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December 26, 2008

NYT scrounging for cash

Thomas Lifson
The New York Times is preparing to sell off its minority stake in the Boston Red Sox, one of its last major assets that can be readily marketed. The patrimony inherited by Arthur Ochs Sulzberger, Jr. is being liquidated step-by-step to keep the company alive in the face of the need to repay debt coming due and a management incapable of generating the income necessary for repayment.

Russell Adams writes in the Wall Street Journal:

New York Times Co. is actively shopping its stake in the holding company of the Boston Red Sox baseball club, according to two people familiar with the discussions.

Times Co., which faces a cash shortage accelerated by steep industrywide revenue declines, has been rumored for months to be open to selling noncore assets. Besides its flagship newspaper, Times Co. owns the Boston Globe, About.com and a 17.5% stake in New England Sports Ventures, which owns the Red Sox, their fabled ballpark Fenway Park and most of the cable network that airs the team's games.

Henry Blodget of Silicon Alley Insider credits Pinch Sulzberger for making a good investment when he picked up the BoSox stake, as it almost certainly can be sold for more than he paid for it.  This is in sharp contrast to his billion dollar plus investment in the Boston Globe and other New England newspapers, which have plunged in value.  As Russell Adams wrote:

It's possible that the Globe could be packaged with the sports assets in a sale; Jack Connors, a former ad executive in Boston, and former General Electric CEO Jack Welch took a serious look at the Globe two years ago, when people close to them said they were valuing it at $550-600 million at the time. The Times rebuffed the inquiries. The Globe was recently valued by Barclay's at $20 million.

Aside from other newspaper properties it owns (also plunging in value), the only substantial asset the Times has left is About.com, an asset for which it paid richly, and which last month reported a decline in revenues. The About.com group of websites the Times owns could probably still be sold for more than Pinch paid for them, or at least enough to keep the company alive for another reporting period or two. But unless the company is able to slash costs fast enough to keep up with the startling 20% range decline in newspaper advertising revenues reported in November, further financial distress awaits.

My guess is that the company will seek some form of rescue from another media company (my bets would be Google or Bloomberg or a foreign enterprise) seeking to capitalize on the residual value of its brand name, also a declining asset.

AT has been for years warning of the trouble ahead for the company. In fairness, it is not easy running a newspaper these days. But Pinch Sulzberger inherited assets with unique value, and has managed a series of bone-headed moves that squandered those assets. The year 2009 could be his last as head of the company.

Hat tip: Ed Lasky

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