The Times they are a-changin’ — again. The New York Times Co., parent company of the Gray Lady, plans to sell The Boston Globe, the venerable newspaper founded in 1872 by six Boston businessmen. The sale, which has been expected, is another indication of the rapidly changing U.S. media landscape, as the Internet transforms traditional media companies and new upstarts rise to challenge them.
The decision to sell The Globe (part of the New England Media Group) is the first major action undertaken by new Times Co. CEO Mark Thompson, the former head of British Broadcasting Corp. For the last several years, The Times has been shedding assets and developing a new strategy centered around video, mobile devices, social media, and international growth. In short, The Times aims to become the premier global news organization, one deeply rooted in technology.
“Our plan to sell the New England Media Group demonstrates our commitment to concentrate our strategic focus and investment on The New York Times brand and its journalism,” Thompson said in a statement. The Times Co. has hired New York-based investment firm Evercore Partners to advise on the sale. Last September, the Times Co. sold About.com for $300 million to media mogul Barry Diller’s IAC/InterActiveCorp.
The Times Co.’s plan to sell The Globe is just the latest indication of increasing deal activity in the tech, media, and telecom space as the U.S. economy continues its halting recovery. Last week, cable giant Comcast said it would spend $16.7 billion deal to buy the remaining half of NBCUniversal from General Electric. Two weeks ago, another cable giant, Liberty Global, announced a $16 billion deal to buy British cable giant Virgin Media, in a move that sets up Liberty mogul John Malone in a clash of the media titans against longtime rival Rupert Murdoch and his News Corp. conglomerate.
Meanwhile, New York City’s billionaire mayor Michael Bloomberg is reportedly “weighing the wisdom” of buying the Financial Times Group, which includes the salmon-hued Financial Times, its website, a 50% stake in the Economist magazine and several high-end financial-information services. And the Tribune Co. is expected to put the Los Angeles Times, the Chicago Tribune, and other newspapers up for sale, according to Reuters.
From a business point of view, the Times Co. purchase of The Globe was a complete disaster. The Times Co. bought the paper for $1.1 billion in 1993, at a time when the traditional newspaper business model was still flourishing. But just a few years later, it would become clear that the advent of the Internet — and the rise of digital upstarts like Google and Craigslist — would eviscerate the newspaper business model, particularly with respect to classified advertising, which had long been a main funding source for editorial operations.
Today, industry analysts believe the Times Co. might only be able to fetch $150 to $175 million for The Globe, a staggering decline in value, and a vivid illustration of the effect that the Internet has had on the newspaper business. The Times Co. had previously tried to sell The Globe in 2009, only to have the deal fall through thanks to the paper’s hefty employee pension obligations.
“More than likely, interested buyers will be wealthy Bostonians,” Reed Phillips, CEO and managing partner of media investment bank DeSilva+Phillips, told Reuters.
By selling The Globe, the Times Co. will help bolster its cash position, which now stands at $955 million, according to Bloomberg. As newspaper advertising revenues continue to fall, this cash hoard represents a key safety net for a newspaper that views itself as holding an important public trust. National newspaper ad sales declined 10% in the first nine months of last year, according to Newspaper Association of America data cited by Bloomberg.
But there are early glimmers that The Times’s digital strategy is starting to pay off. In a milestone, the paper now generates more money from readers than from ads, driven in part by the company’s successful online paywall program, which now has more than 640,000 subscribers, according to Bloomberg. Last year, The Times generated $781 million in overall circulation sales, an 11% annual increase, according to Bloomberg. By contrast, ad sales declined 7.4% to $700 million.
The Times Co. is a public company controlled by the Ochs-Sulzberger family, which has managed the paper for over a century. At the height of its influence, The Times was known as America’s “paper of record,” and it has a distinguished track record of journalism, not to mention more Pulitzer Prizes than any other newspaper. Some analysts believe that the Ochs-Sulzberger family wants to take the company private eventually, which would mean it wouldn’t have to deal with pesky Wall Street investors and analysts.
“They’re selling everything not nailed down,” Benchmark Co. analyst Edward Atorino told the Associated Press. “The family will simply take the Times private. That’s the only logical end game.”