New York Times Sells Boston Globe For 95% Loss
A business move that signals the continuing death of the newspaper industry.
Back in 1993, The New York Times Company, the parent company of The New York Times, bought The Boston Globe for $1.1 billion, at the time one of the largest sales of a newspaper in American history. Last week, they sold the whole thing for, much, much less:
The New York Times Company, in its latest move to shed assets and focus more on its core brand, has agreed to sell The Boston Globe and its other New England media properties to John W. Henry, principal owner of the Boston Red Sox.
The sale, for $70 million, would return the paper to local ownership after two decades in which it struggled to stem the decline in circulation and revenue. The price would represent a staggering drop in value for The Globe, which The Times bought in 1993 for $1.1 billion, among the highest prices paid for an American newspaper.
At the time, The Globe was one of the nation’s most prestigious papers in a far more robust newspaper environment. But like other newspapers, it began to lose readers and advertisers to the Internet, and revenue plummeted. The Times Company has taken several write-downs related to the New England Media Group, and in February it said it was putting The Globe and other assets in the group up for sale.
For The Globe, the planned sale restores a Boston connection that prevailed for 120 years under the Taylor family, which owned the paper from 1873 until its sale 20 years ago. While not from Boston, Mr. Henry has for the last decade been active in local sports, and his Fenway Sports Group owns the Red Sox, Fenway Park and 80 percent of the New England Sports Network. It also owns the soccer club Liverpool F.C. in the English Premier League.
“This is a thriving, dynamic region that needs a strong, sustainable Boston Globe playing an integral role in the community’s long-term future,” Mr. Henry said in a statement about the sale. “In coming days there will be announcements concerning those joining me in this community commitment and effort.”
In addition to The Globe, the sale includes BostonGlobe.com; Boston.com; the direct-mail marketing company Globe Direct; the company’s 49 percent interest in Metro Boston, a free daily paper; Telegram.com and The Worcester Telegram & Gazette. The Times bought the Telegram & Gazette for $295 million in 1999.
Factoring what the Times Company paid for the Worcester paper into the equation, we see that Henry is purchasing for $70 million a group of assets that the Times page $1.4 billion for. That represents a total loss of some $1.3 billion and represents a drop of 95% from the original purchase price. Add into this the fact that the Times Company will remain liable for the hundreds of millions of dollars in pension liabilities associated with the Globe, and the full scale of the loss that they took on this sale is really quite staggering. This isn’t just a phenomenon limited to Boston, though. All around the country, newspapers have been selling for pennies on the dollar compared to what they used to be worth. As the linked article notes, last year Philadelphia’s two newspapers, both owned by the same company, sold for just $55 million after having been purchased for over $500 million just six years previously. The Tampa Tribune was recently sold for only $9.5 million. And some estimates put the entire value of the Tribune Company, which owns both The Los Angeles Times and The Chicago Tribune at just $623 million.
All of this, of course, is just another sign of the decline of the American newspaper industry. Circulation of even the most widely read newspapers has fallen precipitously over the years and, along with it, advertising revenue has dried up significantly. Most of the big newspapers have made the transition to providing content online and have established some form of a paywall. Some papers, such as Cleveland’s Plain Dealer and New Orleans’ Times-Picayune have taken the drastic step of only publishing a print edition on certain days of the week, leaving subscribers to rely on the website on other days of the week. Other papers have folded entirely, or transitioned into online-only endeavors.
Newspapers like the Times and the Globe are unlikely to fade away anytime soon. They’ve both got national reputations that ensure that they’ll survive in some form, most likely online, for some time to come. It’s clear, though, that this business model isn’t going to provide the same kind of revenue that the good old days of print used to, especially given the fact that there are countless numbers of news sources available on the Internet, many of which charge nothing for access. At some point, we’re likely to see one or both of them completely end their print editions. As Rick Moran notes, there’s something unfortunate about that:
[W]atching the death of the daily newspaper in America is painful. When their history is written, it will reveal an industry and an institution that played a vital role in America’s growth and in knitting communities together. There was also the disseminating of information, the for good or ill, led to an informed electorate. It’s hard to imagine an America without the daily newspapers that fought tooth and nail for readership and where reporters would sell their mother to scoop a rival.
That’s the world we’re headed toward, though.
I’d say good for Mr. Henry.
I guess I’m one of those who blames lies at my feet, unlike most conservatives (more progressive due to extremism in the GOP) I have no wish to see the end of the MSM as a matter of fact I’d like to see it grow and prosper! But the reality is I can’t remember the last time I bought an actual newspaper or magazine. Before I used to spend a fortune on English newspapers and books, today well I did a get a NYtimes digital subscription but honestly that’s a drop in the bucket compared to what I used to spend.
Even today I still got a pile of magazines from my last trip that I still haven’t gotten around to reading.
And lets not get started on physical books vs kindle
Rob
As others have pointed out, Henry paid more for Carl Crawford, the failed Left-Fielder, who got a 7-year contract averaging $20/year.
http://sports.espn.go.com/boston/mlb/news/story?id=5907535
I think the thesis of this post is wrong…
The Boston Globe at $70M is going to make the paper a far more viable entity…far more than the Boston Globe at $1.4B was ever going to be.
Are newspapers dinosaurs? Maybe. Warren Buffet recently bought 26 local papers. He’s generally considered pretty smart. In any case it’s easier to feed a cheaper dinosaur.
According to Matthew Yglesias, it’s even worse, because the NYT is still responsible for the Globe’s pension obligations, it’s closer to negative $40 Million.
http://www.slate.com/blogs/moneybox/2013/08/03/pensions_included_boston_globe_sold_for_40_billion.html
I don’t think this signals the “decline of the American newspaper industry” so much as it does the decline of the newspaper chain built with leverage and saddling the acquired newspaper with paying off the loan.
