Because you have been such supportive and loyal readers, today I’m going to give you a chance to make some money.
There’s a golden egg out there, and I want all my friends — personal and digital — to get a piece of it.
It’s called New York Times stock. (NYT on the New York Stock Exchange.)
Most of you have heard, I’m sure, about the two big newspaper sales the last week or so. Jeff Bezos, founder of Amazon, is buying the Washington Post for $250 million, and The Times announced last week that it will sell The Boston Globe and a couple of other properties for $70 million.
Now, The Times took a terrible loss on the sale of the New England Media Group, having bought The Globe and other New England newspaper properties for $1.1 BILLION in 1991. A real bath. However, The Times has been able to absorb that and other “strong headwinds,” as the stock analysts like to say, and it is standing strong today.
With the sale of the Post, The Times will be the last of the big, family controlled newspapers. The Ochs-Sulzberger family has owned or controlled the paper since 1896, and it continues to control the paper through a dual-class stock structure.
Arthur Ochs Sulzberger Jr.
Sale of the Post immediately raised the specter, in journalistic and business circles, of a potential sale of The New York Times Co. A company spokesman said as recently as yesterday that the family has no interest in selling the paper. The only slightly worrisome thing to me is that the company does not appear to have in place a clear-cut plan regarding who might succeed the fourth generation leader, 61-year-old Arthur Ochs Sulzberger Jr.
(As a side note, I don’t think that either of Sulzberger Jr.’s children, Annie Sulzberger and Arthur Gregg Sulzberger — who was The Times’ Kansas City correspondent a couple of years ago — is a likely candidate to take over. She’s not interested, and he didn’t strike me as if he’d be interested in becoming a titan of anything.)
But keeping in mind that a sale is always possible, here’s a little background that should help explain why owning (or buying) New York Times stock seems like a really good deal and potential moneymaker.
While the $250 million that Bezos is paying for the Post sounds like a steal, it is actually a handsome price, relative to other newspaper sales in recent years.
Jeff Bezos
On a Web site called Business Insider, reporter Jennifer Saba of Reuters said that Bezos may have paid more than four times what the Post’s financial results suggest the paper is worth.
Stick with me, now, as I dip into a little financial speak…Saba said the average sale of a metro U.S. newspaper has brought a valuation of 3 1/2 to 4 1/2 times earnings before interest, taxes depreciation and amortization (EBITDA).
Saba said a Morningstar analyst had estimated the Post had an EBITDA of $15 million last year, meaning that its realistic sale value was $59.5 million to $76.5 million. (That’s $17 million multiplied by 3 1/2 and 4 1/2).
Saba wrote:
Such a large premium, which essentially pays for intangible assets like the brand name, may mean that any future sellers of prestigious newspapers will raise their price expectations. Other major newspapers that are in the sights of potential buyers include the Los Angeles Times and the Chicago Tribune.
Analysts and bankers said that when it came to newspapers such as the Washington Post, the usual financial metrics did not apply. The price, as in the case of other trophy assets like sports teams, depended on what a buyer was willing to pay.
So, here’s the Washington Post, essentially a regional newspaper — albeit a great one with a remarkable history — selling for 17 times its 2012 EBITDA.
What does that mean for The New York Times, a national newspaper with the highest name identity of any newspaper and the best news-gathering team on earth?
Saba said that if The New York Times commanded a similar premium (17 times EBITDA), it could be worth nearly $5 billion. (The Times Co.’s current market value is $1.8 billion, she said.)
Yes, it’s a thicket of numbers and what-ifs, but here’s how I see it:
Times stock is selling at about $12 a share today. That’s up 49 percent over a year ago. In fairness, it’s also down 7.6 percent over the last five years. But I’m thinking about now and next year and the year after that. I’ve owned a significant amount of NYT stock for a couple of years, and after the sale of the Post, selling NYT stock is out of the question for me.
