What's the Boston Globe Worth? A Buck, More or Less
The New York Times' David Carr asked six analysts one of the questions of the moment: just how much is the Boston Globe worth?
I liked how Fitch's Mike Simonton suggested that "buyer" may be a misnomer; "assumer of costs" might be truer.
Carr
also reminds us that Jack Welch's indicated that he might be willing to
round up some $500 million or so to buy the Globe just three years ago.
2006, though, now seems like another lifetime in the newspaper
industry. How the Times could have used that kind of money to do battle with Rupert.
So, this week, as we try
to separate the potential buyers from those who may just delight at
seeing those books (how much of the $85 million in annual Globe "loss"
is operating loss and how much "other"?, for instance), I'll
amplify on my remarks to Carr.
Given the state of the world,
the ad market, the newspaper market and vagaries of the online future,
my best guesstimate of a price: a buck.
A buck essentially
represents a gentleman’s agreement: I take a liability, headache and a
distraction off your hands, says the buyer. I give you the great
potential of the Globe brand, a top 25 news web site and improved
ability to re-jigger the pieces, thanks to our new contracts and
cost-cutting, says the Times.
A buck recognizes that there is
so much unknown and such unchartable risk and reward here that only a
token payment can even it out for both sides.
The Times gets
shortchanged. It paid $1.1 billion for the paper just 16 years ago.
It’s struggled to keep the Globe staffed through bad economic times.
It’s subsidized losses.
The new owner takes on great risk.
It's highly unlikely any bank will finance a purchase, given the
half-dozen bankruptcies we've seen over the last year in the industry.
That means the new owner’s own money is immediately at risk. The new
owner starts out behind, even with recent contract givebacks, given the
trajectory of operating loss and a continuing 30% decline in year-over-year advertising revenue. Forget the purchase price; how many millions
will I have to sink in within the next year?
The potential upsides include buying an ad-based franchise at the bottom of
a recession and being able to be a shiny newly painted boat in a rising
economic sea; 2010 ad numbers can hardly help to be an improvement
over this year’s. The feds will soon be paying people to buy cars, and
houses will start to sell again; related advertising will recover a
bit. 2010, I'm coming to believe, will offer a breather to the
beleaguered industry. Yes, the structural changes of ad spending and
reading will continue, but a small ad bounce will help dramatically
downsized companies in the next calendar year. That may only stop the
gasping temporarily, but breath is breath.
The potential
downsides include inheriting a heavy-on-cost business model at a time
when competitors from Huffington Post to Politico to local start-ups to
emerging online initiatives of local broadcasters threaten to do
further damage to daily newspapers. In the fact, the new business
models we're seeing from the start-ups — small, editor-heavy, full-time
staffs, growing legions of part-time reporters, columnists and
bloggers, regional aggregation models — stand far distant from the
model of a paper like the Globe. If you truly believe that Boston needs
a vibrant, public service-oriented news source, is assuming Globe
ownership the place you want to start?
One other data point: The
most recent sale of a metro newspaper occurred a continent apart. The
San Diego Union Tribune, a deeply mediocre newspaper in a widely monied
metro area, was once the envy of every major news publisher.
Would-be
buyers wined and dined the Copley family, the long-time owners. The
Union-Tribune value, as little as a decade ago: at least a half a
billion dollars. After languishing on the market for months, the paper
finally sold in March, for a reported $50 million – and that price
seemed to be based on some lucrative real estate that went along with
the deal.
The Globe’s real estate is less desirable. Its glorious history and
brand are balanced out by its by its cost structure and the difficulty of turning quickly around a 137-year-old steamship.
Now, an announced price may well vary from a simple dollar; it would be better
optics for the Times. For instance, the new owner could put more
dollars into the buy, if the Times agrees to keep some of the current Globe pension
obligations, for instance. There are all kinds of content, advertising
and technology relationships that could be built into a new Times/Globe
relationship, with values to be computed. The Guild and other unions, as in the recently done deal for Maine Newspapers,
may be willing to exchange further givebacks in exchange for equity,
lowering costs enough to justify a buyer putting more money up front.
Other possibilities abound.
Add, subtract, multiply, divide, though: the math still comes out pretty much to a buck.
