What's the Boston Globe Worth? About a Buck

The New York Times' (NYT) David Carr asked six analysts one of the questions of the moment: just how much is the Boston Globe worth?

I liked how Fitch's Mike Simonton suggested that "buyer" may be a misnomer; "assumer of costs" might be truer.

Carr also reminds us that Jack Welch's indicated that he might be willing to round up some $500 million or so to buy the Globe just three years ago. 2006, though, now seems like another lifetime in the newspaper industry. How the Times could have used that kind of money to do battle with Rupert.

So, this week, as we try to separate the potential buyers from those who may just delight at seeing those books (how much of the $85 million in annual Globe "loss" is operating loss and how much "other"?, for instance), I'll amplify on my remarks to Carr.

Given the state of the world, the ad market, the newspaper market and vagaries of the online future, my best guesstimate of a price: a buck.

A buck essentially represents a gentleman’s agreement: I take a liability, headache and a distraction off your hands, says the buyer. I give you the great potential of the Globe brand, a top 25 news web site and improved ability to re-jigger the pieces, thanks to our new contracts and cost-cutting, says the Times.

A buck recognizes that there is so much unknown and such unchartable risk and reward here that only a token payment can even it out for both sides.

The Times gets shortchanged. It paid $1.1 billion for the paper just 16 years ago. It’s struggled to keep the Globe staffed through bad economic times. It’s subsidized losses.

The new owner takes on great risk. It's highly unlikely any bank will finance a purchase, given the half-dozen bankruptcies we've seen over the last year in the industry. That means the new owner’s own money is immediately at risk. The new owner starts out behind, even with recent contract givebacks, given the trajectory of operating loss and a continuing 30% decline in year-over-year advertising revenue. Forget the purchase price; how many millions will I have to sink in within the next year?

The potential upsides include buying an ad-based franchise at the bottom of a recession and being able to be a shiny newly painted boat in a rising economic sea; 2010 ad numbers can hardly help to be an improvement over this year’s. The feds will soon be paying people to buy cars, and houses will start to sell again; related advertising will recover a bit. 2010, I'm coming to believe, will offer a breather to the beleaguered industry. Yes, the structural changes of ad spending and reading will continue, but a small ad bounce will help dramatically downsized companies in the next calendar year. That may only stop the gasping temporarily, but breath is breath.

The potential downsides include inheriting a heavy-on-cost business model at a time when competitors from Huffington Post to Politico to local start-ups to emerging online initiatives of local broadcasters threaten to do further damage to daily newspapers. In the fact, the new business models we're seeing from the start-ups -- small, editor-heavy, full-time staffs, growing legions of part-time reporters, columnists and bloggers, regional aggregation models -- stand far distant from the model of a paper like the Globe. If you truly believe that Boston needs a vibrant, public service-oriented news source, is assuming Globe ownership the place you want to start?

One other data point: The most recent sale of a metro newspaper occurred a continent apart. The San Diego Union Tribune, a deeply mediocre newspaper in a widely monied metro area, was once the envy of every major news publisher.

Would-be buyers wined and dined the Copley family, the long-time owners. The Union-Tribune value, as little as a decade ago: at least a half a billion dollars. After languishing on the market for months, the paper finally sold in March, for a reported $50 million – and that price seemed to be based on some lucrative real estate that went along with the deal.

The Globe’s real estate is less desirable. Its glorious history and brand are balanced out by its by its cost structure and the difficulty of turning quickly around a 137-year-old steamship.

Now, an announced price may well vary from a simple dollar; it would be better optics for the Times. For instance, the new owner could put more dollars into the buy, if the Times agrees to keep some of the current Globe pension obligations, for instance. There are all kinds of content, advertising and technology relationships that could be built into a new Times/Globe relationship, with values to be computed. The Guild and other unions, as in the recently done deal for Maine Newspapers, may be willing to exchange further givebacks in exchange for equity, lowering costs enough to justify a buyer putting more money up front. Other possibilities abound.

Add, subtract, multiply, divide, though: the math still comes out pretty much to a buck.

Comments

[Doc 224899:]

The Boston Globe has shriveled because people who read papers now are older, more successful, and have attention spans longer than a 3.47 second sound bite. Statistically, that means they're more likely to be conservative and be put off by the Globe,s editorial policies, which are delusionally liberal and more appealing to, well, uh, to people who sit in the back off the life's big classroom waiting of for a gold star they didn't do any homework to earn.

Jun 15 08:59 AM

[NP Refugee:]

I continually wonder just how much the liberal bias does, in fact hurt the newspaper industry. It has to be taking a toll. Perhaps the growth and Fox News and the decline of CNN may be indicative of the effects of liberal bias in media. One really must ask just stupid an entire industry can be to alienate what is 50% of the populace--a percentage of the populace that is more likely to read deeply and delve past the headline in Yahoo! or Google news.

