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The newsonomics of The Boston Globe’s sale
Make more room for the great metro sell-off of 2013.
With the unsurprising news that The New York Times Company is trying, once again, to part with The Boston Globe, we see the start of a wave of likely change in metro newspaper ownership across the United States. When the Globe changes hands, and when Tribune puts its metros on the block, readers in Boston, Baltimore, Chicago, Los Angeles, Hartford, Orlando and South Florida will all see change. They’ll join readers in Tampa, Chicago, Orange County, San Diego, and Philadelphia, who have had new owners take over the local presses recently. Add in readers in Denver and Seattle, who lost one of their two papers completely. It’s astounding, really.
The Globe sale, first reported by Bloomberg’s Edmund Lee and Jeffrey McCracken and immediately confirmed by the Times, is the next logical step in The New York Times’ global aspirations. Over the years, the Times Co. has sold its regional newspaper group), its digital standalones (About.com and more), its classical music station, and even its share in the Red Sox. It’s even sold off most of its own flagship building.
All those sales have done two things. First, they improved the company’s balance sheet. The serial infusions mean the company now has more cash than debt for the first time in a while. Second, they allow management to focus exclusively on The New York Times. Jettisoning all the other businesses has meant that management could focus on its singular global brand. By 2012, the Times had grown to 80 percent of company revenues, with the Globe (and the New England Media Group, which it dominates) contributing the other 20 percent.
Selling the Globe is simply the last step in the process of the Times’ focus on its global opportunity. The arrival of new CEO Mark Thompson likely had little to do with the decision; though he recently visited the Globe to meet and greet, figure that his role in the Globe decision was one of ratification. His strategy, some details of which will be announced in coming weeks, is all about monetizing the Times’ global audience. Given that, and the fact that the Globe has been financially underperforming the Times, makes the decision to put the property on the market a fairly easy one.
The Times outgrew New York over the decades by starting home delivery across the country; now more than half of its papers are delivered outside New York metro. What was once a national opportunity is now a global one, and that’s led to the company’s all-in bet. It will live or die, as a company, as The New York Times.
All of that leaves The Boston Globe in a familiar pickle. It’s not global, even though some of its reporting has reached out globally. It’s a metro, and it has suffered along with the rest of its metro peers (“The newsonomics of Tribune’s metro agony”). That means likely ad losses of another 8 percent or so this year, even with a little digital ad growth. Unlike its big brother (“The newsonomics of the zero and The New York Times”), its all-access digital circulation growth hasn’t made up for those ad declines. For 2012, the Globe was down about 2 percent in circulation revenues and the same overall. The Globe, then, is neither a contributor to the Times’ global vision nor to its bottom line. NYT Co. doesn’t break out the profit of the Globe’s New England group, which includes the Worcester Telegram & Gazette. We can figure it may be about 15 percent of the Times’ 2012 overall operating income of $133 million. That would mean about $20 million a year.
Which takes us to the juicier questions: Who might want the Globe, and how much is it worth?
We can figure the Globe group will go for $100-$150 million, assuming its pension obligations aren’t part of the deal. That’s 4-5x those annual profits. The price also fits another sad metric: Metro newspaper properties are today worth about a tenth of what they were worth at their height. So, for the Globe, that’s $1.1 billion 20 years ago, and maybe $110 million today. Newsrooms may have suffered a 30-50 percent decline in numbers, but the newspapers themselves itself have lost 90 percent of market value.
At $110 million, who knows who might come out of the woodwork for a prize with the value, both symbolic and real, of The Boston Globe? Today, some 66,000 Americans can claim a net worth of least $20 million. Put a few together into a group, civic or investment or both, and you’ve got a bidder. Expect that there are numerous conversations now going among Boston’s moneyed elite. So far, no one’s talking publicly. On the list:
The Taylor family, which sold the paper to the Times Co., has been interested in the past, as recently as 2009, when the recession and those pesky pension obligations scuttled the company’s attempt to unload the Globe.
