Analysis: No 'Billionaire In The World' Wants To Sustain Globe Losses

The Boston Globe is for sale. The newspaper itself reported Wednesday morning that its owner, The New York Times Co., has hired the investment bank Goldman Sachs to solicit bids from potential buyers. There are said to be at least two interested buyers, but they have not been named.

To find out who might be interested in buying the paper and what they stand to gain or lose with the purchase, we turned to media analyst Lauren Rich Fine, director of research at ContentNext Media in New York and a professor of media management at Kent State University.

Bob Oakes: Let's look at this a couple of different ways. In the current economic climate inside the Boston Globe, ad revenues and newspaper circulation are declining, but viewership at the Web site, Boston.com, is solid. Is the Globe an attractive asset to own for some buyer out there?

Lauren Rich Fine: No it is not. Because the problems that they're suffering right now pre-date the current economic downturn. The newspaper industry has been going through some dramatic changes that I could boil down to really one challenge, which is the migration of their very profitable classified advertising to the Internet, where they both lost market share and lost some pricing, which has really squeezed their margins.

That happened much earlier in the Boston market, in part because of how young the market is, how wired the market is. So the ad declines started there much earlier than the current economic downturn, and are unlikely to improve anytime soon.

The New York Times Co. is trying to sell the Boston Globe at a tough time, given the conditions inside the Globe, labor-wise. The largest union, the Boston Newspaper Guild, rejected contract concessions, hoping instead to go back to the bargaining table — fighting the move by the Times and the Globe to cut Guild wages by 23 percent. How might all that affect offers?

Well, first of all, I had yet to hear that they officially had decided to sell the paper, but it wouldn't be an unwise move. Although, I think what they had really hoped would happen is they would get the concessions and then be able to go out to buyers and tell them that at least the unions are flexible.

At this point, anybody who was buying the paper in hopes of getting an economic return would be unlikely to show up at the table. There are certainly buyers who would make a purchase — you know, someone like a Jack Welch who had been rumored in the past to show some interest, although of late has not been showing any interest. He might do it just to go again and prove he's really a good manager and he can figure out the solution to the industry.

But typically in a case like this, it would be somebody who's interested either in the real estate, interested in owning it philanthropically because they care about the mission of the Globe and want to be associated with that. But, this paper will lose money for the foreseeable future and that's not typically attractive to buyers.

I would note that, based on some work I've done, I believe The New York Times could instead force the Globe into bankrupcty without hurting their own paper and organization, and have some different ways of approaching the unions in that sense.

Why would they force the Globe into bankruptcy?

It would allow them to basically take over the union contracts and renegotiate completely.

We're speculating on all of this, but how likely do you think bankrupcty is?

Well, the rate that they're going, without a likely buyer — The New York Times parent company isn't in the most solid financial position itself — it really can't afford these losses. This isn't a question of trying to get to an attractive margin, this is an organization that's losing money. And so they need to do something dramatic.

The unions probably were correct in calling their bluff that they don't really want to close the paper, but where they might have misfired here is not realizing just how dire the situation is.

The Globe lost $50 million last year, and reports that it's on track to lose money again this year. Given that, could a potential buyer be expected to push further cuts in order to return the Globe to profitability?

Absolutely. There isn't anybody who's sane that would endure these losses for the foreseeable future. They would absolutely go in there and probably the structure of any deal would probably be along the lines of trying to buy the assets so they didn't take on the union contracts. There are different ways to get around that, but this is unsustainable. There isn't a billionaire in the world who would want to sustain losses like this.

The Times paid $1.1 billion for the Globe when it purchased it in 1993, the highest price ever paid for a single newspaper. What do you think it might be worth now?

Well, at this point it's probably not worth a lot, given that it's generating all of these losses. There's no way to put a dollar figure on it. If it's even in the $100- to $200-million range, I'd be surprised. And even then, that would be an aggressive price given the losses that the paper is incurring.