Falling revenue at the Boston Globe drags down The New York Times Co., say newspaper experts; Times CFO expects sale of newspaper would help company's overall operating margins
August 2, 2013
– Falling revenue at the Boston Globe's media group only heightens the urgency for The New York Times to finally unload the newspaper -- even at a disappointingly low sales price -- before it can drain any more of the company's attention and resources, newspaper experts told the Herald.
"That paper's still struggling," said Ed Atorino, a media analyst for The Benchmark Co. "They can't wait to get rid of it, so I see them giving it away to somebody. It's been going downhill, taking up a lot of management time. It's really been a disappointing asset. I think they wanted to sell it a long time ago and couldn't."
Revenue at the New England Media Group, which owns the Globe, boston.com and the Worcester Telegram & Gazette, fell 7 percent last quarter compared to a year ago. Advertising numbers fell 10 percent. Circulation revenue -- even with a May spike in home delivery prices -- fell 2 percent. Other revenues dropped 14 percent.
"We expect that a sale will help the company's overall operating and (earnings before interest, taxes, depreciation and amortization) margins," said Times CFO Jim Follo in the company's second-quarter earnings conference call yesterday.
Bidders for the Globe reportedly include Red Sox owner John Henry, Tampa-based Revolution Capital and a group consisting of the Taylor family and former Time CEO Jack Griffin.
Ken Doctor of Newsonomics said the Globe's 10 percent ad plunge is higher than most metro papers, and he called the circulation revenue drop problematic. Newspapers with a digital paywall, like the Globe, have typically seen circulation revenue climb about 10 percent in the first 12 to 18 months.
"To go negative when you put it in shows a structural problem," said Doctor, who blamed it on either the paper's quality or cost. "As buyers have looked at the books, they realize that's a big problem."
As a result, it's stunting the Times' growth, Doctor said. He crunched the numbers and found the Times' circulation revenue would have actually been up 7.4 percent in the first half of the year -- instead of just 5.1 percent -- without the Globe group in its portfolio.
Times execs also said yesterday it would be "unlikely" employee pension obligations would be included in the Globe sale.
"It's not the pension obligations that are weighing down the price of the Globe," said Doctor, "it's the overall financials of the Globe itself."
Times stock fell 3.28 percent yesterday to close at $11.78 per share.
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