Is Yahoo (NASDAQ:YHOO) looking for a buyout or merger with the New York Times Company (NYSE:NYT)?
We’ve all known about (or been part of) a rumor that has caused serious damage. So I’ll put the disclaimer up front that this New York Times-Yahoo deal is just wild conjecture as of this moment. I stumbled across it via a Techland blog post that builds on a microstory on Business Insider‘s website referencing a tweet from Benzinga.com. Quite a game of telephone and quite a lack of substance.
But heck, what’s a little rampant speculation among friends? Let’s have some fun and take a look at what would happen with such an alliance between Yahoo and the New York Times Company.
For starters, Yahoo would be making a bargain buy. NYT stock hit its lowest mark since mid-2009 in August and remains at a loss of about -16% year-to-date. Of course, the reason for the bargain is some rather ugly numbers. Stagnant earnings (a hallmark of print media companies) have persisted, with the New York Times Company posting a quarterly loss in seven out of the past 12 periods. Also, annual revenue has slipped each consecutive year since 2007 and is on par for another losing year in fiscal 2011. Ouch.
However, there is a ray of hope. NYT earnings actually came in above estimates in July thanks to strong digital ad sales and a new paid subscription model for its website. Clearly the digital push of the flagship New York Times property is propelling any positive developments at the company of the same name.
Of course, revenue from print advertising and circulation at the Times’ newspapers together account for nearly 80% of company revenue, so there’s only so much that online success can do as long as it remains dependent on hard copies of newspapers.
That said, don’t think newsprint is all NYT stock has to offer. The parent company also is the owner of the highly popular About Group of online properties that include About.com, ConsumerSearch.com, Caloriecount.com and others. According to company figures, About.com reaches 40 million unique visitors each month in the U.S., with over three-quarters of them coming from search engines. That’s no mean feat.
This is where the alliance between NYT and Yahoo comes in. If Yahoo can help the New York Times Company sever ties with some of its lagging print media legacy business and if the NYT can help YHOO prop up its ad sales and online revenue, it will be a win-win.
Yahoo CEO Carol Bartz blamed “comprehensive changes” in ad sales for a steep decline in display advertising revenue in the July earnings call. And, as Techland points out, Bartz promised she and Yahoo would “position ourselves for more rapid display growth in the future.”
Grabbing the talent from the New York Times Company that has been having success with ad sales would be one way to “position” itself. Adding a footprint of 40 million-plus users to across-the-company ad contracts would be another.
And lets not underestimate Yahoo’s need for quality content to run its family of sites, too. Portal pages like Yahoo.com remain (sadly enough) one of the biggest places people get their news. Imagine if the vision of DealBook was executed on a grand scale in concert with Yahoo Finance, or if the pithy columns from the
Times op-ed pages and engaging features from its style section and weekend magazine were blown out on the web? That could have a significant impact on sitewide traffic and page views.
As for the NYT, it needs a heck of a lot of help to move beyond legacy print businesses and adapt to the future. I used to work for the New York Times Company, so I know firsthand the difficult online push that has been under way the past few years. Many of the old guard at my newspaper were shocked when they heard quotes from NYT chairman Arthur Sulzberger Jr. like, “We will stop printing The New York Times sometime in the future.” But anyone who understands the numbers behind print publishing and is watching the evolving landscape of digital media should understand Sulzberger wasn’t being spiteful or glib — he was just being brutally honest with statements like this.
If the New York Times Company is indeed going to evolve beyond selling hard copies of newspapers, a pact with Yahoo may be just what it needs to shed the architecture of a print media company and structure itself as an online entity. And far from being the White Knight here, Yahoo could shore up a hemorrhaging ad sales department and dramatically improve the quality of its online content with an influx of New York Times talent.
Or course, all that is easier said than done — the 160-year-old newspaper is run with a dual-class stock structure that leaves almost monarchical control in the hands of the Sulzberger family, which sees the operations as much more than just a business but a family heirloom. Then again, when Rupert Murdoch came calling with $5 billion for The Wall Street Journal — more than twice the market value of the company — it was enough to sway the Bancroft family. Though it’s worth noting they recently have expressed regrets for caving in to News Corp. (NASDAQ:NWS).
And even if the Sulzbergers go along, all this presumes the Yahoo-New York Times rumor has any substance behind it to begin with and is not just a sneaky tactic to juice NYT stock on low volume before a holiday weekend.
Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.
