Tuesday, August 6, 2013

Print News Fire Sales: Post, Globe, Newsweek (again)

Three big sales over the weekend in the news field.

First was the report that the New York Times sold The Boston Globe to the owner of the Boston Red Sox baseball team, for $70 million.  Considering that the Times bought the Globe for $1.1 billion in 1993 (before the newspaper business started crashing), that's quite a loss in value.  A 93% drop in value in 20 years.  But a look at some of the details makes it look even worse.  The sale of the Globe includes a couple of small regional papers and related real estate holdings; estimates place the value of the real estate alone at nearly $70 million.  More critically, the sale did not include pension liabilities of $100 million, which the Times will retain.  As such, what the Times got won't even cover its existing pension liabilities for the Globe's employees.
   From the viewpoint of the Times, they got rid of a distraction and a drain on corporate resources.  The Globe lost about half its readership in the last ten years, and reportedly, its advertising revenue fell a further 10% in the first half of this year.  This may help the Times in their stated goal of refocusing on building the primary Times brand and growing online revenues.  And it helps a bit with those pesky pension liabilities.
   It's also been reported that the Times turned down three higher bids for the Globe.

Newsweek has another owner, as well.  The Washington Post sale of Newsweek for $1 was one of the first of the news media fire sales.  After that initial sale to Sidney Harman in 2010, ownership shifted to Barry Diller through a partnership, and the Newsweek staff and brand was integrated into online news site The Daily Beast.  Ownership later terminated the print version, refocusing Newsweek as a semi-regular focused section within the Daily Beast website.  Portents of another sale surfaced when Diller publicly indicated that acquiring Newsweek was a mistake, and its merger into the Daily Beast a failure.
   Last weekend, IBT Media, publisher of online global news site International Business Times, agreed to acquire the Newsweek brand.
"We are thrilled to welcome this iconic brand and global news property into our portfolio. We believe in the Newsweek brand and look forward to growing it, fully transformed to the digital age," said Etienne Uzac, the co-founder and CEO of IBT Media in a press release.
Terms of the deal were not announced at the time, but Newsweek was starting to tap into growing online ad revenues as a digital publication, and continued to bring in revenue from licensing its brand outside the U.S. The internationally recognized brand of Newsweek should have a positive impact on IBT brands.

Then came yesterday's unexpected blockbuster - the sale of the Washington Post to Jeff Bezos, founder and CEO of Amazon.  The announced price of $250 million certainly tops recent newspaper sales, but is also significantly less than what the Post was worth ten to twenty years ago (one analyst indicated that just 10 years ago, the Post would have been worth $2 billion).  From a financial "multiples" perspective, the announced price is less than half of the Post's 2012 revenues of $582 million; conversely, it's 5 times annual losses.  Both multiples are significantly outside industrial norms (I used to do broadcast M&A evaluations, where prices were more typically 3-5 times annual revenues, or 8-12 times annual profits).
   Furthermore, unlike most recent deals, the sale is limited to the newspaper, the Post website, some suburban papers and affiliated publications, and two printing shops.  It does not include the Post's current building or other DC area real estate, other Post Co. owned media (broadcast stations, online magazines Slate and The Root, and the international magazine Foreign Policy), or other Post Co. properties.
   As such, it does seem that Bezos may have paid a bit of a premium for the Post - for the prestige and influence of one of the U.S.'s preeminent media outlets.  As for the parent Post Co., it gets to shed that portion of its business that's been a significant drain on the company's profits and had little indication of a rapid return to profitability. As for Bezos, he announced that Post ownership will fall under a new holding company (Explore Holdings) separate from Amazon, and that current editorial and management staff will continue in place after the sale is finalized (at some point in the next two months).  Since most analysts don't see much opportunity for a quick turn-around in profits for the Post, that's probably the smart move at this time.

In all three cases, sales to innovative, accomplished, and successful businessmen may be the best move for organizations facing radical transformation of their traditional markets.  They're likely to be more willing to explore and exploit new markets, and/or developing opportunities for added revenues.  At least their focus won't be on trying to hold onto past glories.

Sources -  7 things to know about The Boston Globe's sale to John Henry, Poynter
Newsweek Magazine Sold to IBT Media, The Daily Beast
Washington Post sale: Details of Bezos deal,  Washington Post

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