Thursday, January 24, 2008
Might Google Buy the New York Times?
Might Google Buy the New York Times?
By John Ellis
In the last five years, the New York Times has declined in value by an astonishing 70 percent. There is no indication that things will get better any time soon. Indeed, as the specter of recession looms, there is every reason to believe that things will get worse. At some point here in the near future, the market capitalization of the New York Times will fall below $2 billion. At that point, a psychological floor will have collapsed and the company will be in play.
The company that has the most to gain from buying the New York Times is Google. If it proffered a Murdoch-like, no-auction bid of $4 billion, wouldn't the Sulzberger family have to accept it? Every single class B shareholder would accept the offer. It's their only exit. It is also likely that Times employees and retirees would enthusiastically support the deal; it's their only exit as well. So it would all come down to whether the Sulzberger family (smaller in number and not as far-flung as the fractious Bancroft clan that owned Dow Jones) would accept the deal.
The choice for the family would be basically this: double your money or double down on "young Arthur," as the NYT's Chairman and CEO is sometimes called. In the back of their minds, the prospect of doubling down on "young Arthur" could only mean that the company's stock will continue its relentless decline. The prospect of doubling up with Google offers realized value, a global platform and thus a much clearer path to future growth. Everyone would be a lot richer than they are now. Assuming a cash/stock transaction, some might be a whole lot richer in the future.
I am told by smart people who know the business that the Sulzbergers will never sell; that their identity is the New York Times. It's also said that they take their role as stewards of journalistic "excellence" and "integrity" seriously. They're plenty rich as it is, if not as rich as they once were, so it's not about the money. It's about the Statue of Liberty and justice and righteousness, all of which they feel The New York Times embodies. And I believe that they believe all that.
But as everyone knows, and the Sulzbergers know better than most, the game has changed. Classified advertising has been gutted by Craig's List (and a thousand other web-sites). Department stores have consolidated and newspaper advertising budgets have consequently declined. The way people access information has fundamentally changed, thanks to the Internet. On and on it goes.
But perhaps the biggest change is that The New York Times is squarely in the cross-hairs of the aforementioned Rupert Murdoch. Mr. Murdoch recently acquired Dow Jones for $6 billion. He did not buy Dow Jones because of its growth potential. It's a mature business, to say the least. He did not buy Dow Jones because he sees limitless growth opportunities in financial news and business information. It's a crowded field. He bought Dow Jones so that he could own The Wall Street Journal. He intends to use The Wall Street Journal as a precision-targeted weapon. And the target he has locked onto is The New York Times.
The Sulzbergers understand this. 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.
What's in it for Google? Well, for one thing, it's cheap. Sell off the New England properties and the real cost is $3 billion. That's not much money to buy one of the premier brands of the information age. It also comes with some excellent real estate, which further reduces the risk. And happily enough, it will probably get cheaper in the coming months. So the price is definitely right.
Second, Google is embarking on an ambitious mobile platform. It is buying wireless spectrum and will soon introduce Google Mobile. In so doing, it is entering into an arena where the established players have hired (almost) every lobbyist and (almost) every law firm with expertise in telecommunications in Washington, DC and in virtually every state capital. Owning the New York Times would level that playing field in one fell swoop. Owning major media outlets is a strategy that has worked very well for General Electric, Disney, News Corp., Time Warner and others in their dealing with the federal government and with state governments. There's every reason to believe it would be helpful to Google.
Third, there's all that content. Google is a company that could actually make money repurposing the cultural and culinary coverage, to pick just two categories, of the New York Times, across both its Internet and mobile platforms. An acquisition of The New York Times would greatly enhance the richness and reach of Google News. And should Google choose to invest in expanded news and cultural coverage, it could greatly enhance the richness and reach of The New York Times.
Finally, a Google acquisition of the New York Times would allow Kleiner Perkins (which would likely be assigned the task of finding new management for the paper) to attract people of great talent to a fascinating and challenging project: the reinvention of a great newspaper across multiple platforms and within a variety of applications. Even if the project failed, the knowledge gained from the undertaking would make Google a better, smarter, more deft information age company.
The alternative, which is what the Sulzberger family must keep in mind at all times, is a slow, steady slide with a relentless and ruthless competitor attacking at every turn. Whatever else he does, "young Arthur" is not going to lead The New York Times to greater glory. He's had more than enough time to turn things around and no turn around has been forthcoming. Taking the company private will not work, because then the mission becomes debt service. The only real hope for the paper is what it could call a "strategic sale," on mutually agreed upon terms that would enable the Family to say it held up the flame.
John Ellis is a contributing columnist to RealClearPolitics.