PrintJanuary 23, 2008
Will Google Buy the New York Times?
John Ellis, writing on Real Clear Markets, makes a strong case for the business logic of a Google takeover of the New York Times Company. And he lays out a plausible scenario leading to the Sulzberger clan deciding to sell out to Google. For anyone following the decline and fall of the New York Times Company (that AT has been chronicling for years), this article is a must-read.
Ellis lays out few of the ways that Google could repackage and extend the content and the brand, making money distributing it by the internet. He cannily notes that having a major media company would be an asset in dealing with regulatory authorities at all levels of the country, and he ballparks the numbers showing that for Google, an offer with a good chance of being accepted in the foreseeable future would be relatively cheap.
I found his analysis of the situation facing of Sulzberger heirs insightful.
The question they have to ask themselves, knowing that Mr. Murdoch intends to bleed them to death, is this: Can they afford to engage in this battle without a very deep-pocketed partner or do they sell the New England properties (The Boston Globe, NESN, The Boston Red Sox stake and the Worcester Star-Telegram) and use the proceeds to fund the counter-offensive? Given "young Arthur's" tenure as Chairman and CEO of the enterprise, is there any evidence that he would deploy the proceeds from the sale of the New England properties in a manner that would thwart Mr. Murdoch's siege.If the answer to the latter question is "no," then the Sulzberger family's argument (that they are the keepers of the flame of journalistic "integrity" and "excellence") disintegrates. You can't keep the flame burning if you don't have any fuel. You can't be a national and international newspaper if you don't have the means to support it. And from a fiduciary point of view, the Sulzbergers have to accept the fact that Mr. Murdoch's platform (News Corp.) enables him to lose money on the Wall Street Journal without any debilitating consequence. He really can bleed them to death.
Ellis is fully consistent with the analysis we have been presenting on AT on the competitive disaster facing Pinch Sulzberger's management masterpiece. Last September, when analyzing potential white knights in an article titled, "Will Pinch Sulzberger be ‘The Man Who Lost the New York Times'?" I wrote:
Larry Page and Segey Brin are the two mega-rich founders of Google. They know quite a bit about the information age, are reported to be politically liberal, and seem to have a grasp of what it takes to stake out a position and make money in advertising and information services.
Another candidate to use the NYT content and make big money is Michael Bloomberg.
Pinch surely by now understands that he is going to need some form of rescue with outside financing. He ought to be scrambling to put together a group of investors investors more interested in participating in keeping the institution alive than in a financial return, and offer a package of some form of convertible debt, or a package of securities, as a way of staving off default on bond covenants.
Pinch surely by now understands that he is going to need some form of rescue with outside financing. He ought to be scrambling to put together a group of investors investors more interested in participating in keeping the institution alive than in a financial return, and offer a package of some form of convertible debt, or a package of securities, as a way of staving off default on bond covenants.
That would be a way to try to keep the Sulzberger family part of the company, and maybe even secure for himself an honorary position and the right to use an office, as new management comes in and revive the company by capably exploiting the possibilities of the new information distribution system provided by the internet.