Jun 15 09:09 AM

[swaps:]

Lack of truly relevant intellectual content has hurt as much as technology.
The newspaper reporters collectively, fearing the loss of jobs, missed the story of their lifetime. Now, they are losing their jobs anyway.
Hint, a former Italian president, a fired Brigham Young University professor, a former Bush official know what the missed story is. That's three sources, but the media wouldn't go there.

Jun 15 10:32 AM

[treblekicker:]

"how much of the $85 billion in annual Globe 'loss' is operating loss"

$85 Billion? Really?

Jun 15 10:47 AM

[DonFurio:]

Doc 224899, they'll never admit it, but that's definitely part of the problem.

Jun 15 12:07 PM

[SA Editor M...:]

Typos were corrected to change 'billion' to 'million' in two places.

Jun 15 12:10 PM

[Howard_T:]

If the Globe could somehow convert itself into an "all sports pages" newspaper, it would likely recover much of its circulation and reduce costs significantly. Say what you might about the rest of the newspaper, its sports pages are excellent. Here are found some of the best sports writing and reporting in the US, and the talent pool runs deep. As has been pointed out above, the left-leaning editorial stance and reporting bias have cost the Globe much of its readership. The movement away from the near suburbs to the exurbs over the last 50 years has removed some of the incentive to buy the paper (any newspaper). "Back in the day" you could take a bus to the nearest MTA stop and read the paper during your daily commute. It's not easy to read the paper while behind the wheel of your automobile at 65 on route 128. Now a newspaper is attractive only to relay the news of what's happening in your local region, to get the grocery store ads, and to keep up with local government. National news is too easily available in the 30-second sound bite variety on your TV, or in greater depth (though with much more fog to penetrate) on your computer. A large metropolitan newspaper cannot satisfy the local angle without having to publish many regional editions. The Globe has tried this with little success and great expense.

I guess what I'm saying is that the days of the metropolitan daily are just about done. The reason for the success of the Globe's sports pages is the size of the regional attraction of the Boston-based sports teams. Everyone in the area wants to know what the Red Sox have done last night. If someone could come up with a business model that unites the local papers and their local news gathering operations with the sports, national news reporting, and editorial writing (without the bias) of a metropolitan daily, he might have something profitable.

Jun 15 01:52 PM

[Bobby Rifle:]

So explain why the Boston Herald still trails the Globe.

Explain why the San Francisco Chronicle has lost about 20% of its circulation in the past few years.

Explain why the Washington Times still (badly) trails the Post.

Furthermore, explain why conservatives are so narcissistic now that they think it's all about them, and nothing to do with the broader changes of all forms of media splintering into niche markets.

On Jun 15 09:09 AM NP Refugee wrote:

> I continually wonder just how much the liberal bias does, in fact
> hurt the newspaper industry. It has to be taking a toll. Perhaps
> the growth and Fox News and the decline of CNN may be indicative
> of the effects of liberal bias in media. One really must ask just
> stupid an entire industry can be to alienate what is 50% of the populace--a
> percentage of the populace that is more likely to read deeply and
> delve past the headline in Yahoo! or Google news.

Jun 15 10:08 PM

[Doc 224899:]

Read "The Closing of The American Mind" by Allan Bloom, that reveals how the liberal neo-marxist b.s. corrupted our schools and produced a bunch of cultural relativist morons with degrees who can't tie their own shoes. You can get a used copy for $0.01 on Amazon. Of course they'll never admit it. They were educated and indoctrinated in schools that threw out The Great Books by people like Mark Twain and Charles Dickens and Rudyard Kipling. They dummied down the schools so nobody has to read for meaning or solve problems or show their work for math problems. Creative Spelling? What's that? They deserve to have businesses that tout their p.c. ideology fail.


On Jun 15 12:07 PM DonFurio wrote:

> Doc 224899, they'll never admit it, but that's definitely part of
> the problem.

Jun 16 05:16 AM

[jay fredric...:]

The losses in the newspaper industry have little to do with politics and much to do with economics. The "liberal media" tag is so tired, so worn out, it's laughable. It's the economy, folks, nothing more and nothing less.

Jay fredrickson

Jun 16 08:36 AM

[Joe six-pack:]

As you can tell by the comments, the Libs just don't get it. Sure the bad ecomony has played a large part, but there are other factors. Newpapers have been chasing the younger, hipper crowd for years, without success. By doing so, they have pissed off a large number of their older, more conservative subscribers. The drop in ad revenues leads to more cutbacks on page count and the substitution of wire copy for "real" news reporting, all accelerating the downward spiral. I've been in the business for over 30 years, and I've been watching it happen.

Jun 16 02:16 PM