by Jonathan Berr | August 27, 2012 11:29 am
Time Warner (NYSE:TWX) CEO Jeffrey Bewkes probably would buy The New York Times Co. (NYSE:NYT) today to bolster the company’s flagging CNN network — if the iconic publisher were for sale. And even though it’s not, the case for CNN and the New York Times to join forces remains compelling.
As media analyst Ken Doctor argues in the Newsonomics blog, partnering the two news organizations simply makes sense as media continues to converge in today’s world. Video-based CNN is already producing more text content, while print-based New York Times is producing more video reports.
Joining the two would also help reduce costs — and the timing of such a partnership is near perfect.
For one thing, Mark Thompson, the incoming CEO of The New York Times Co., knows TV because he spent more than three decades at the BBC. And CNN is searching for a leader to replace Jim Walton, who announced his resignation as president of CNN Worldwide in July as the all-news network struggles to rebound from record-low ratings.
The Walton departure is strange, though, because it is effective at the end of the year. If CNN wants to change, why is its sticking with a leader under whose watch the network has shown such a significant decline in viewership?
It’s too bad that a new arrangement can’t be implemented in time for the political conventions, and the presidential election, which are expensive for the media to cover.
And still, whether Wall Street would be excited by such a partnership is another story — and the answer to such a question remains unclear.
To start, shares of NYT have declined nearly 60% over the past 5 years, indicating how little Wall Street values quality journalism. New York-based Time Warner reports CNN’s results as part of its Networks Business — its largest. SNL Kagan estimates that CNN and sister network HLN generated about $600 million in operating profit in 2011 on revenue of about $1.29 billion. And analysts expect the parent company of Warner Bros. to generate more than $29 billion in revenue this year.
The good news is that, by joining forces, CNN and the New York Times would be able to offer advertisers access to a huge well-heeled audience. And I don’t mean the huge, youthful American Idol audience. Their offering would instead be attractive to investment firms and luxury brands that are of interest to older people with money — and advertisers might be willing to pay premium rates to make sure that their marketing messages reach the intended audience.
Still, combining CNN and the New York Times is not a cure-all. The all-news channel has lost ground to MSNBC and News Corp‘s (NASDAQ:NWSA) Fox because it’s perceived as vanilla compared with its more opinionated rivals.
And declines in advertising revenue are hurting The New York Times Co. even as it posts gains in circulation revenue thanks to the growth of tablet subscriptions, because many people who read the Times on their iPads have paid next to nothing — 99 cents a week — for the privilege.
Plus, there are many issues that would have to be worked out. First, newsroom cultures are pretty idiosyncratic and managing journalists at the best of times is like herding cats. Any organizational chart of a combined CNN-New York Times would resemble a Rorschach test because it would be so convoluted — which may explain why past efforts to join CNN and ABC and CBS News faltered.
Robert Christie, a Times spokesman, declined to comment on Doctor’s analysis. CNN couldn’t immediately be reached.
As of this writing, Jonathan Berr did not own a position in any of the aforementioned securities. Follow him on Twitter@jdberr
Source URL: http://investorplace.com/2012/08/the-new-york-times-co-and-cnn-a-match-made-in-media-heaven/
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