No one doubts that the New York Times Co. is in financial trouble, or that the Times as we know it will someday cease to exist.
But Rick Edmonds, who analyzes the news business for the Poynter Institute, has done a great job of demonstrating that there’s no there there in an attention-grabbing piece in the Atlantic arguing that the Times Co. is rapidly running out of money — and, in a worst-case scenario, could shut down as early as this May.
The Atlantic article, by Michael Hirschorn, is pegged to the writings of financial analyst Henry Blodget, who has been sounding the alarm about the Times Co.’s cash woes for some time now. Hirschorn says even the drastic measures that the Sulzbergers might consider could fall short of being enough: selling their share of the Red Sox (already under way, supposedly), selling About.com (even though it’s one of the few bright spots in their portfolio), even shutting down the Boston Globe.
But Edmonds carefully walks us through the numbers, demonstrating that the payment-due deadline the Times Co. faces in May is not at all what Hirschorn seems to think it is. Edmonds writes:
Long story short, the company will be able to meet the May deadline. And corporate finance is not like an auto loan, in which the repo man comes if you miss a few payments…. [C]reditors typically renegotiate the terms — as they have done to much sicklier newspaper companies than the New York Times Co.
Edmonds also shows that Hirschorn’s comparison of print and online readers isn’t just “not apples-to-apples,” as Hirschorn himself acknowledges, but more in the nature of apples to cinder blocks. In other words, Hirschorn doesn’t even come close.
There are three problems with the newspaper business right now: (1) the Internet is destroying its business model; (2) too many newspaper companies took on way too much debt in building their empires; and (3) the worst recession since the early 1980s, if not the ’30s, is wiping out the advertising that Craigslist didn’t already grab.
Right now, it’s the recession and the debt that are taking the biggest toll on the business; without those, newspapers might have some hope of making a downsized but successful transition to online.
The Times Co. took a couple of small but important steps this week, unrolling lucrative front-page ads in the Times and announcing that it will soon do the same in the Globe. The future of legacy media is going to look very different from what we’re all accustomed to, as Edmonds himself acknowledges. But the Times Co. should be able to make it through the recession. After that, we’ll see.
Photo (cc) by Steve Rhodes and republished here under a Creative Commons license. Some rights reserved.
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It continues to amaze me that with 48% of the voters voting against Obama while the NY Times continues to peddle its ultra liberal agenda, ideology is never considered to be a part of the business problem, just the internet and craigslist. When half the country (or half the electorate) thinks your newspaper lacks any credibility, isn’t that a problem too?
Fish: Not when your circulation is holding up better than that of most newspapers. I’d say your logic needs some work.
Also, check the election returns for New York and surrounding states.
The Boston Globe according to Barclay’s last week’s report has positive cash flow prior to interest on debt and depreciation. Unless this is a cigar butt, which it might very well be analyzed and concluded as such, depreciation is an ongoing expense.Furthermore, interest on debt is not an absolute. For example, if the company is both insolvent and illiquid, there is no interest on debt, nor debt, if no means to pay.The physical assets become marked down tremendously, to wholesale or salvage value. For example, if the Globe were to cease to exist its Boston printing capacity will, likewise, not be an appealing investment to anyone, most likely.So, that means that if the Boston Globe can hold its own, more or less, the trade name is worthy to continue even if the net loss is horrible so long as cash flow is around break even. Newspapers are being hit strongly by micro and macro economics but when this economic cycle turns to the good the Boston Globe will probably be back more solidly on its feet and most likely last for many years. It is hard to predict the future, though.Not to hurt the profession, but debt and union contracts renegotiated will give this cigar butt many more puffs, but without forgiveness by both, neither the workers nor lenders are likely to get much at all.
If the New York Times people can’t continue with the Times, I’d be very surprised if Murdoch wouldn’t want to take this for a run.
