Wednesday, August 07, 2013

The Washington Post & Jeff Bezos

Before predicting what founder Jeff Bezos will do or
should do with The Washington Post, let’s salute the Graham family.

Donald and his niece, Post Publisher Katharine Weymouth, as well
as the board of directors, took a hard look at the newspaper and realized
they had neither the management expertise nor the bench strength to
pull the paper out of its current quandaries, which are similar to the ones
affecting every newspaper in the United States – print advertising
revenues are down as is the paper’s overall print circulation.

So they did something few, if any, families could do with such long
ties to a business:  They fired themselves by selling the paper. 

I’m sure this was an emotional ordeal, especially for Donald Graham,
who’s worked at The Post for more than 40 years and been around it
since the day he was conceived. 

It’s not unlike selling the house you grew up in:  It’s not just a structure,
it’s where you learned how to walk and talk, played with your parents
and friends, celebrated birthdays and holidays and learned about life
from the people who cared for you the most.

Another reason to salute the Graham family is the manner in which
they sold the paper.  It was done quietly and respectfully.  The price
they received -- $250 million -- appears to be close to the paper’s annual
print revenues.

That’s far better than what a New York newspaper family recently did
with The Boston Globe, which sources say is doing more in annual
revenue than is reflected in the recent sale price of $70 million.

The only thing that could make this sale complete is Weymouth turning
in her resignation.  She needs to do the honorable thing and leave so
Bezos can appoint his own CEO.


While there’s much to celebrate in a rich man like Bezos owning the
Post – it’ll no longer be hostage to quarterly earnings reports
– shareholders should be asking him a number of
questions:  How does he plan to lead two companies, that are in
different industries, as well as on opposite sides of the country, 
simultaneously?  Can he be effective at both? 

Sure you can hold conference calls and trade emails with your
executives on the scene, but there’s nothing like being there.  So if
Bezos is under the impression that running the Post can be easily
done from his perch in Seattle, he’s in for a rude awakening.

He needs to gain the kind of understanding on the Post that he has
of Amazon by calling on the paper’s leading advertisers and meeting
the leaders of the community it serves, both in and out of the District.

Print’s Future

I’m sure there are many suggesting Bezos’ purchase signals the death
of print.  But I think there’s a very good chance he’ll learn the many
benefits of print, some that are unique compared to digital media.

Sure, he can borrow from the wire service/digital world and create
emails, if they’re not happening already, telling people what’s
happening in the world, and locally, for Post subscribers.

But he might also look at ways to redesign and reformat the print
product.  Instead of a front page that tells readers what happened
yesterday, perhaps he considers a magazine approach to the print
product, one that analyses and speculates on what happens next
and provides a broader and deeper understanding of events.

Whatever happens, let’s hope Bezos relishes his newfound
challenges and makes The Post an even better newspaper.

Tuesday, August 06, 2013

The Price is the Message

If the medium is the message, as that late, great Canadian philosopher, Marshall McLuhan, asserted, then so is the price.

And the message also includes how the sale is handled. 

In fact, these two parts – the price and how the sale is managed – signal everything about the seller, from what they think of the new owner, as well as the other bidders, to how they view the property they’re selling, maybe even its customers.

And so in The Boston Globe’s sale to Red Sox owner John Henry, two conclusions can be drawn about Arthur Sulzberger, Jr. 

First, Arthur and his executives handled the sale poorly as it came to light that other bidders offered more for the paper than Henry’s winning bid of $70 million.

Of particular interest was a group in California, which also owns the San Diego Union-Tribune.  Word is they offered Arthur more for The Globe than anyone else.

While it's Arthur's prerogative to accept or reject offers, his approach to The Globe sale could place him in hot water should the company’s shareholders think he failed to maximize the newspaper’s value.

As Bloomberg News reported in June, Times executives were expecting bids in the $100 million range.  As Times executives were reviewing the bids, The Globe reported that Henry’s offer was among the lowest.

Meantime, the American Thinker reports John Lynch, the San Diego Union-Tribune’s chief executive officer, saying, "’We had the money in the bank, we had the highest price and we rolled over (Friday) and accepted all their (Times' executives) terms.’”

So why did Arthur reject the owners of the Union-Tribune?  Could it be because their politics lean right and he fears a right-wing Boston Globe editorial page?  Or did he just dismiss them out of hand because he knows Henry? 

Or was he looking to sell to someone whose knowledge of the newspaper business is minimal?  Which, in the not too distant future, will make The Times’ ownership of The Globe look outstanding.

These questions may never be answered.

Of course, a price like $70 million for a property that should command so much more, makes me wonder if it's Arthur’s reflection on what he truly thinks of The Globe:  It’s a run-down property, with little to offer; at $70 million, it’s a cheap whore with lousy Johns.

One thing is certain:  Members of the Bancroft family, the former owners of Dow Jones and the storied Wall Street Journal, can hold their heads high:  They sold their company for premium to an executive who knows the ins and outs of the newspaper business. 

So much for the scion of the Great Gray Lady – he’s a weak executive who needs to be forced out.

Monday, August 05, 2013

Arthur Sulzberger, Jr. & the rejection of Jack Welch

The question any New York Times shareholder should ask
today is, if in spurning Jack Welch’s generous offer of $500
million for The Boston Globe and the Worcester Telegram
& Gazette, did Arthur Sulzberger, Jr., fail to live up to his
fiduciary responsibility.

The answer appears to be yes because as 2006 turned into
2007, and the subsequent years followed, Sulzberger must
have realized he’d never see such a generous offer again.

Did he really think he was going to recover what the company
paid for The Globe -- $1.1 billion in 1993 – by refusing to sell
to the former CEO of General Electric?  Was that a credible
point of view in 2006?

To put Sulzberger’s rejection of Welch’s offer in perspective,
it’s important to realize that in 2006, Sacramento, Calif.-based
McClatchy purchased Knight-Ridder’s 32 newspapers, which
included The Philadelphia Inquirer, San Jose Mercury News,
The Miami Herald and The Charlotte Observer, for $6.5 billion.

That’s about $200 million for each newspaper, if you calculate
the valuation by dividing the purchase price by 32.  Admittedly, 
it's simple.

But compare it to Welch’s offer – about $250 million per
newspaper if you divide his offer by two – and you seriously
have to wonder what Sulzberger was thinking.

Instead of maximizing the value of a distressed business – the
clarion call of any chairman of a publicly owned company – by
picking up nearly half the purchase price for The Globe and the
Telegram & Gazette in Welch’s offer, Sulzberger, seven years
later, settles for less than 7 percent from the owner of the Boston
Red Sox, John Henry.

It almost makes you wonder if he’s a closeted Rex Sox fan
or just incompetent.

It doesn’t take a genius to look at revenue trends and determine
that your business is sooner headed down the toilet than it is
the top shelf of media properties.  Once you know this, you
either invest heavily to turn it around or you sell the business
as quickly as possible.

You certainly don’t hold onto it and do nothing, which is
what Sulzberger did.

If ever there should have been a Tiffany business – one with
the crème de la crème of readers, highly educated with high
household incomes and wealth – it is The Boston Globe.

Instead of being that business, it was eking out – based on
the offers The New York Times Company received – about $8
million in cash flow, which means Henry likely overpaid;
newspaper multiples – or valuations – were once seven times
cash flow, meaning the price should have been closer to $56 million,
not $70 million.

But maybe Henry figured he needed to offer a premium for
both papers – all of $14 million.

New York Times shareholders should demand Sulzberger’s
resignation before he inflicts even more damage to the firm.