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The battle for New York’s papers

Uncategorized By April 28, 2008 No Comments

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, 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, 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.


google — It’s all about the physical internet, stupid

Uncategorized By April 21, 2008 No Comments

In a nutshell, Google is fine, thanks. Last quarterly earning showed a revenue of $5.2bn for the first three months of 2008, a 42% increase compared to a year ago. And the operating income is cruising at $1.55bn, or 30% of the revenue. Going deeper into the financial statements give some clues about Google’s strategy for the coming years. In one word : dominance will be secured through a control of the physical internet, i.e. servers and networks. Expenditures for the period amounted to $842m, a jump of 41% versus Q1 2007. Altogether, Google has invested $5.14bn in datacenters since 2006. A level that no operator can match. Not Microsoft, not IBM, not HP. That gigantic infrastructure will allow Google, not only to serve any advertising to any customer, but also to develop and host new applications, most of them having yet to be invented.


Classified — A reminder of a transfer : the Craigslist figures

Uncategorized By April 21, 2008 No Comments

Call it a transfer. As we have seen above, the classified market for US newspapers is down 20% to 30% from a year ago. In the meantime, Craigslist, the mostly free #1 classified website in the US is quietly heading for the $100m mark in revenue. According to a report by the research firm Classified Intelligence, Craigslist is expected to generate more than $80m in revenues this year. It is mostly profit since the San Francisco-based classified company has a staff of only 24.

Here a summary of Craigslist’s growth in revenue terms :

2003……… $7m
2004……… $9m
2005……… $15m (approx)
2006……… $30m
2007……… $55m
2008……… $81m (estimates)

Some of these figures are estimates since Craigslist is a privately held company and isn’t required to disclose financial results. Other numbers for Craigslist:

Unique Visitors/mo…..28m (source : Quantcast)
Page views/month……..9bn
New classified/mo…….30m
New jobs listing/mo…..2m

Craigslist’s business model still has much upside. On the 450 markets it serves worldwide, the company charges in only 11 of them, all in the US. Jobs listings cost from $25 to 75 and apartments ads placed by broker in New York City are charged $10. Just figure out the impact of any adjustments in the cursor.


Substituting pennies for dollars

Uncategorized By April 21, 2008 No Comments

For each dollar it gains in online advertising revenue, the New York Times looses six dollars in print ads. See the first quarter financial results released last week by the company Q1 2008 yielded a loss of $335,000 for the period compared with a net income of $23m for Q1 2007. Advertising revenue is down 9.2% for the group even though circulation revenue is up 1.9%.

A closer look is even more alarming. It shows a sharper decline in advertising on all regional markets (-26% for its New England operations and -19% for its other regional papers). This is actually a trend : a decline of 30% in advertising revenue versus 2007 is not uncommon in certain regional US markets affected by the complete collapse of both jobs and real estate classified ads. For the New York Times, the drop was 35% for jobs ads, 30% for real estate and 20% for cars. Needless to say, the entire US newspaper industry is bracing for the release of the first quarter results in the coming days.

The fundamentals of the sector are deteriorating much faster than anticipated. The advertising side is impacted by two factors: number one is the current recession that affects first the real-estate market, then job related ads, and now all sectors of the economy. The second factor is the structural migration of a large portion of ads towards Internet pure players — not only classified but display ads as well, since advertisers are now seeking a cheaper and measurable space on the internet. Both trends are irreversible. Revenue lost to the Internet won’t come back, even if the economy rebounds: every player will soon be addicted to a cheaper and more efficient internet. And circulation won’t help either. It is and will remain flat since newspapers are not keen to invest in major audience-boosting initiatives. In the meantime, newspapers are increasing their online audience (+12.3% for Q1 over a year ago according to the Newspaper Association of America).

What’s next then ? First, a major depreciation of assets. In an interesting piece published by Portfolio, Howell Raines, former executive editor of the New York Times, wonders if newspapers aren’t “The worst investment in America“, quoting the story of Brian Tierney who bought the Philadelphia Enquirer two years ago. Since then, Mr. Tierney has seen the value of his investment melting like the polar cap. The same applies to Sam Zell, the Chicago real-estate mogul who bought the Tribune Company last December for $8.2bn. As The New York Times reported recently Tribune Co. is dealing with a debt (now amounting to $12.8bn) that it is likely to default on, in the wake of a double-digit decline in advertising. The long-term part of this debt is now trading at 50 cents a dollar. And Mr. Zell is disappointed with the level of internet revenue (he actually coined the term “pennies for dollars”). As Howell Raines puts it in Portfolio, “[Publishers] have to find more revenue at a time when little, if any, elasticity is left in the old business model, even though newspaper profit margins still average a deceptively healthy-looking 17 percent. But those margins have been maintained by one-off fixes like radical slashes in payroll, trimming news holes and circulation, and a self-defeating stinginess in regard to innovation”.


InterActive Corp backing the “Queen of Buzz” for a news site

Uncategorized By April 7, 2008 1 Comment

Best editor money can buy. At least, that’s the pitch. Internet media mogul Barry Diller is teaming up with former Vanity Fair and New Yorker editor Tina Brown to launch an aggregator news site, reports Radar. In a conversation with the Monday Note last September in Monaco, Diller hinted that he was up to launch a news site, saying that, news media were far for having grasp all the potential of the internet.


