertising revenue for all newspapers, and you can surmise the extent of the crisis that faces the Times. None of its remaining options — cutting its dividend, selling off major assets, and/or many more layoffs — are attractive. On top of all of this, there are questions about whether the $366 million short-term credit line on its books is still actually available. The company’s stock has been downgraded to junk status, it is shut out of the commercial paper market, and selling equity at fire sale prices has to seem likely to emerge as the choice of last resort.

Of course the Sulzbergers have been bleeding the Times via dividends for decades. But at this point, the company is not earning its dividend so it will have to eat in to capital to pay off the family.

The bondholders can't be happy: Pinch Sulzberger's Achilles Heel: The Bondholders

And here's a sophisticated way of looking a newspaper finances (the Z score).
Financial Woes for the New York Times

Here is a comparison between "Pinch" and Rupert Murdoch:
Running headlong into a perfect storm, the Times' has to fight off attacks on their ad revenue on three fronts: A cyclical downturn in the crucial auto and real estates sectors, the inexorable migration of advertising to the internet, and lastly, the competitive pressures likely wrought by Murdoch's purchase of the Wall Street Journal.

The Future of the News wrote an excellent summation of the revenue strategy Murdoch is planning to use to pinch Pinch.

"In what could not possibly be a coincidence, Rupert Murdoch's Wall Street Journal (WSJ) and New York Post both announced today that they will be publishing glossy weekend magazine inserts supported by high-end, luxury advertisers. The Post will be inserting "Page Six" magazine in its Sunday editions, featuring celebrities, fashion, profiles, food, wine, and restaurants. Sunday's first issue will be 96 pages, and will include ads from Calvin Klein, Mercedes-Benz, BMW, and other high-end advertisers rarely seen in the Post. Then a year from now, the WSJ will begin inserting "Pursuits" magazine into its Saturday editions once per month. Exploring "the world of wealth," this publication will include ads for luxury goods and travel."

All of which means that crosstown at the NY Times, the Gray Lady is bracing to have her purse snatched again [....]

Worse still for the Times, rather than grow new advertisers, the Post seems intent on stealing high-end ones from the Sunday Times. Same goes for the WSJ, with its new weekend magazine.
Leveraging the NY Post and the WSJ brands to snatch advertisers from a distressed competitor? Brillant. Can you say cross promotion platform? Rupert can.

Variety reports on Murdoch's upcoming launch of the Fox Business Network.
"It's going to be different from CNBC, just as Fox News is different from CNN," Murdoch told Wall Streeters at a Goldman Sachs-sponsored conference. "CNBC is a financial channel for Wall Street; we're for Main Street." CNBC has had little competition, short of Bloomberg TV, since CNN shuttered CNNfn in late 2004. Fox Business Network is set to launch in 34 million homes Oct. 15, when it will begin to compete with the NBC Universal-owned network.

"They dwell too much on failures and scandals and politics," he said. "We want to spend a lot of time on innovation, successes and people who are making money"
Broaden the audience, make more more compelling television, grow ratings.

Here's the money quote that sums up his philosophy:

"Cost savings, he said, "are not really what we're about; we're about expanding revenues."

Rupert is all about top line growth. Pinch is reduced to selling off valuable assets and hollowing out his core business with drastic expense cuts just to pay the current dividend!
If I were a betting man I would take Murdoch over Pinch any day of the week. Pinch inherited the New York Times, a global icon in newspaper publishing. Murdoch inherited a tiny paper called the Barrier Miner, in Broken Hill, New South Wales, (2000 population: 21,000), and Southdown Press, a small publisher of American comic books. While not nothing, it is an awfully humble beginning compared to Pinch.

All told, the Murdoch's companies were probably worth at most a few hundred thousand US$ or so when he took control of them. Today, the News Corp. market cap is $68.82 billion, while the Times is $2.89 billion. News Corp., in other words, has a market cap almost 24 times as much as the New York Times.

It's as if Pinch left England on the QE2 and washed up in New York harbor in a lifeboat, while Murdoch left Australia in a rowboat and sailed into NewYork commanding the Seventh fleet.

1 comment:

Anonymous said...

Hi My name is Margaret and I live in Broken Hill and have just read the article. I thought my luck had changed. I own the Barrier Miner Newspaper name now. I registered it some 3 years ago and thins was where Murdock started. Perhaps he would like to buy his first business name back for ole time reasons or perhaps he does not want to remember those times.

I just shut the paper down as it was hard sorcing staff all the time as we are in a remote area but still run under the Barrier Miner.