An update: Murdoch decides not to bid for Newday. The AP story.
Five newspapers in New York. Ranging from the most respectable to the lowest tabloid. One is the object of a bidding war, another is under siege by Wall Street. Who will control NYC's newspapers a year from now? Here is an overview of the main players and scenarios for their possible next move.
#1 : Rupert Murdoch, owner of the New York Post and the Wall Street Journal. Rupert completed the acquisition of the WSJ from the hands-off Bancroft family for $5.2bn in December 2007. He's happy with his new toy. He set an office in the Journal's headquarters overlooking Ground zero, he revamped parts of the paper (an upgrade is due this Monday April 27), and he will replace the managing editor Marcus Brauschli who resigned last week. Things are moving fast and hard, the usual Murdoch way. At 77, the Australian-born mogul seems rejuvenated by this acquisition. In his crosshairs: the New York Times. To Arthur Sulzberger, Times owner, he said in a note "...let the battle begin!". And he means it. He will modify the Wall Street Journal to go after the Times' audience, adding more politics, sports, and even culture.
But he won't rest with this media trophy. On April 22, he made a $580m offer to buy Newsday. The New York (Long Island) paper is a nice business: a bit less than 400,000 copies; $500m in revenue for 2007 and a nice $80m EBITDA, many papers would be happy with such numbers. Newsday is to be unloaded by Sam Zell, the new owner of Tribune Company (The Los Angeles Times, Baltimore Sun, Chicago Tribune). Zell is saddled with a crushing debt load ($1bn due this year) that a collapsing advertising revenue can non longer support.
Why Murdoch would want Newsday ? Because he also owns the New York Post (667,000 copies), that has been bleeding money for long ($50m a year!). Murdoch wants to combine back office operations and thus save a lot of money. Plus he wants to increase pressure on the New York Times by controlling a broader spectrum of news -- from highly respected financial stories to trashy tabloid gossip -- and their related operations (syenergies on printing, adverstising, classifieds).
And, combining audiences, Newsday (870,000 copies) plus the New York Post (400,000) -- even if there is duplication -- would make life harder for the Times.
#2 : Michael Bloomberg, currently mayor of New York and main shareholder of Bloomberg LP, the financial information service he created in 1981. On April 19, Newsweek broke the story that Bloomberg could bid for the New York Times. The paper is facing a deterioration of its fundamentals, with an advertising base shrinking faster than expected and web revenues that are growing but are still far from compensating losses at the carbon-based version.
Why would Bloomberg want the New York Times? First, because he can. His stake in Bloomberg Limited Partnership is worth $11.5bn according to Forbes magazine In comparison, the market value of the New York Times Co. is estimated at less than $3bn. Michael Bloomberg is currently 65 and his second term as a mayor will end in 2009. There are obstacles. First, Bloomberg has to be embraced by the Sulzberger family: it controls the NYTimes Co's capital through a dual shareholding structure. Also, there is no doubt that an open and friendly proposal from Michael Bloomberg for buying the Times (or a big chunk of it), would increase Wall Street pressure on the family. Such pressure is already intense (see below, the Harbinger paragraph). In other words, Sulzberger would have to be pragmatic and negotiate. Second argument: the business potential. Combining the pantheon of journalism (soon to be a mausoleum) and a Bloomberg’s fantastic business news delivery system is a no-brainer as far as shareholder's value is concerned. Bonus result: Murdoch would have a much more difficult time eating Sulzberger's (or, rather, Bloomberg’s) lunch.
#3 : The Harbinger-Firebrand private equity fund. To sum-up, the tandem now owns 20% of the New York Times. Their proxy contest succeeded, they get two seats at the Gray Lady's board. Philip Falcone and his pal Scott Galloway are not exactly newspapermen, but they are nevertheless willing to push the Times to innovate. Their foray epitomizes the tremendous firepower of the big investment funds. In that instance, this power is about to reshape a icon of the media industry.
What to expect with the Harbinger gang ? Not that much because of the dual ownership model of the Times. But the management of the NY Times now must make moves in several directions: ownership, content, business model, staffing, spin-offs…
#4 : Warren Buffet. Investor, the wise man from Omaha (the Nebraska, glowing headquarters of its investment vessel Berkshire Hathaway) second to Bill Gates with a net worth of $52bn, according to Forbes. Warren Buffett is also a board member of the Washington Post Company. He knows quite a lot the newspaper business. He could be credible white knight for the New York Times.
#5 Mort Zuckerman. Owner of The Daily News (700,000 copies), Murdoch's New York Post archrival. Friday night, Zuckerman announced he was to match Rupert's offer ($580m)
for Newsday. Same idea as above, he whishes to combine operations and save money for both papers.
Why this battle is worth to watch, even from Europe?
1. It will we be interesting to see the results of Murdoch's strategy to expand the territory of the Wall Street Journal towards a broader audience (French new owners of business dailies, do you read this?)
2. There is a new kind of players in town. Big hedge funds, like the Harbinger-Firebrands. Many escaped the credit crisis. We'll see the results of the pressure they are applying to a company such as The New York Times.
3. Aside of the papers circulation, there is the online audience issue. The NYT Times, WSJ.com and even Newsday are big players in a field still pregnant with possibilities.
4. New York is New York. Among others things, it is the capital of advertising. Trends start there. So, watch.
> Related stories on MondayNote.com, here
> A profile or Rupert Murdoch. Newsweek published an excellent account on the way he's functioning. In this piece, they revealed Michael Bloomberg's itch to buy the New York Times
> The Bloomberg Monday Machine, the best story ever written about Bloomberg LP, how it works, its journalistic firepower, etc. In Fortune.
> The Harbinger Fund, the incredible history of an investor, Philip Falcone, whose fund is worth 760 times its was seven years ago. Read "The Midas of Misery", cover story of Business Week.
An update: Murdoch decides not to bid for Newday. The AP story.