Newsday Sale Shows New Value Equation
Important Details: A bidding war for a daily newspaper? That headline has surprised many observers over the last several weeks, as three serious bidders push up the price of Newsday, the Long Island-based New York daily that the Tribune company has put on the block. The top bid is now Cablevision’s, at $650 million. That offer surpasses bids of $580 million each offered by Rupert Murdoch’s News Corp and Mort Zuckerman’s New York Daily News. The new pricing significantly surpasses recent metro paper pricing, and this at a time when annual ad revenue declines have reached double digits.
These offers point more to the unique value of one property — Newsday — in combination with other properties than they do to the paper’s standalone value. Each of the three bidders sees extra value in Newsday as they look at potential synergies:
- News Corp owns the New York Post, losing an estimated $50 million a year as it contests rival tabloid the New York Daily News. If it wins Newsday, News Corp will maximize cost savings — in production and printing, in circulation, in ad sales and in news-gathering — pushing the Post towards profitability. In addition, News Corp owns the NYC-based Dow Jones and two TV stations, WWOR-TV and WNYW-TV.
- The Daily News, privately held and headed by Zuckerman, sees similar expense streamlining in acquiring Newsday, in addition to a purchase’s defensive value against his main rival, the Post.
- Cablevision sees an opportunity to solidify its lucrative Long Island base and synergize its operations that stretch from northern New Jersey to southern Connecticut. What are the most important synergies a strong cable operation can devise? Phil Balboni, founder of New England Cable News and its longtime head until recent departure to head Global News Enterprises (see Insights 20 March 2008, Global News Puts a New Spin on “Foreign” News) puts these three in priority order: 1) synergistic ad sales; 2) synergistic news-gathering; 3) better web monetization of news video produced by Cablevision for its cable operations. “I think Cablevision and Newsday make a fit here,” Balboni told Outsell.
Implications: It’s been clear that the new Tribune, under Sam Zell, would have to shed assets to make dents in its out-sized debt. With ad revenue heading farther south, that necessity means that Newsday will be only the first of property we’ll see sold in the dismantling of Tribune. What’s noteworthy in this bidding war is that the new value of newspaper properties, Outsell believes, will increasingly be seen in their ability to be paired with other properties.
Combining print properties is nothing new — clustering print properties in metro areas (see Insights 6 December 2006, “Clustering” Wins Some Ground in the Bay Area) — has been a driving force of the US industry for years. So it’s the Cablevision bid that most stands out. Certainly, the Dolan family, founders of Long Island-based Cablevision, have long eyed the property. Now, however, the new realities of the broadband internet, in which news video-forward sites are on the ascendance, make a Cablevision/Newsday combination more interesting. Synergy is always slippery, and its execution difficult. There’s no doubt though, as any would-be entrant into local news would build an enterprise they’d do it whole — combining print, video and audio content creation into a single enterprise. And that enterprise’s products would be monetized with advertising, sold by a single staff. That’s what this deal aims toward. Whether it succeeds or not, it helps outline the picture of future media operations and ownership.