Just guessing here, but I think that if somebody like billionaire New York Mayor Michael Bloomberg went to Arthur Sulzberger saying he was interested in buying the paper, he’d have to start at about $20 a share just to get Sulzberger’s attention. Recall what Saba said: A trophy asset is worth whatever a buyer is willing to pay.
Let’s see, at $20 a share, that would be a 66 percent premium over today’s stock price of $12…That’s a 66 percent profit for stockholders, before taxes.
To appropriate a 1969 line from the Friends of Distinction, “Can you dig it?”
***
Editor’s note: Julius Karash, a good friend and former KC Star business reporter, sent me an e-mail today, putting the demise of the print-journalism business in perspective…He said:
“If you write something about the sale of the Washington Post and The Boston Globe, it might be interesting to note that Capital Cities Communications shelled out $125 million when it acquired The Kansas City Star Co. way back in 1977…According to a CPI (consumer price index) calculator I found at inflationdata.com, that would amount to $481.65 million in 2013 dollars.”
Today, The Star would be lucky to draw a bid of about $20 million, in my opinion.
“If it WERE…” not “If it was…” Otherwise, it were a good article.
Thanks, Ridge…changed within 10 minutes of posting.
The comments have to start somewhere, right?
Jim:
I really hope you are right. Newspapers have been a part of American life since the very beginning (in fact instrumental in the formation of our nation) and part of my life since I learned to read. Unfortunately, with the rise of the Internet they are about as relevant as sending a letter versus an email. Until newspapers come up with a viable model to generate money consistently through electronic means, I just don’t feel they can develop, let alone survive. Stories can be had better on the web in a more timely fashion with better visuals, such as video trailers, and advertising revenue must compete with outlets such as craigslist. Most people I know these days do not subscribe to any newspaper (this is especially worrisome when one examines the younger demographic). On another note, I am also starting to worry about universities and a potential decline in students due to the rise of eLearning options.
Richie — You’re right on target about newspapers needing to come up with a more viable model, and that’s one of the reasons I’m encouraged about Bezos taking over the Post. This is the first big newspaper buyer in recent years whose background is in technology. He’s not some businessman or hedge fund owner trying to bottom feed for a good deal, whatever the industry. You know that Bezos has a plan for growth and for using the Washington Post label to advance his vision. I’m excited about it. The Post had gone about as far as it could under the Graham family…I don’t think that’s the case with the Sulzbergers, though. On the technology front, they are all in, and so far, they have put their dedication to journalism and publishing above finances.
I get a cheap thrill out of correcting a good writer. I pickup my Strunk and White or John Bremner every once in awhile to check how slovenly I’ve become.
I should go to Half Price Books and pick up those books…I never have understood the “if it were…if it was” construction. But I’ll take your word on it, professor, since you’ve already got the books.
It’s a counter conditional construction; The lyrics “If I had a hammer…” fits the music, but not the grammar. Properly, “If I had had a hammer….” I can discuss English a little bit better than the newspaper business, so I stick to something I know a little more about. Like ending a sentence with a preposition.
Buying NY Times stock got more and more confusing today.
I would rather dangle that participle than buy stock in the American Pravda.
It was down 6 cents today, closing at $12.02…
You know what Warren Buffet says, don’t you?
When in doubt, buy; when certain, don’t.
Nah…just kidding. I made that up.
That danglin participle was supposed to be funny.
:(
I miss smarty.
Fitz,
In he next two years the number of “smart” phones will continue it’s previous three-year trend of 100% increases. I do not know, so I will ask, what does Kansas City Star app cost for an iPhone 5 S or Samsung Galaxy 4?
The number one cause of death in Africa is diarrhea. Yet more people in Africa have cell phones than modern plumbing. In that situation – I am going for the cure. clean water! We will awaken and open up a newspaper. I augment my reading with websites. But Fitz we did not earn/win the 1982 Pulitzer in Spot News and Investigative Reporting from a website. What would Paul Haskins or Leo Wozniak or Bob Lynn do? Atkinson or Serrano?
Another thing, the demos most coveted in the U.S. cannot read and do not graduate from high school. They have cell phones and can text.