Local newspapers continue to be viable as long as they’re debt-free and its editors and publishers don’t expect big bucks in their compensation plans.
Report the news. Sell advertising. Even in the Internet age it’s still a model that works.
@Dave Schuler:
I kind of wonder if you may be right. It’s a bit maybe like the death of Borders and the endangered position of Barnes and Noble, contrasted with the fact that I know quite a number of Indie booksellers doing very well.
It happens that I gave a speech like 4 years ago IIRC in Miami in which, while discussing the future of publishing, I speculated that the Indies that were quick on their feet might outlast the chains with their debt, their growth-oriented business models, their pay-outs to prime locations like malls, their huge floor space, etc… I was absolutely making that up to pacify the audience largely composed of writers and, of course, Indie booksellers. But I’ll take “accidental” prophet.
But somehow Rupert Murdoch’s media empire is actually profitable…
I thought it might be entertaining to see what the Globe’s rival, the Boston Herald, had to say about it. One of their columnists offered some advice for the Globe’s new owner…
I couldn’t believe that those were all based on actual incidents, but I did a little digging, and they were. They had at least two top columnists busted for plagiarism (including MSNBC legal dependent Mike Barnicle), and a Boston city councilor did pass off porn photos as legit pictures of US troops committing rape in Iraq, and the Globe ran with that.
@Dave Schuler:
This is true for small town weeklies. The jury is still out on small/mid-sized city dailies. Frankly they have always been the most endangered by these changes (in part because they are also the ones who have historically had the least amount of money invested in them).
BTW, as you suggest, a key part of the Globe’s problem was that the NYT’s bought it as a Cash Cow and never actually invested in the paper at all. It’s job was to “print money” for Times Corp.
@Jenos Idanian #13:
Let’s see how Rupert does when he’s played out the last of his Marvel properties. Lot of dogs on the 20th-21st Century Fox list. I have a suspicion the Avatar sequel is going down in flames. HarperCollins has some strong divisions (thanks to a very, very minor degree to me and my wife) and he has pieces of BSkyB, but I suspect he’s wrong about newspapers, at least in the US.
And his Fox News audience is either 90 years old or retarded. That can’t stay profitable.
@Jenos Idanian #13:
1-) The New York Times Company is actually profitable. And they have high costs with things like, you know, reporting and foreign bureaus(Expenses that Fox News do not have).
2-) Several of Murdoch´s newspapers and news outlets are unprofitable. The Times of London is unprofitable, the NY Post is bleeding red ink. Sky News(That, unlike Fox News, has expenses with reporting and foreign bureaus) is unprofitable. His Australian newspapers seems to be very unprofitable. The Daily, an Ipad newspaper, was a disaster.
That´s why investors pressed for the newspapers to be divested from the rest of Newscorp. To be fair, Rupert seems to really like newspapers, and in fact he was using the profits of his TV and movie division to subsidize newspapers.
@michael reynolds:
They can. The real problem of journalism is that it´s very expensive to keep correspondents in Port Moresby or in Khartoum. Fox barely has foreign bureaus(They have a bureau in London, a guy with a single camera in Rome and another guy with a single camera in Tel Aviv, anda that´s it), they simply pay for uniformed people to talk on TV.
Michael Jackson and Madonna and Vanilla Ice all sold a lot of records.
Because Murdoch has you and your denizens hypnotized means absolutely nothing.
One of the biggest problems America has is the Republican catechism that profit margins are the be-all and end-all.
Instead of Henry Ford being a model for the Republican party…it’s Mitt Romney.
The inevitable, and dangerous, outcome of the radical Republican project of supply-side economics is that all of the sudden capitalism no longer has to produce. Supply-side…by it’s very name the implication is that demand is not necessary. Where do we find ourself today? In the midst of a demand crisis. It’s why Republicans are so hyper- focused on deficit and debt. If they admit the truth, that this is a demand crisis, they admit that their signature idea…supply-side economics…does not work.
So yeah…Murdoch is profitable…BFD.
@Matt Bernius:
And then there’s the question of whether there’s really a market niche for a national daily journal of opinion.
Just to point out that the opposite side of the coin of ‘print news is dying’ is that more and more ‘paywalls’ are popping up on the internet. Foreign Policy, the Economist, WaPo, Andrew Sullivan and more I bet, all have their hand reaching for your wallet.
Murdoch will always be profitable because he caters to the lowest common denominator…ie Jenos, JKB, bithead, Edmondo, etc.
The latest news is that Henry was outbid by three other parties, all of whose offers were refused.
@CSK: Yup, that’s how it looks. The NYT didn’t choose the highest bid, which by law they had a fiduciary responsibility to their own shareholders to take. So it looks like they broke the law.
I’m not holding my breath to see the SEC or the Justice Department take notice of this, however.
@Andre Kenji: it’s really embarrassing how far the nyt has sunk in the past decade, they appeal to a small but supportive audience. the grey lady is no more, and the motto should be “all the news that fits our agenda”.
good crossword puzzles though.
@bill:
The NYT does not have a small audience. In fact, their main problem is precisely the opposite: they were always a newspaper that dealt with the elites in Manhattan and in Westchester. Now, they have a global audience, and they are still learning to deal with that.
Paul Krugman can go to Europe, Asia and Latin America and be recognized by people because the NYT publishes him. Kinda, here in Brazil even lay people, that don´t read in English, says “The New York Times covered that” to point out to local issues that foreigners would supposedly care.
@Andre Kenji: i meant their audience is not as objective about the “news” they get. sure the paper is known globally, but what they report and how they do it is demeaning for them- they were a great paper back in the day.( i,e they reported news before views).