January 27, 2015

New York Times Sales
We learned last week that Michael Bloomberg would like to buy the New York Times Company. He even spoke to Chairman Arthur Sulzberger about it a couple of years ago. So what else is new? Rupert Murdoch covets the Times as well.

The only live question is whether the Sulzberger family would sell.  Through a spokesman Sulzberger said Friday, as he has many times before, that the company was not on the market whatever the offer.

Case closed?  Not quite.  The Wall Street Journal was not for sale until Murdoch’s News Corp. made the Bancroft family an offer — 67 percent above their shares’ trading value — they felt they could not refuse.  Nor did any but the inner circle know the Graham’s Washington Post was for sale until Jeff Bezos bought it in August 2013. Ditto, the Chandler family’s late-1990’s surprise decision to sell Times Mirror to Tribune.

With that one qualifier, I think the Times’ and the Sulzbergers’ situation are so different that a sale anytime soon would be extraordinarily unlikely.

For a seconding expert opinion, I checked by phone with Alex Jones, executive director of the Shorenstein Center at Harvard, and co-author with his late wife, Susan Tifft, of the definitive book on the Times, The Trust.

“If anything has changed, and some members of the family (are willing to sell), I’m not aware of it,” Jones said, “and I think I would be aware of it.”

The structure of the family trust is the heart of the matter, he added.  “It would be almost impossible unless there was unanimity” among family shareholders to sell the company to an outsider.  Even were there a block of dissident family members, Jones said, stock in the Trust would have to be offered first to the other Class B Trust shareholders before it could go to anyone else.

So that’s a big difference.  The Bancrofts were divided on whether to sell in 2007 but those in favor persuaded some holdouts and outvoted others to accept Murdoch’s offer.

Also no Bancroft family members were still working in management.  The opposite is the case at the New York Times Co, where Sulzberger’s cousin Michael Golden is vice chairman.  Spokesperson Eileen Murphy told me that besides Sulzberger’s son, Senior editor for strategy Arthur Gregg Sulzberger, five other cousins of his generation are in management track jobs at the company.

Circumstances were very different at the Washington Post as well.  The newspaper was losing money with fast-declining revenues.  It had become a small part (about 14 percent) of a much larger company with several very profitable divisions.  Chairman and CEO Donald Graham said he could not justify to shareholders carrying the Post, and making big investments in its digital reinvention, at the expense of the rest.

So Graham and his niece, Post publisher Katharine Weymouth, concluded that the paper needed the infusion of capital and new ideas that Amazon tycoon Bezos could provide — “runway” as Bezos later described it.

The Times as a company is practically the reverse.  As a strategic decision, it has sold all other holdings to concentrate on the New York Times, its digital versions and its international extensions.

Public New York Times shareholders know the score, and while the stock has fallen after a rocky third quarter earnings report, it trades up slightly from its value when the Post was sold 18 months ago.

The newsroom buyouts and layoffs late last year were read in some circles as a sign of major trouble. But the impact of a shave of less than 10 percent of the newsroom budget is not a huge event financially for the company.   Further, the Times has indicated a number of those positions will be reallocated to hiring for digital expansions.

With fourth quarter and full-year results due February 3, the company’s prospects as a business are mixed. Through three quarters, it was showing a 1 percent revenue increase and operating at a tiny net loss (though quite profitable on a cash flow basis).

The Times has shifted its revenue balance away from print advertising, booking big increases in circulation revenue with its digital paywall and smaller ones by growing digital advertising.  Its balance sheet is healthy with $300 million more in cash on hand than debt.

Management’s discussion of the third quarter results did indicate slowing in the potential for another wave of circulation revenue growth and a dilemma as the Times experiences  lower revenue per customer as the reader/subscriber base shifts from print to digital and now to mobile.  But those are challenges are way less severe than the company faced in 2009 when it sought a high-interest loan (with options to buy company stock) from Mexican billionaire Carlos Slim Helu.

After the fact of the Dow Jones/Wall Street Journal sale it came out that Dow Jones CEO Rich Zannino, while putting a positive spin on results and strategies publicly, was advising the Bancrofts privately that they would never get a better offer and should take it.

Years down the road, Times CEO Mark Thompson or a successor might make a similar recommendation to Sulzberger, Golden and the rest of the family.  But not now.

Disclosure:  Arthur Gregg Sulzberger is a member of Poynter’s National Advisory Board, and I spoke with him at some length at the group’s annual meeting here earlier this month. He struck me as smart, current, grounded and fully engaged in the next steps in transforming the company.  As his responsibilities increase, all the more reason to think family control is here to stay for the long haul.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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