Aaron Kushner and his 2100 Trust Group, which last year bought the Orange County Register and now are merrily remaking and upgrading it. Kushner has already made a public play for the Tribune papers, possibly as a group, or at least the Register’s neighbor, the L.A. Times. Kushner was rebuffed by NYT Co. in an earlier auction. Now the Bostonian (with work experience at Boston Consulting Group and degrees that may be Globe-useful from Stanford in economics and organizational analysis) may be old enough, turning 40 soon, to merit consideration.
Probably, not on the list: former Globe fancier Jack Welch, who presumably has gone on to other things; Rupert Murdoch, who wants the L.A. Times much more; and Warren Buffett, who has eschewed metros in favor of smaller community newspapers. (Although do expect an announcement of another Berkshire Hathaway newspaper acquisition — as soon as Monday.)
The Times Co. has hired Evercore Partners to assist in the sale. Would-be buyers will find these strengths and weaknesses as they spin through the Globe’s numbers:
Innovative top leadership: Publisher Chris Mayer is a rarity. He’s a savvy modern publisher, digitally aware. His tech background distinguishes him in the publishing trade. For instance, the Globe’s embrace of news-anywhere publishing, enabled both by its installation of an Eidos publishing system and its early adoption of responsive design, has displayed industry leadership. At the same time, Mayer put together a deal to print the rival Boston Herald, making his “other” revenue a star performer in 2012. Such printing in-sourcing has been embraced by industry leaders as a strategy going forward. Most importantly, Mayer takes a wider view — both in business strategy and civic impact — on how the Globe can help create a next-wave digital Boston. Most publicly, we see the Globe’s unique application for ICANN’s new top-level designations, as it has applied for control of .boston. “Those that won in the first stage of the Internet,” he told me recently, speaking of Google, Facebook, and Apple, “have all organized the chaos.” Mayer’s view: A contemporary news company can be that organizer on a metro level, creating a digital order and feeding the journalistic mission at the same time.
All-access/digital circulation innovation: Mayer has recently been in media, as the debate about its digital circulation strategy grows. The Globe ended 2012 with 28,000 digital-only subscribers, and we’ve seen some parsing of that number. It may seem low, but I haven’t heard of many metros with more; most aren’t disclosing numbers at all. I like to use my 3 percent metric here. The New York Times, poster child of the paywall, gets about 2 percent of its U.S. unique visitors to pay for digital-only subs, or 640,000 of 32 million uniques. It’s on the road to 3 percent, or 900,000 to 1 million. The Globe’s arithmetic is a little tougher because it meets the public with two sites. BostonGlobe.com is the newspaper’s full content; Boston.com is the long-standing city brand. Combined, they do about 7 million unique visitors. Let’s take out half that number, given that Boston.com’s city site nature exceeds its “news audience.” Let’s take 3 percent of the resulting 3.5 million monthly unique visitors, and we get 105,000. That, I think, is a reasonable target for the Globe. At 28,000, it’s just under 1 percent — not bad, but not great — for its first year of paywall operation. Consider it a strong beginning, with lots of upside potential.
A robust newsroom of 365: While reduced from its height, the Globe’s staff hasn’t been hollowed out as many of its peers have been. Editor Brian McGrory just took on the top job, as longtime editor Marty Baron popped out of the Globe’s financial frying pan into the simmer pot of the Washington Post, replacing Marcus Brauchli as executive editor. The Globe has maintained its stake in “accountability journalism,” and McGrory pledges further investment in it — now, of course, depending on new owners. It is beginning to master multimedia journalism, with work such as its 68 Blocks series.
The revenue numbers: Despite its pricing up of home delivery subscriptions by as much as 60 percent and shiny new digital-only sales, the Globe didn’t manage to do what some of its peers are pulling: having circulation revenue increase match ad decrease. It’s troubling that the new circulation programs haven’t offset that 8 percent ad loss.
The untangling of the expenses: As the Times and the Globe have moved to make their enterprises as efficient as possible in the great newspaper downturn, they’ve integrated many “back-office” processes. Any new standalone buyer of the Globe will have to disentangle those Times production, finance, and HR efficiencies — and that means new expenses.
Betting on a future of growth, not loss: Even with all the efforts of the Globe, it ended last year down 2.5 percent in overall revenue. That weakness makes one wonder how stable its 2013-2016 revenues will be, even if the Globe’s buyers gets a good deal going in. What’s needed: deeper pockets, the kind Warren Buffett has and Aaron Kushner is digging into a bit in Santa Ana. The best Globe buyer owns a cash cushion, both for targeted investment and as an absorber against transformation shocks to come.