Neil Budde: From Yahoo to the Daily Me

Uncategorized By April 7, 2008 No Comments

From Yahoo to the Daily Me In the Internet publishing world, Neil Budde is seen as both a pioneer and a reference. He created the Online Wall Street Journal that now enjoys one million subscribers. Then he left for Yahoo!, raising speculations that the search company will make a major move into publishing (it didn’t happen). Last week Budde announced that he was leaving Yahoo! for the customization-aggregator Daily Me. Is it simply a career move from a bureaucratic Silicon Valley giant to a more startupish venture? Or is it the expression of a vision ? Judge by yourself with Budde’s explanations.


Patience, blog 2.0 is coming

Uncategorized By April 7, 2008 No Comments

Schizophrenia at work. Many web publishers are working hard to increase all forms of interaction with readers they ignored during decades. They are adding comments to articles, opening blog platforms (getting sued and loosing sometimes). Sites are lining up legion of low paid bloggers ($10 a post), where productivity becomes the obsession at the expense of relevancy or quality. Some even literally die on the job as recount in this amazing story in the New York Times).

At the same time, everyone is struggling with an increasingly noisy background. Web editors are working on algorithms (good luck pals) to enhance the visibility on the most interesting contributions, others are spending a lot on moderation. Results varie as shown in this study made by Ball State University, which concludes that blogs have, in fact, done very little to increase the quality of dialogue with the public.

What could be next ?Probably a more decisive quest for better contribution. Not through software filters and algorithms but through human, professional, judgment. Interaction with readers should (and ultimately will) be seen as a tool to enrich the content of a website, rather than a trick to increase pageviews (a cheap one by the way since blogs and reader-generated comments are the lowest priced space — a fifth or a tenth of the average Cost Per Thousand).

Call it blog 2.0 or “relevant interaction”, it will inevitably come. And it will benefit on all parties: readers will be rewarded to think rather than shout ; journalist will be challenged; publishers will see their content improved, and CPT will increase.


Magazines — What works and what doesn’t

Uncategorized By April 7, 2008 2 Comments

At a recent speech at Columbia University, Newsweek editor Jon Meacham asked which students read the magazine. None of them did. As reported in the Wall Street Journal, he delivered this stern response: “It’s an incredible frustration that I’ve got some of the most decent, hard-working, honest, passionate, straight-shooting, non-ideological people who just want to tell the damn truth, and how to get this past this image that we’re just middlebrow, you know, a magazine that your grandparents get, or something, that’s the challenge,” Mr. Meacham said. “And I just don’t know how to do it, so if you’ve got any ideas, tell me.”

You want ideas? See if there are some in The Economist’s success on the global market. The magazine’s top bosses have been awarded the Executive Team of the Year by AdWeek as much as the overall product as for the business performance. First, here are some figures of the trade :

circ USA…………..rev…………..rev…………..pages…………..pages2007 (m)………….. 2007——- 2006 —–chge 2007— 2006 chge ————————————————————————– ECONOMIST 0.73…………..31…………..24…………..+28%…………..693…………..613…………..+13%
NEWSWEEK 3.12 159 155 +2,4% 613 631 -2,8%
TIME 3.4 174 218 -20% 692 762 -9,2% ————————————————————————— Source : MPA- For The Economist the US circulation is half of the total. Even though the UK-based magazine is still five times smaller than Newsweek and Time, it is leaving the two others in the dust both in terms of volume and value growth. To prevent further erosion of its profitability, Newsweek has offered a buyout to 20% of its staff. What’s makes The Economist performing so well ? According to the editor John Micklethwait and publisher Paul Rossi, several factors are in play :

– The magazine’s global perspective. “It became more relevant when a Milwaukee factory worker can loose his job to somebody in India”, as Micklethwait puts it. Or even more since 9/11, “People have suddenly seen how their world can be turned upside down by a lunatic in a cave in Afghanistan”.

– Editorial positioning. The Economist is liberal on social issues and liberal on economic issues as well – that blurs traditional boundaries (and that is unthinkable in a country like France for instance where you must choose your side). – Depth, tone, pitch. The average readers spend 57 minutes a week. Writing is sharp, precise, informed, sometimes funny. Opinions are strong and argued. Angles are original (particularly in special surveys).

– Creativity to capture big ads. For example the interactive Energyville game made for Chevron by the Economist Group (supreme luxury : the magazine is trustable enough to avoid suspicion of coziness with such a big advertiser). – Even the website, that tends to be less and less paid-for by the way, is very thorough, with clever, often recursive, levels of reading.

– Its independence, protected by a board of trustees (and by its economic performance).

The Economist’s success is quite reassuring from a journalistic perspective. No one, not a single marketing egghead, would have a bet a cent on the success of such global positioning in the era of proximity obsession.


Google owns 69% of the internet advertising

Uncategorized By April 7, 2008 1 Comment

Here is why Google was so eager to buy the ad-server company DoubleClick : their combined market share reaches 69% of unique visitors, according to Attributor, a start-up specialized in tracking monetization on the web (January numbers). The split gives 35% for Google itself and 34% for DoubleClick. And, if we measure by domains (instead of Unqiue Visitors), it’s even better — or worse, depending on your free market beliefs: Google contros 77% of the market and DoubleClick less than 6%. Basically, as Attributor puts it, DoubleClick owns the head of the market, Google owns the tail, as shows the table below : audience*……<100kUV…………..100-1m UV…………….>1m UV DCLK……………… 9.1 %……………… 29.9%………………48.0% Google ………….. 71.4% ………………41.6%………………15.9% …………………………………………………………………………………… * in Unique Visitors per month In comparison, on a global UV basis, Yahoo has a market share of 11.5%, MSN 10%, AOL 5%. To measure this, Attributor crawled 68 million domains and 25 billion pages instead of using the traditional panel. Attributor plans to release such data on a monthky basis.