What is it about the Financial Times that inspires such longing among billionaires? The salmon-hued daily newspaper, which is owned by London-based publishing and education giant Pearson, is widely considered a must-read on Wall Street and in the upper echelons of the business world. In fact, more so than perhaps any other daily news publication, the FT can lay claim to being the paper of record for so-called C-suite executives, a term that refers to a company’s most senior management. Billionaire media mogul Rupert Murdoch reportedly eyed the FT for many years. He ultimately bought the Wall Street Journal, but it’s noteworthy that the Journal’s current top editor, Robert Thomson, and its incoming top editor, Gerard Baker, are both FT veterans.
The latest billionaire said to be enamored with the FT is none other than New York City Mayor Michael Bloomberg, founder of the giant media company that bears his name. On Monday, the New York Times reported that Bloomberg is “weighing the wisdom” of buying the Financial Times Group, which includes the newspaper, its website, a 50% stake in the Economist magazine and several high-end financial-information services. Mayor Bloomberg is apparently a big fan of the Economist and reportedly reads the FT every day. (According to the Times, Bloomberg carries a thick stack of newspapers under his arm “all day.”)
Bloomberg’s affection for the FT is understandable. The newspaper, first published in 1888, is known for its comprehensive but concise coverage of the business world, as well as its stable of stellar reporters and columnists, including respected journalist John Gapper, who regularly displays an uncanny aptitude for slicing and dicing the most important business (and general-news) stories of the day. Veterans of the FT are scattered throughout New York City’s media world at just about every influential news service.
The paper publishes one-of-a-kind features like its regular “Lunch with the FT” series and also produces an ultra-high-end glossy magazine entitled How to Spend It, which offers advice to the wealthy on, well, how to spend it. The FT also runs several prestigious business events throughout the year, including the annual FT/Goldman Sachs Business Book of the Year Awards, which the paper produces in conjunction with the world’s most famous investment bank. And in an industry milestone among major publications, the FT now has more digital subscribers than print subscribers, in an indication of the success of the company’s digital strategy.
In short, the FT, which has a combined global-print-and-digital-subscription base of 600,000, is simply one of the most respected news organizations in the world. So why would Pearson want to sell such a prestige publication? The short answer is that the FT is not for sale, or at least that’s what Pearson is saying publicly. Charles Goldsmith, a spokesman for Pearson, told the New York Times that the company “has not initiated any sort of sale process for the Financial Times and has no plans to do so.” However, last month Bloomberg — the billionaire’s eponymous news service, that is — reported that Pearson is “planning to explore a sale of the Financial Times newspaper as the company focuses on its faster-growing education business.”
For some time now, I’ve argued that Pearson should hang on to the FT. Although the newspaper is nowhere near as profitable as the company’s education business, Pearson as a whole generates revenue of nearly $10 billion annually and currently has a market capitalization of more than $15 billion. In other words, it’s not like Pearson needs to sell the FT in order to raise capital. Furthermore, in my opinion, the FT is actually worth more than a strict financial valuation would suggest. Wall Street analysts estimate that Pearson could fetch $1.2 billion for the FT.
I think the FT is worth more than that, owing to the quality of its journalism, as well as hard-to-quantify factors associated with the prestige of its global brand, and the access and entrée it affords its parent company to the world’s business and political elite. Pearson is also a very benevolent and deep-pocketed owner in a dicey media climate, with a demonstrated commitment to high-quality journalism and a hands-off editorial approach. In short, from a journalistic point of view, Pearson is a very ideal owner. I believe that Pearson shouldn’t sell the FT for very much less than $2 billion, but I’m in the minority on that and, of course, I am not a professional financial analyst.
But times are changing, and so is Pearson. The company is in the midst of a management transition, with CEO Marjorie Scardino set to step down at the end of this year and Rona Fairhead, CEO of the Financial Times Group, intending to depart next April. In fact, it was the announcement of Scardino’s impending departure that set off the latest round of FT-sale speculation. Scardino, who worked in journalism earlier in her career, has been famously committed to the FT and once declared that Pearson would sell the paper “over my dead body.”
Scardino’s successor John Fallon, however, is a veteran of Pearson’s education business and is not believed to share her affection for print newspapers. Pearson is moving to expand its education business internationally, and let’s face it, a 125-year-old print newspaper — prestigious though it may be — does not exactly cohere with the rest of the company’s portfolio, which includes various education assets as well as the Penguin Group publishing house. In fact, financial analysts have been nudging Pearson to dispense with the FT for years now.
Does it make sense for Bloomberg to buy the FT? (The other oft-mentioned potential bidder is the company’s archrival, Thomson Reuters.) There are a few schools of thought on this. The first and most dominant school of thought is that anyone thinking about buying a print newspaper in 2012 needs their head examined, because of the well-documented evisceration of newspaper profits, thanks to the Internet revolution. It is widely thought that Murdoch overpaid for the Journal, and there is reason to think that the FT, similarly, could only change hands at a distinct premium to its economic value.
On the other hand, Michael Bloomberg is worth an estimated $25 billion, and he could probably buy the FT with the remaining balance on his NYC subway MetroCard. For some reason, billionaires — and millionaires in a previous era — like owning newspapers, and if Bloomberg wants the FT badly enough, he has the resources to make a deal happen.
Another school of thought is that the FT would make a nice addition to the Bloomberg media stable. The company is a financial-information leader and sells subscription services with its ubiquitous Bloomberg terminal — at $20,000 a pop — to just about every major investment bank and hedge fund on Wall Street. The company has been working to expand its consumer footprint, and in 2009 purchased BusinessWeek magazine — now rebranded as Bloomberg Businessweek — which it has transformed into a widely admired publication. Bloomberg TV, meanwhile, is gaining more visibility as it mounts a challenge to CNBC. If you look at Bloomberg’s media portfolio, there’s one piece of the puzzle missing: a print newspaper. It’s likely that this has occurred to Michael Bloomberg.
There’s another reason to view a potential sale of the FT to Bloomberg favorably. I believe that newspapers — especially high-quality publications like the FT — constitute a kind of public good (although not in a strict economic sense). Top-tier news organizations like the FT are important for society, which is why it’s a good thing when they are owned by relatively benevolent, deep-pocketed owners. This is all the more important as the traditional newspaper business model slowly (or perhaps not so slowly) disintegrates. Bloomberg has many critics, but it seems clear that he values newspapers and the role they play in society. If Pearson decides it no longer wants to be responsible for shepherding the FT, perhaps Mayor Bloomberg is the man for the job.