Make no mistake: 2013, as your friendly newspaper realtors would tell you, is a great time to sell. The last 18 months have seen the greatest volume of deals in the last five years. And, why not: There’s a mildly up economy, all-access is bolstering revenue optimism, and heck, the Oracle himself, Warren Buffett, is buying newspapers by the dozen. The only problem for sellers is that prices haven’t moved much up. The newspaper market looks a lot like the nation’s housing markets: There’s a better balance of buyers and sellers, yes, but prices haven’t picked up much from their bottoms.
Still, for the Times Company, it’s time to let its impressive little brother go.
That big brother/little brother relationships has, of course, rankled Globe people over the years, ever since the Times Company paid $1.1 billion for the Globe in 1993. Yet, if you had to have an at-times overbearing big brother, you’d want one that had similar values. (We’ll defer comparisons to the Chicago Tribune and Tribune Company/Los Angeles Times relationship, which often has seemed more like a journalistic Hatfields and McCoys dramedy.) New York, through richer and poorer, has largely supported the Globe’s journalistic mission.
At the Globe today, you have to wonder who the new parent will be. That, of course, is a question square in the court of New York.
How much will the Times Co. — which has been a good steward of impressive Boston journalism — use civic interest as a filter in its consideration of buyers? Dollars are dollars; it’s easy to pick the top bidder. It the payout were a little lower from a buyer showing the values and wherewithal to maintain the Globe’s public service mission, would the Times Co. opt for it? We can hope so. It would be its final act of Boston Globe stewardship, one the good citizens of one of America’s first cities will well appreciate.
New York Times Was Offered More Than $100 Million for Boston Globe
Por Keach Hagey [The Wall Street Journal, 23/2/13]
New York Times Co. received a formal bid valuing the Boston Globe at more than $100 million last month from a former Globe executive and a Boston private-equity firm, though about a third of the value would come from the buyers assuming some of the paper's pension liabilities, according to people familiar with the matter.
That bid remains on the table, but this week the Times announced it had hired Evercore Partners to shop the New England Media Group, whose main asset is the paper.
People close to the situation said that as a public company, the Times had to open up the sale process to prevent shareholder lawsuits.
The Times has been in quiet talks for the past year with the buyer group, which includes former Boston Globe President Rick Daniels and private-equity firm Boston Post Partners, represented by Managing Director Heberden Ryan, the people said. The talks began after the departure of former Times CEO Janet Robinson, they said.
Times Chief Financial Officer Jim Follo facilitated the talks throughout the year by helping the prospective buyers undertake due diligence.
In January, the group submitted a formal bid that included the assumption of between $25 million and $35 million of liabilities connected with the Globe's nonqualified pension plan, in which senior company executives participate.
The Times would have kept the larger pension obligations for the rest of the Globe employees on its books, the people said. That would suggest the cash payment the Times would receive could be only around $70 million.
A spokeswoman for the Times declined to comment. The Times acquired the Globe for $1.1 billion in 1993 but took an $814 million write-down on the paper and other New England Media Group assets in 2006.
Other potential suitors for the Globe include Jack Griffin, the former CEO of Time Inc. and current president of Empirical Media, who was involved in an earlier, unsuccessful bid for the paper with Aaron Kushner, according to people familiar with the matter. Mr. Kushner went on to buy the Orange County Register instead and is no longer involved with Mr. Griffin, according to the people. Mr. Griffin hails from a Boston newspaper family and has an office of his company in the city.
Mr. Kushner, who has been vocal about his interest in Tribune Co.'s newspapers expected to come on the market soon, is also a prospective suitor for the Globe this time around, said people familiar with the matter.
Several people close to the Times Co. and Globe said the Times was hoping to draw a bid out of News Corp ., owner of The Wall Street Journal, which had been seen as a possible buyer of newspapers after it splits its print-media assets from its entertainment businesses this summer. But News Corp.'s ownership of a television station in Boston would rule out purchase of the Globe, given regulatory rules that prohibit companies owning a newspaper and a TV station in the same market, said a person familiar with the situation. News Corp. Chairman Rupert Murdoch will continue to control both the print company and the entertainment company after the split.
