Monday, December 29

The Baseball Bubble -- NYT shops its Stake in Sox

As promised, ITM will be providing regular analysis of our national pastime's place in our national recession. First up---our very own Sox. Reports from multiple sources have indicated in recent days that the New York Times is actively shopping its interest in New England Sports Ventures (NESV)---its interest, that is, in the Sox, Fenway, and NESN.

While some have trumpeted this as another indicator of the Sox vulnerability in the face of the Yankees financial juggernaut, the truth is just the opposite. In terms of profit margins, NESV has been one of the best performing assets in the NYT's portfolio. Unfortunately, the paper is cash-starved. They have slashed jobs, begged for staff buyouts, and recently even floated the idea of borrowing against their brand-new Renzo Piano designed headquarters across from Port Authority.

In 2002, the NYT paid about $75m for its 1/6th ownership stake in NESV. They got carried along the tidal wave that later took the name of Red Sox Nation. They saw two World Series and profits from endless, endless marketing opportunities opened up by the creative group at the helm. They achieved synergies (damnit, I apologize for that word, but what can you do?) for their big Boston-based investment---the Globe. Unlike 2002, the Sox are now a financial juggernaut, too. The NYT is reportedly asking $300m for its stake, but would take substantially less. Either way, the NYT will get what it desperately needs---cash.

The real takeaway from all this is not so much about baseball but about the struggles of old media. The NYT says this move is about slimming down and getting back to its core business---newspapers. To some extent, this is true---nytimes.com has finally started to establish itself as an online power.

But this move also indicates that the NYT has not succeeded in its first wave of new media expansion. NESN was the crown jewel in the NESV stake. Like its competitor News Corp, the NYT---fearing the death of print and following an FCC rule that allowed greater media conglomeration---wanted to expand into cable in order to generate video content, both for wire-transfer and online delivery. They bought up some disastrous assets from Discovery Channel and asked after many other high profile video operations. This strategy has not worked. Outside of NESN, the NYT has made very little headway into cable outlets or online video. So the NYT is cutting its losses and hoping that it can make a go of straight-newspapers online. What this likely means is less regional news and fewer media jobs. That's because the real success model for online news is the Drudge Report, the Huffington Post, and Deadspin---not content producers, in large part, but content distributors with low overhead.

We love the Sox and NESN because they're content producers---content meaning a 12 pitch Youk at-bat, video of Pap dancing with a beer carton on his head, and Remy, Don and Heidi Watney. Right now, that doesn't fit into the NYT's long-term strategy. The only thing that fits the bill is cash---to pay for the "core" of what the NYT does best---hard news. Cash is what the Red Sox are certainly good for.

So cheer up, Nation, this is a good sign. The Sox are thriving, and I don't think John Henry is losing much sleep over the departure of the old gray lady.

1 comment:

D Vicino said...

Cash is king....and liquidity is a great thing to have in this market. A 300M sale price would be a great ROI, i'll be interested to see what they end up getting for it. Can't fault the NYT for trying to generate some cash to reinvest in what they're good at.

In somewhat unrelated news...the nytimes was reporting earlier today that the Yankees have spent considerably more money this offseason than the other 29 teams, combined. Are they still expecting those corporate boxes at the new Yankee Stadium to (or continue to) sell?

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