Rupert Murdoch, Mort Zuckerman, the Dolans. All very smart, successful and savvy media owners.
Yet, despite the fact that newspapers and magazines are going down the toilet, they are about to plunk down $580 to $650M for Newsday.
Buying Newsday would have given the News Corporation control of a third major paper in the New York region. Consolidating operations and offering combined advertising buys could have made The Post profitable for the first time in generations and made it a much stronger competitor to its archrival, The Daily News.
But a News Corporation takeover of Newsday could have run afoul of federal regulators, because in addition to The Post, the News Corporation owns two television stations in the New York Area, WNYW and WWOR. The company is seeking waivers from rules that generally prohibit owning a newspaper and a television station in the same market, and owning Newsday might have made it harder for the company to make its case.
Mr. Zuckerman also saw opportunities to strengthen his tabloid, whose executives say makes a modest profit.
Cablevision, controlled by the Dolan family, owns no newspapers and does not have the same obvious opportunities to save money by merging operations. Industry executives said that Cablevision would probably have to invest heavily in upgrading Newsday’s printing plant.
The company is a major cable television provider, the dominant one on Long Island. It also supplies Internet and telephone services, and it owns Madison Square Garden, Radio City Music Hall, the New York Knicks and the New York Rangers.
Analysts and people close to the Dolans say that with Newsday, the company could offer combined advertising sales and subscriptions, and could use the print and digital operations to promote each other. But throughout the talks, the Dolans and Cablevision have maintained silence about their bid or the rationale for it.
Now call me new fashioned, but I am not sure I’d be invested $600M on a falling sword.
According to Wikipedia, as of fall 2007, Newsday’s weekday circulation of 387,000 made it 10th-highest in the United States, and the highest for a suburban newspaper.
According to Business Week, this picture from Tribune Co., parent of Newsday suggests revenue is falling.
In fact, the same Business Week piece pegs its 2007 net income at $90M. Is 7-8x times P/E worth it for a newspaper?
I guess Cablevision is arguing that it is, because it’s an entry into a new media and provides for synergies with its cable properties; for Messers Zuckerman and Murdoch, it would be as well, since it gives them a greater stranglehold on the NY market. However, with Mr. Murdoch seemingly capping his bid at $580M and not matching Cablevision’s $650M, the News Corp. Chairman is effectively saying that he’s willing to pay as much as he did for IGN but not what he paid for MySpace parent Intermix. Yes, that is comparing apples with oranges… and I guess so is comparing Cablevision’s offer with that of Mr. Zuckerman’s or News Corp.’s:
Competitors insisted that Cablevision’s offer was not, as it appeared, truly worth $70 million more than the others — primarily because Cablevision was also bidding for the real estate occupied by Newsday, while Mr. Murdoch and Mr. Zuckerman had agreed to let Tribune continue to own it. But they conceded that even with that difference, Cablevision’s offer was the highest, by perhaps $40 million.
I am all for diversification and giving advertisers choice, but are the Dolans spending their money wisely? I don’t think so. I’d make sure I resign Jaromir Jagr and Sean Avery first with the NY Rangers, whom they also own.
In fact, I wonder why media companies don’t borrow a page from Eastman Kodak. Back in the 1990s, I believe Kodak ceased investing in new analog initiatives and began to aggressively focus on digital opportunities. I don’t see many people buying or using analog equipment or printing pictures… but even then, look at EK’s stock price and tell me if media should continue to invest in print?
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