How The Boston Globe, up for sale, is navigating its free/paid strategy
Por Justin Ellis [Nieman Journalism Lab, 22/2/13]
BostonGlobe.com is increasing subscribers, and Boston.com is finding new ways to make money. But as buyers look at New England institution, how is it juggling its two-brand strategy?
Sitting in his office last week, Brian McGrory, the new editor of The Boston Globe, described the relationship between the two websites — similarly named, often confused, one free, one paid — that his newspaper offers.
“I’ve always thought that the success of BostonGlobe.com was inhibited in a couple of ways by Boston.com,” McGrory said. “One, is this sense that people don’t need to pay for our journalism because they were getting enough of it for free on Boston.com. Two, we haven’t used Boston.com to its fullest potential to let people know what they are missing when they don’t pay.”
That was Thursday. Six days later, the Globe’s parent company, The New York Times Co., announced it was putting the newspaper, both websites, and the rest of the New England Media Group up for sale. Following years of rumor and speculation, the Globe and its New England siblings will be the final parts of the Times Company’s non-Times assets to be sold off. In a statement, Times CEO Mark Thompson said:
We are very proud of our association with the Globe and the Telegram & Gazette, but given the differences between these businesses and The New York Times, we believe that a sale is in the best long-term interests of these properties and the employees who work for them as well as in the best interests of our shareholders.
The Globe that is for sale today is a different paper than the one that was on the block in 2009. Former Globe editor Martin Baron said the paper has continued its deep history of investigative journalism and is making the right bets in multimedia and innovation. “It’s a great group of people and I’m sorry they have to go through this disruption and tumult once again,” said Baron, now executive editor of The Washington Post. “They went through it once already.”
The Globe has produced Emmy-winning online video, was an early adopter of responsive design, and is seeing growth in its digital subscriptions. “It’s a group of superior journalists, they work very hard and they’re totally dedicated,” he said. “They’ve made themselves vital to the conversation in the greater Boston area.”
Perhaps the biggest change to come since 2009 — and perhaps the biggest new factor for potential buyers to consider — is its digital circulation strategy. It’s been more than a year since the paper digitally split itself in two, with the popular and longstanding Boston.com remaining free and a new BostonGlobe.com launching as a paid destination that echoes the print product in form and content.
The digital subscription piece of that model has been a slow climb for the Globe — each quarter has brought additional growth, but totaling just 28,000 paid digital subscribers at year’s end. Whether that’s a good or bad number is up for debate, but it’s hasn’t been enough to generate the kind of new circulation revenue that can make up for the ongoing print advertising decline. At the New England Media Group, of which the Globe is by far the biggest part, advertising dollars have continued to drop, to the point that, in 2012, ad revenue made up only 47 percent of total revenue.
The future of the Globe was already changing before the announcement of the sale, as the company juggled innovation in print and online to find new revenue. Boston.com has become a launch pad for new products, including the creation of an online radio station and selling event tickets. More recently, they’ve begun tinkering with how much Globe content to give away in order to entice new digital subscribers.
In a series of interviews from the last several months, a picture emerges of a newspaper with a strong tradition and local identity that is trying hard to find its footing in the new business of journalism. Now there’s more urgency to that mission. When I spoke with McGrory last week, he argued in very plain terms the past and future of the paper and its city are tied together.
“Think of Boston without the Globe,” he began, “Boston without the Globe is a place where Whitey Bulger is still dealing drugs and committing murders in Southie. It’s a place where pedophiliac priests are still getting transferred from one town, one parish to another. It’s a place where the probation department is still being run like a criminal enterprise. It’s a place where the Democratic speaker of the house is still trading influence. Time and again, the Globe has broke the biggest stories, every day, that are vital to this community.”
Two sites, two personalities
A big key to figuring out the Globe’s future will be to determine the right relationship between Boston.com and BostonGlobe.com. It’ll be from those sites, along with the print paper, that the Globe will expand its brand and its audience, said publisher Chris Mayer. “Diversifying the revenue streams is just creating more of an ability to continue to be steadfast in the way in which we want to support the mission and deliver the core value of The Boston Globe,” said Mayer. “Expanding the number of products is really a part of that.”
