Wednesday, February 20, 2013

Bloomberg reports the NYT will sell The Boston Globe

Abit of news this afternoon as Bloomberg is reporting that The New York Times Co. is now "formally exploring a sale of The Boston Globe." The publisher will be working with investment bankers Evercore Partners to find a buyer.

The New York Times bought the Globe in 1993, in better times for sure.

The Boston Globe was founded in 1872 and remained a private company until 1973 when it went public. The NYT came in and bought the public company, Affiliated Publications, in 1993 for $1.1 billion. The NYT will not get anywhere near that price for the property now, as revenue has fallen to $186 million for the New England Media Group, which is how the NYT reports the Globe's performance.

Ad revenue fell a bit over 6 percent in 2012, while circulation revenue was essentially flat. Total revenue for the group was $394.7 million – which if this were 20 years ago would mean the NYT might stand a chance at getting its initial investment back if the sales price were based on revenue. Unfortunately, when net income is taken into account that would most likely force the price down considerably.

But, in the end, the issue at the Globe is complicated by its underfunded pension plan, which Bloomberg estimates is a liability in the range of $110 million to $240 million (though the WSJ estimated a much smaller liability). Because of that situation the NYT will most likely try and complete the sale with the new owners shielded from the pension situation. Ultimately the best price for the Globe will come from a buyer with political motives to own a newspaper rather than financial motives (as was the case in San Diego).

The Boston Globe has made some interesting and forward-thinking moves in the area of digital, including recently launching a new website for the newspaper – putting the new website behind a paywall in order to drive digital subscriptions. The effort has not been a rousing success, however, with only 28,000 paid subscriptions achieved to date. Meanwhile, the paper is also maintaining the free website, calling into question whether a mid-major market newspaper could force a paywall on its readers.