How Sick is The New York Times?

I really hesitate to bring this up, because it seems to be firmly in the realm of the unthinkable. But could we be looking at the near-term demise of The New York Times, at least as we know it?

This sort of speculation cropped up earlier this year, in a provocative article in the Atlantic, where Michael Hirschorn crunched the numbers and concluded that Times could be bankrupt by May. That seemed ridiculous, and his theory was debunked by many other analysts and strongly denied by the Times Co. itself.

But what if Hirschorn actually was on to something?

In the past few months, the Times Co. has taken several steps to shore up its financial position, including selling part of its New York headquarters building, taking in a $250 million investment from Mexican billionaire Carlos Slim, eliminating its dividend, putting its small stake in the Boston Red Sox up for sale (it would also like to sell the Boston Globe, I hear, but can't find any takers, even at a discount) and, today, laying off 100 workers and announcing "temporary" wage cuts for managers—and asking its unions to consider similar cuts.

Those are all prudent moves to conserve cash and raise funds. But they also seem to indicate a certain sense of financial panic in the Times' executive suite. In fact, some of these moves look a little desperate. Selling real estate at the bottom of the market? Not always a good idea. Temporary pay cuts? Wanna bet they're temporary? Eliminating the dividend? That might make some Sulzberger family members think twice about their longtime aversion to selling the company. Borrowing $250 million—at a whopping 14 percent interest? Hell, Visa offers better rates. Tony Soprano, too. 

At the same time, the Times' core businesses continue to struggle. The job and salary cuts today indicate the company is still trying to get its costs down. Advertising sales, in the current recession, are lousy. The company's regional papers, generally clustered in Florida and California, are in Ground Zero of the mortgage meltdown. About.com, once seen as a savvy diversification move, has the same ad revenue problems as all dot.coms, though it stands a better chance of improvement over time than the traditional publishing business. In short, cash flow—which the company needs to make its debt payments—is at a trickle, and will be for a while. Hence some of the more drastic moves we've seen.

I'm certainly not saying the Times Co. is about to go bankrupt. Certainly not in May—the building deal and the Slim investment specifically averted the financial problems Hirschorn predicted in the Atlantic, though the Slim deal set up nasty longer-term obligations that will eventually have to be dealt with. But you have to wonder what the outlook is for the Times over the next year or two, as these problems continue, more debts come due, and it runs out of things to cut or sell.

As the nation's greatest journalistic institution, the Times seems like it should be impervious to the newspaper industry's problems. But it's anything but, as we're seeing. To survive, it may require an endgame that would have been all but unthinkable just a couple of years ago: a sale to somebody with deep pockets like Rupert Murdoch, or the creation of some sort of tax-exempt, non-profit public trust—and that's problematic all by itself—to keep the paper going. Maybe somebody like Warren Buffett or Bill Gates would step in to buy the newspaper and preserve its legacy and standards, even if they have to run it at a loss. 

Who knows? But astonishingly, it's starting to look like something big has got to happen to save The New York Times. It's showing way too many financial distress signals for comfort.

PS: Vanity Fair has a long takeout on the state of the Times, and doesn't like what it finds.

Comments

[Marc]

*cough*Googlezon*cough*

[Mark Potts]

The infamous "Googlezon" prediction was a fantasy, to say the least. And Google has said repeatedly it has no interest in buying the Times. Not gonna happen.

[novax]

If you want to kill the New York Times as a journalistic institution, having Amazon or Google buy them is a great way to go about doing it

[Terro]

The nation's "greatest journalistic institution"? You have got to be kidding...unless "journalistic" means something like journalism, which is what the recent NY Times has indulged in.

Let it die.