The more important issue is cash flow. Businesses can go forever losing money provided they continue to get their receivables in a timely fashion.The Red Sox are a great example of why a baseball team that sells out every game is worth having in your portfolio. All the revenue from those tickets is gathered in the December-February timeframe, but the money isn’t spent in some cases for months. At an average ticket price of $48.80, the Red Sox gather roughly $158 million (not including surcharges for handling, etc.) in cash in a very short period. (I’m assuming the average ticket price is calculated by adding the face value of all available tickets and dividing by the number of tickets. It would be different if it’s simply the sum of adding the price of one ticket at each price level and dividing by the number of price levels.)
Fifty-two percent of the voters supported Barack Obama in the election. I guess that the Times political slant agrees with the majority position.
So because the NY Times’ circulation (down another 3.6% at last check) isn’t falling quite as fast as say, The Atlanta Journal Constitution, the Times is somehow a success story? Whose logic is in question?Imagine opening a restaurant, market, dry cleaners etc. and making it clear that Republicans are not only unwelcome, but will be targeted mercilessly. Then as the business fails and it’s time to analyze what went wrong, the policy that deterred numerous potential customers isn’t even on the table for discussion. Priceless. One can only hope that rumored changes in the Boston Globe editorial staff might mean that somebody is finally “getting it.”
Fish: Plus 20 million unique visitors a month to NYTimes.com, making it by far the most successful newspaper website in the U.S. It’s like you’re determined to ignore the facts.Besides, the only way any business can succeed is to identify an audience and try to serve it. You seem to think the Times’ audience should be “everybody.” That quickly becomes “nobody.”
Dan, what exactly is a successful newspaper website in this day and age when clearly the industry doesn’t know how to harvest any meaningful money out of them? I rarely go near it, but the Times website is free again, right? I’m thinking of the restrateur who has a full house but every diner has a coupon to eat for free. Is that success? The audience for news should be everybody, but when it becomes so slanted that it’s taken for granted by the left and intolerable to the right, I think it’s a problem. Both the giving away of content free of charge and being so predictable in slant calls to mind Thomas Paine’s “What we obtain too cheap, we esteem too lightly.”
Not sure they are listening, Fish. NYT is more “successful” than WSJ, despite actual cash flow from the latter? “Businesses can go forever losing money provided they continue to get their receivables in a timely fashion.” Too bad Bernie Madoff doesn’t read this blog. Reminds me of the Marx Brothers, who bought suits for $30 and sold them for $20. Business was so good they had to hire a second truck….
OK, so let’s look at Wall Street then. Just about every major stock fund was down in 2008. So by your math, they all suck.Which, of course, is a fallacy. No one makes money every year, without fail. In a down market, we rate the companies that outperform their competitors as best, even if they don’t do well.Put another way, when compared to other Republican presidents of the 20th and 21st Centuries, George H.W. Bush looks pretty good. Even though he was a pathetic boob.
And btw, saying papers give away content free of charge intentionally misconstrues the model. Advertisers still underwrite what you see.
I’m still predicting the imminent demise of the Boston Herald. Another nail in the coffin in today’s Globe — the Herald was beaten, badly,on the Finneran pardon story, precisely the kind of news story it needs to own to survive. Meanwhile, its marquee columnist has another phone-it-in screed about legislative pay (and on top of his recent column begging readers to drop a dime and do his legwork for him)
I rarely go near it, but the Times website is free again, right? I’m thinking of the restrateur who has a full house but every diner has a coupon to eat for free. Is that success?Fish, have you ever heard of television news? Pretty thin gruel these days, but it used to be quite good, locally and nationally. Did you pay for it? No. The advertisers did.You also misunderstand the print revenue model. What you pay for a newspaper barely makes a dent in terms of profit. You’re paying for paper, printing, and distribution. If you can eliminate those expenses, then there’s no reason not to give it away for free on the Web.That is, if you can sell enough advertising to support it. That’s been the problem.