A 20-year-old in Missouri who is too old to return to high school to attain graduation can enter the GED program. There is a program that uses incentives of $800 monthly for failing in the first attempt.
I hope The Star and other dailies survive. But technology will have to be huge in the solution of people reading newspapers. I think they will have to be offered for next to nothing on phones, tablets and the contact lens and other eyewear that the internet will be loaded to in the not so distant future. The price of an app for this demo may be small to me, but the coveted demo has cigarettes, pot, alcohol, TMZ and the E Network too channel too. If I were to invest in a newspaper, of any size, I would also marry in the other media. Maybe that 20-year-old in eastern Jackson County would know the meaning of the word circulation.
Also for those that can buy or get a loan for a new vehicle, dailies will have to loaded to the computers in cars. I know we have radio news…I am not knocking it, but I do not listen to the radio, even for music. I have my own without ads interrupting. My dad listens to it, so I know it exists.
The systems are becoming so much more sophisticated, along with safety features. Like On-Star, XM-Sirius – whatever. For heaven’s sake, we have cars that do some and in extreme cases do all the driving.
Again, I really do hope that in my final years I can go out to my yard and grab the plastic-wrapped, cylinder-shaped roll of information. Plus, if it were not for newspapers, I would not still have some of my best friends (like Fitz, Killer, Keenan and OJ – I will not mention the women) and best memories. I cannot share many here.
I can, and would pay more for the newspapers I read daily, then recycle. Not on the internet, in yards and hotels where they are delivered or bought as long as they are on the market.
We should note, Larry, that the winners of the 1982 Pulitzer Prize for general reporting were the entire staffs of The Star and The Times. That was for coverage of the Hyatt disaster in 1981. You were part of the staff, which makes you a Pulitzer Prize winner, too.
…Now, why won’t you mention any of the women? I’m wracking my brain trying to think of some…Help me out.
I pay a monthly fee to get the paper delivered to my home, but if I want it on my kindle I have to pay more.
I pay a fee for Sports Illustrated to be mailed to my home and I get the content on my kindle for free.
…We print subscribers to The Star also pay a relatively small fee for full digital access. That doesn’t come with our subscriptions, as it does with many papers, including NYT.
I have decided that I will divest myself from all NYT stock if i ever buy any to reduce the crime rates among journalists.
The nice thing about Bezos is that he can experiment all he wants and he has no board to answer to. It’s his paper and his money, not Amazon’s. Also, according to the article i read, he’s going to change the name, so he’s only interested in possessing the material aspects of the paper, not the blue sky.
Jim, straining my pea-sized brain, the names of four Star/Times women readily come to mind: Laura Hockaday, Marjean Busby, Elaine Adams and Laura Scott. But surely there were others who played key roles in making the newspaper a “must read” in its glory years, which didn’t necessarily end in 1977 with the paper’s sale to Cap Cities as was evidenced by the Pulitzer prizes garnered just five years later. At any rate, I can report that on the paper route with which I’m associated, far more people subscribe to The Wall Street Journal on a regular basis than do to either The NY Times or USA Today, which suggests to me that making money is their highest priority in life and that the general news is somewhere further down on the list. But back to The Star and the potential impact of The Post’s sale on it. Unfortunately, you may be right. McClatchy might be lucky to get $20 million for the paper. I think the current regime under Ms. Parrish is trying to turn the “ship” around as much and as fast as they can, but at the same time I think the powers that be could (and should) be doing some things a little differently. I brought up the George Brett special section the other day so let’s look at that, for instance. The finished product was a six-page pull-out in the Sunday paper and yet there was only one ad in the entire thing. Am I to believe that that one little ad paid the cost of a 300,000 (or thereabout) print run of six pages? Plus, the environmentalist in me has to wonder how many trees were harvested so that the sports writers down there at 18th & Grand could simply rehash the George Brett story, thus continuing this long, drawn-out love-fest. Balance. I look for a sense of balance in a good newspaper but I’m not seeing it often enough with The Star. Too much Royals, too much Chiefs, etc., etc. Oh, I have other complaints with the paper, but I guess I need to put my thinking cap on and come up with a reliable viable model for Mr. Nelson’s creation in this the digital age where our attention span is extremely short, our incomes are basically stagnant and our sense of community is fast disappearing. Meanwhile …
Doctor says I got an awful bad case of those ol’ newpaper blues,
O, Lord, doctor says I got an awful bad case of those ol’ newspaper blues,
Don’t need no loan for the I-phone, Lord,
Just want some timely information I can really use!
