In an article published on July 24th on New York magazine’s website, writer Seth Mnookin says that The New York Times is no longer on the verge of extinction, thanks to recent efforts of longtime publisher and Chairman Arthur Ochs “Pinch” Sulzberger, Jr., claiming that the “digital subscription plan—the famous ‘paywall’—was working better than anyone had dared to hope.”
Mnookin focused on the latest quarterly earnings report from the paper to back up his assertion that the worst is over for the Times, despite what critics thought would sink the paper. Unfortunately for Sulzberger, the markets are not nearly as convinced as New York magazine is of the success of the Times’ new business model. Although the Times’ parent company, The New York Times Company, has seen the value of its stock rise slightly in the past few days as its losses were lower than Wall Street projected, the company’s stock has still lost 13% of its value over the past six months. For comparison, the S&P 500 index has gained 4% over that interval.
According to the website, News&Tech, The New York Times Co. said it lost more than $119 million in the second quarter of 2011, largely because of a write-down of $161 million, reflecting the declining value of its Regional Media Group, which runs its regional papers. It said that excluding the write-down, the Times posted a profit of $82.9 million on revenues of $576 million.
Mnookin also mentioned the early repayment of a $250 million loan that the Times received from Mexican billionaire Carlos Slim Helu in 2009 as another sign of improving health. But as Times CFO Jim Folio noted on a recent earnings conference call, this was largely due to the fact that the company raised an additional $225 million last year through the sale of bonds, combined with the net proceeds of $117 million from the recent sale of a portion of their ownership in the Fenway Sports Group, which owns the Boston Red Sox. The repayment of the loan will cost the company $279 million in total and will reduce the cash on hand to approximately $240 million, or about $160 million less than they had at the end of last year.
While prepaying the loan will save the Times a significant amount of money over the next three years it was done at the risk of lowering the paper’s cash cushion at a time when advertising revenue is still declining. Add to that the unfunded pension liability of $270 million and you have a company that is still struggling.
If Mnookin is correct that Sulzberger has saved the paper from extinction and put it back on the right path, then why didn’t Sulzberger lobby for the return of a dividend since the company reported profits of $234 million last year? Even a small payout by the company would back up their public pronouncements of the company’s return to health and instill confidence on Wall Street that management actually has a strategy in place to keep the newspaper operating for the foreseeable future.
The one bright spot for the Times appears to be their digital subscription model. According to the Times they now have 224,000 digital subscribers plus another 57,000 on the Kindle and Nook (their stated goal was 300,000 subscribers in the first year). While that seems like a success since the paper started charging for online access only in March, it isn’t clear how much revenue these basic digital subscribers are generating, thanks to a dizzying array of subscription choices offered by the Times. And since overall revenue numbers have barely budged it is apparent that the revenues are negligible at this time.
Meanwhile, Sulzberger managed to bungle another paper of record, after overseeing the purchase of The Boston Globe in 1993 for $1.1 billion. The Globe is now worth a fraction of that and has seen losses in recent years of as much as $85 million in a single year. To make matters worse, the company cannot even decide if the Globe is for sale.
Mnookin also touched on troubles News Corporation is experiencing, perhaps to favorably contrast the Times’ state of affairs. Mnookin even delights in arguing that the Times was “critical” in breaking open the scandal. But although News Corp has seen its stock price fall since the phone hacking scandal gained traction this month, their Wall Street Journal is the highest-circulation daily newspaper in the United States. In the latest numbers released by the Audit Bureau of Circulations in May, the Journal more than doubled the Times’ average daily circulation.
New York magazine might prefer the Ochs-Sulzberger monarchy and might think The Wall Street Journal, no longer owned by the Bancroft family, “has gone to seed,” but consumers do not think so. It is not likely that the UK-based phone hacking scandal will cause the Journal’s circulation to fall significantly, and News Corp’s share price has already stabilized after losing value during the height of the scandal.