The state of play between the two sites is shifting. Boston.com is set to be redesigned, and it’s already seen a broad reduction in the amount of Globe content it carries. “I’ll be blunt: Right now, it’s a bit of a muddle between the two sites. There’s not enough of a distinction between what is BostonGlobe.com and what is Boston.com,” McGrory said.
McGrory’s only been on the job since December, when Baron departed for the Post. He said untying Boston.com from BostonGlobe.com and creating a clearer identity for the sites will help make a stronger case for paid content. “There are lessons to be learned there. Perhaps we have been a little bit too cautious in terms of making sure we don’t harm Boston.com. Perhaps by being cautious, we haven’t fulfilled the great potential of both websites,” McGrory said.
Boston.com — which draws around 6 million unique visitors per month, quite high for a regional news site — was always going to play a prominent role in supporting and marketing the new site. With that much traffic pouring through Boston.com, peeling off any of those visits would be beneficial to BostonGlobe.com. At launch, the newsroom allowed five free stories from BostonGlobe.com to go to Boston.com, along with any breaking news and sports coverage. Now that number has been reduced to four, and Globe sports columnists have been cut back. They’ve also tinkered with the free offerings from social media, dropping the number of free links to BostonGlobe.com to two per month, down from five. It’s a move reminiscent of when The New York Times reduced the free stories allowed through its metered paywall from 20 to 10.
McGrory said drawing a line between the two sites means changing the content. The new Boston.com will still have a share of community voices, entertainment, and social media, but the news content will be less Globe-sourced and shorter, with stories rounding out around 100 to 150 words. “There’s a perception that Boston.com is Globe Lite, and a fear on our part that people are saying, ‘Why do we have to subscribe to the Globe if we get Boston.com for free?’” he said. The new framing of the sites would have Boston.com being the “front page of Boston,” McGrory said, while BostonGlobe.com would be a reflection of the paper’s reporting. (That’s actually quite similar to the old framing, but the lines are being drawn more firmly now.)
BostonGlobe.com’s responsive design was ahead of the game, a move that is becoming more and more popular with news publishers. But inside the Globe, the move to two websites meant adapting their workflow for stories, graphics, and multimedia. Jason Tuohey, editor of BostonGlobe.com, said that’s meant taking a less print-centric approach for graphics team: “They’re really pushing the boundaries with multimedia, I think, because they’re creating these interactive graphics from mobile up,” he said. One example would be the recent 68 Blocks series, where a team of Globe reporters lived in the Bowdoin-Geneva part of Dorchester to tell the story of the neighborhood. The paper amplified that reporting through data visualizations, video, and other multimedia only available on BostonGlobe.com. The series is now available as an ebook, free to subscribers or $2.99 in various formats.
Growing the local audience
“The things that we can deliver that differentiates the reading experience is going to be either what’s happening geographically, or what is happening in this geography that is relevant above and beyond,” Mayer said. The Globe divided the audience for that into two buckets: people willing to pay for a newspaper and those who want news, information, and entertainment mixed with a little social engagement. Mayer said he’s happy with the traffic to both sites, but sees it as the foundation to continued growth. For Boston.com, that means finding new ways to engage with people, on mobile devices, new apps, and social media, he said. For BostonGlobe.com, the goal is exposing more people to the local coverage and unique reading experience of the site. “The product’s a year old,” he said. “What works — in the first year, it’s a way to build awareness and to get people to sample and then subscribe — is going to evolve over time.”
“They’re creating something that works on any device, which is not how a lot of other news outlets operate.”
Another area Mayer wants improvement on BostonGlobe.com is advertising. Part of the sales pitch to readers is its clean, distraction-free reading experience. By limiting the number of ad positions on section fronts and article pages, the Globe hoped to get premium rates for its online ads. Mayer said many advertisers are now looking for more granular audience data as well as tools to evaluate the effectiveness of ads. The fenced-in nature of BostonGlobe.com does provide for some data, as users are required to register to use the site.
