It Takes A Billionaire
What does David Geffen really want with the NY Times?
First… what he is getting right now… from the Times and all the “I said it first” bloggers trying to grab attention with a big name and a big game. A lot of fawning attention, cheap.
But if you stop for a second and think… the story so far is very similar to what happened with the LA Times… except there would be no Geffen recreating The Gray Lady in his image… stakes are just too high. LAT is looking more like the Pennysaver every day… not so the NYT.
On the other hand, the discussion about the LA Times, just 3 years ago, was about billions – 2 or 3 – for just the one paper and now, the discussion about the entire NY Times Company is about $2.2 billion, with the entire value of non-family Class A stock as of Friday at $877 million and About $1.38 billion in debt.
This includes not just The Paper of Record, but 15 other papers, the International Herald Tribune, a piece of the Red Sox, a local NY radio station, About.com, and the part of their new HQ in Manhattan that they own.
With a committed Geffen being worth more than the company, the threat of bankruptcy would go away. They could sell off the 15 secondary papers, including The Boston Globe, for $300 million, the Sox stake for $150 million, and About.com for about $650 million and you’ve eaten away at the debt in a big way. But you’ve also given up revenues from About, which means that you’re just in the NYT and IHT business with a radio station and a part of your building.
From there, you deal with what still stands. And the papers, on their own, would still be losing about $30 million a year. But the pensions would have been made safe, debt would be manageable at under $250 million, and the market cap of the tighter company might well stabilize (after some rollercoastering) about where it is now, given ongoing value, even though the company would be less than half the size. And as Kane once said, if the paper lost $30 million a year, every year, Geffen would run out of money after about 100 years.
But more likely, the braintrust at The Times could turn around this mighty franchise and turn it profitable again in the next decade. And the, Geffen could be remembered as The Man Who Saved The New York Times AND make some money in the long run.
Without a Geffen, none of this can happen, since the sell-off, which is unavoidable, becomes a fire sale with prices to match if there is no financial stability behind the effort. In other words, with Geffen or someone like him, behind you, you can say, “no.” With a bankruptcy court pushing you, you really cannot.
Imagine how much strong The Tribune Company would be today had they sold the LA Times to Geffen three years ago for a big chunk of money with a “b.” But instead, they are going through the same sell-off ugliness under Zell: The Magician With A Broken Hat, but it’s much, much worse because the pressure is that much greater.
Bottom line, to my eye, is that the price point has come down to the level where Geffen can start to see a way out for the company. And yeah, the hero appeal is there. Unlike the LAT – a good paper that never had a definitive personality – I do believe that saving what the NYT represents means a lot and would mean a lot for Geffen As Savior.
Last April, the stock was selling for 3x what it is today… still needing a savior… but economically unfeasible. It’s great to love journalism, but right now, it’s low hanging fruit for very tall men.
All of these spiraling big media companies need two things… a willingness to put ego aside and to get slim (not as an investor) and their very own billionaire who is willing to be the stabilizing force and is honestly interested in a long-term play, so when the selling off happens, it is not just to turn the overall investment as soon as possible.
When the history of Old Media is written, it will be recorded that many (if not most) defunct newspapers didn’t die because they ran out of readers… they died becaue the people who went into so much freakin’ debt to BUY newspapers ran out of money to pay down the debt….
For reasons David astutely lays out: I wish Geffen luck.
But more likely, the braintrust at The Times could turn around this mighty franchise and turn it profitable again in the next decade.
WOW – what a huge, unsubstantiated, presumption.
IIRC, the majority shareholder of Class A comes from the rightist spectrum. The ass-clowns in charge rode the paper into the ground and you find it logical to keep them in current positions? Is that not admitting Geffen’s intent on buying NYT is not about saving the company but to protect it for political and ideological reasons?
Martin: it’s all about political and ideological reasons until Murdoch is foiled by either the economy, or his own hand. Someone has to stand opposed to his view. Why not use the Times as a that weapon? Makes sense to me.
His view? He basically endorsed Obama for president. You’re familiar with Murdoch’s political views?
I’ve never fully understood the two-tier stock for the Times, why the Sulzbergers control it, etc. Can anyone provide any links with any clear explanations? If somebody like Geffen were to buy all the publicly-available stock, would he be able to override the family’s votes?
It’s easy to kick management, but the freefall has been about the economy of print, not management. Yes, there could have been more aggressive moves more quickly. But no one figured that out. No one. So to blame the management seems unfair.
That said, you are reasonable in wondering whether they can change mindsets. To my eye, the ability to see see the need for a white knight instead of fighting it would signal that they had started towards that kind of insight in earnest.
And no, I don’t think Geffen is an ideological choice (nor a choice they want at all right now), though he would fit that mold. But he is a rare kind of figure out there these days. NYT would not be part of a bigger play. He is an individual, not a corporation. And he has the money for real.
I could see a Times/Huffpost collaboration with content on a big blackberry/small notebook. I think newspapers are going to be like payphones-once everyone has a personal reader, why lug the paper around?
It’s all about content vs delivery method.
Dave-do you feel sorry for anyone in the Sulzberger family that this is happening? Aren’t you the one that is always taking them to task FOR this happening? Granted, Geffen can bail them out like Slim did, but that is still only temporary. They can’t seem to figure out how to change their business model because they are still in “We’re the NYTimes!!!!” mode, and can’t realize that 99% of America doesn’t care.
If there is any evidence that the Times is out of whack, see this article, that they published this weekend:
http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html?pagewanted=1&ref=magazine
So, the Times decided in the midst of their fall, to publish an article about how their Economics (!!!) reporter (who is paid 120K a year!) can’t manage his own finances. I don’t even know how to respond to that! Why don’t they just pay Lloyd Bankstein 100K to write editorials about corporate finance and responsibility?
Should I wait for Arthur Jr’s. mea culpa next week, where he stuns Times readers by announcing that he can’t afford his divorce, his mistress, his three homes and his family’s paper? I’m just waiting for the PR release: “It is with real sadness that the Sulzberger family relinquishes ownership of our shares, but we all realize that it is time to move on.”
Nothing against you or what you’re writing about, but isn’t this inevitable at this point? And who is going to write the book about Arthur Jr. and his cohorts refusing to get with the times (no pun intended) and realizing too late that their ‘old media’ paper was dead!
I have no wishes to see the Times fold. I don’t think it will be the death of journalism by any means, but I think (some) of the most talented writers in America will be without jobs. When that day comes (and it will), I will be sorry for those journalists, but I won’t be mad at the David Geffen’s of the world if they didn’t bail them out. The Times is supposed to be the best and most important ‘paper of record’ in the world-if they couldn’t see their own down fall, then it is their own fault.
The Times’ record of impeccable journalism takes another bow: Jayson Blair … Judith Miller … and now Maureen Dowd.
Yeah, but Chucky, let’s be fair: Janet Cooke trumps all of them. I mean, talk about someone who padded their resume…