I didn’t notice that — just a single ad — in the Brett section, Rick. Like many other people, I had already read the whole series online, so I didn’t read it again. I wonder how many complaints they would have had if they had not run it in print. Perhaps they should have just waited to see what the reaction was before running the special section. That cost a lot of money.
P.S. Love the poem!
John Altevogt just sent me an e-mail reminding me of The Star’s relatively new printing plant….I forgot about that. It was a $200 million investment; the plant opened in 2006.
Yes, that would definitely raise the stakes for The Star, but I think the company would have to take a big markdown in the printing plant. Let’s put the number at $75 million, including the printing plant.
The question is whether, or not, McClatchy would split off The Star from the printer. They may not be able to if they’re tied into the same loan. If they are, no bank is going to allow a split particularly if, as The Star claims, the paper is actually profitable.
For $20 million I can imagine any number of local groups putting together a deal to buy the paper. If they’re really making a profit, it should be even easier to make a buck with competent management. As is they have too many chiefs and not enough Indian. Streamline management, rehire guys like Karash and any number of other real reporters, fire the entire editorial page staff, Use national columnists for national issues and then pay local bloggers with established constituencies by the column for local issues. Actually provide balance for the paper’s many diverse constituencies and reflect the area’s values and it could be a money maker
I disagree that whatsherface is doing a damn thing to turn anything around. The one crumb they’ve thrown to readers is to make it sports heavy. Everyday the top left-hand spot on the website is a sports story, but the same top heavy pack of dinosaurs that were running it into the ground when she came are still there and the same pack of counterproductive snooze inducers are still sullying the papers reputation on editorial and yet the guys and gals who actually add value and professionalism have been shown the door. The damn place is a glorified welfare agency for aging 60’s deadbeats and affirmative action babies. I’d donate my services to run personnel in that place for 2 weeks and I guarantee you even the liberal journalists (and not all of them are) would like the changes..
One reason I got out at age 60 was that I already had more than 36 years in with The Star, and I just didn’t want to celebrate a 40th anniversary there; that was just too long.
After 35 plus years of employment anywhere, most people are just hanging on, going to work for something to do and to brag about how long they’ve been there. Most self-employed people, on the other hand, don’t have the luxury of gliding their careers to a soft landing; they’ve got to keep producing.
I like the way the young people of today operate — often out of necessity — moving from one thing to another, always trying to move up a notch, grab a little more responsibility or figure out a way to be self-employed. I wish I could have, would have, done that. It would have made for a more varied and interesting career. And it might have spared me the recurring dreams I have about still being down in the newsroom, being assigned to report stories but insisting to the the editors that I was retired and just there for the hell of it…Actually, it’s a nightmare…
What’s interesting is that i think you’ve done some of your best journalism here, when you were allowed to simply report what you saw in front of you without having to worry about policy, or an editors opinion. That’s the kind of journalism I love to read and you’ve clearly made this one of the most interesting blogs in the area. And what is more interesting is the response your writing gets. Diverse people come here and discuss hot button issues respectfully and without the kind of idiotic bickering you see under the Star’s articles. Well done.
Thanks, John…I’ve also developed an appreciation for a much broader spectrum of political views. When I was in the news room, or the KCK office, I could somewhat insulate myself from views I didn’t like and ignore them. But if you’re going to be a good blogger, in my opinion, you have to open the gates to everyone and say — as the British would — “come through!”