But Mayer said they need to improve their ability for targeted advertising and offer new advertising experiences in different products. Jeff Moriarty, vice president for digital products at the Globe and general manager of Boston.com, said the company is developing responsive ads for BostonGlobe.com that would adapt to screen size just like any other piece of content on the site.
As happy as they are with the responsive design, plans are in the works to launch a native BostonGlobe.com news app for smartphones in 2013. Moriarty said they wanted to create native apps that feel built for mobile from a design and utility standpoint, not just a desktop site stuffed into a smaller package. That could mean shorter stories and customization not available in the responsive site, but also using device-based features like geofencing and background downloading of stories, Moriarty said. “It’s really about not dumping the newspaper into an app, which a lot of people do, but rethinking it,” he said. “The other reason for that obviously is to get access to the frictionless commerce of the [app] store.”
Managing the Boston.com brand
For its part in the two-site plan, Boston.com was supposed to play the role of infotainment provider. It’s not exactly a new job for the site, which was one of the early local newspaper portals when it was created 17 years ago. In the new plan, news updates would be short, slide shows, listings, and entertainment would be front and center.
Boston.com has also taken on the role of experimental money maker. Now visitors to Boston.com can buy tickets to Patriots games, watch live video shows, listen to streaming radio, or find town- or neighborhood-specific news. Another plan in the works is for the site to sell .boston domain names to area businesses. And, thanks to a recent grant from the Knight Foundation, they’re partnering with MIT’s Center for Civic Media to build tools to help connect with readers and report the news.
By experimenting in the open, Boston.com has become even more important to the Globe’s future by becoming a laboratory for new ideas to reach audiences, but also a pipeline for new products. “We’re going to try a lot of new things and see what sticks,” Moriarty said.
They’re also trying new forms of advertising, like the recently launched Insights, which allows local businesses to create blog-like posts that are published on the site. Part Yellow Pages, part BuzzFeed branded content (though the posts don’t appear in-stream with other stories), Insights is another way Boston.com is trying move past traditional forms of advertising to pay the bills.
“As we look at Boston.com moving forward, the advertising opportunities are going to change,” Moriarty said. “The traditional banner positions — though they’re valuable and they work — we need to go above and beyond to really set ourselves apart.”
Even as the sites become more distinct, it’s clear BostonGlobe.com will still rely on Boston.com as a source of both traffic and new subscribers. BostonGlobe.com gets a prominent slot on the Boston.com homepage to promote subscriber-only content.
“Right from the beginning, it struck me as an unusual and creative approach, but I was skeptical as to how well it would work,” said Northeastern University journalism professor Dan Kennedy. “They have had some success, but the skepticism hasn’t entirely vanished.” Boston.com’s news offerings, while lacking the range or depth of the Globe’s, might be good enough for many. If you can get your fill of breaking headlines and Red Sox news on Boston.com, why would you pay for BostonGlobe.com? “Except for the people who want every last bit of The Boston Globe, you’ve got a very robust, free website to this day,” Kennedy said. “Which may explain why the success of the paid site has been relatively modest.”
Kennedy said pulling more news content away from Boston.com could, rather than strengthening BostonGlobe.com, instead send readers to local competitors like NPR affiliate WBUR or The Boston Herald. Overall, Kennedy said it may be too early to judge whether the Globe’s strategy is working.
But the state of the Globe’s double down will likely be a big consideration for any potential owner. Particularly, a new owner will have to determine how much time, and capital, they are willing to invest to see if the two-site approach can succeed long term. McGrory says he believes the paper’s digital strategy is headed in the right direction — even if the mechanics of the sites need tweaking. “I’ve always had strong opinions over the years about Boston.com and, in the last year and a half, the byplay between BostonGlobe.com and Boston.com. Now I’m in a position to exercise some influence on that and its been quite gratifying,” he said. The new Globe, he said, needs to be able to reach people no matter where they are, even if they “are reading us as they stand in line at a Dunkin Donuts.”
“None of this works — none of what we’re talking about works — if we don’t continue here to produce really high-quality journalism that people want to read. We can talk about digital ’til the cows go home. But unless we’re producing material that people feel they need to read, want to read, then we’re screwed on much of the rest of it.”