The New York Times Co.’s declaration last month of its billion-dollar plans for expansion into cable and broadcast TV raised some eyebrows on Wall Street.
At a time when TV station prices are peaking, NYT president Lance Primis’ statement that “if we found the right TV station today, we’d be ready to buy it right away” made some bankers and analysts question the company’s sense of timing.
As one money manager asked: “Why now? If they wanted to be aggressive in broadcasting, they could have done it 10 years ago.”
Of course the Times has been dabbling in TV and cable for almost 20 years, having bought and sold cable systems in the 1980s and having bought five small-market TV stations at different times in the ’70s and early 1980s. Its approach to electronic media has been timid, however, and investment bankers are skeptical about whether anything has changed.
One investment banker recalled that three years ago, when Time Warner was preparing to launch its New York 1 all-news cable channel, the Times was offered a chance to collaborate on the channel. The company did not pursue the approach and although its editorial staffers appear regularly now on the channel, the banker says the Times could have had a much broader involvement in the channel, possibly including an investment in it.
A spokeswoman for the Times last week refused to comment on suggestions that it passed up the New York 1 opportunity. But the company clearly has a different policy now, having declared that it wants to invest in existing or start-up cable channels, particularly those with a news orientation.
The Times’ latest pronouncement on strategy is a reversal of direction in a broader sense, however. When the company sold its New Jersey cable system in 1989, it said it wanted to “concentrate on its core businesses” of print media.
Shortly after the sale, the Times bought McCall’s magazine as part of a strategy to build up its women’s magazine group. Last year it invested further into print by paying just over $1 billion for the Boston Globe.
In recent months, however, the Times has sold its U.K. golf magazines and its women’s magazine group, including McCall’s. Magazine industry sources say the company couldn’t get the magazines working together properly and instead decided to sell.
The Times now plans to devote the bulk of its available cash flow over the next few years to the electronic media, particularly by buying more medium-market (defined as markets 10-70) as well as some cable programming interests.
Gordon Medenica, NYT’s vice president of operations and planning, says the Times changed its mind about broadcasting partly as a result of Fox’s recent raid on network affiliates. The move by Murdoch spurred an increase in compensation by all the networks to their local affiliates.
“What Murdoch has done is re-establish the value of being linked to a strong local station,” Medenica said. NYT’s stations, in Memphis, Tenn., Huntsville, Ala., Moline, 111., Ft Smith, Ark., and Scranton, Pa., are either CBS or ABC affiliates.
Medenica said NYT’s attitude was also affected by the improved operating performance of its stations, which in recent years have increased their audience share. “We have convinced ourselves that we can be operators of TV,” he said, adding that “if you go back a couple of years we were less convinced of that.”
Along with other network affiliates in its markets, NYT’s stations have lost audience share over the past few years to Fox. But an expanded local news broadcast helped stem some of the erosion and in some cases increased audience share, according to figures from Petry National Television, which represents competing stations to the NYT broadcaster in most of its markets.
Expanding the local news was an idea of the longstanding station manager at NYT’s Scranton station, Elden A. Hale, who has since been promoted to executive VP for programming and development within NYT’s Broadcast Group.
Now with responsibility for all of the company’s stations, Hale is using the expanded local news idea throughout the broadcast group. “Local news is what is going to separate all of the stations from each other,” Hale says.
He added that “local news and information programming will be what defines the New York Times Co. TV stations,” Hale says.
Hale’s success doesn’t necessarily prove any skill on the part of NYT in television, as Hale was station manager of WNEP before it was acquired by the company.
One industry source argued that expanding local news was a standard tactic in the industry to help stations distinguish themselves.
One of the only innovations Medenica could cite that came from the bigger NYT company was the introduction of a marketing function for the broadcast group, modelled on its regional newspaper group.
Jack Fentress, veepee and director of programming at Petry National Television, notes that, whether the executives were already there or not, the Times hasn’t “done anything to screw it up and I think that is probably the most cogent point.”
One investment banker questioned what advantage the Times could gain by buying a few more small TV stations. The banker argued that the company should make investments that exploit the value of the Times name, something the company has been reluctant to do in the past.
Medenica says NYT wants to buy more stations “to be a player in the business.” The company’s goal is to increase its share of the national audience from its present level of 2% to 6%.
“That is also a level at which peer TV-based companies begin to show up on the radar screen for co-ventures in programming, getting involved with people who are launching shows… It gets us a seat at the table,” Medenica says.
Some Wall Street analysts applaud NYT’s plans. “I think they have an intelligent longterm policy,” says John Reidy, an analyst with Smith Barney.
“It’s a sensible thing for them to do. Nobody is sure exactly how profoundly print is going to be impacted by the things that are now happening in electronic media,” says John Morton, a media analyst with Lynch, Jones & Ryan.
No one is sure whether NYT will follow through on its announcement either. Despite the headlines, it could well be three years before the Times makes any big investments. Medenica says the Times has heavy capital expenditure commitments in the next couple of years on a new $315 million printing plant for the Times newspaper, so most of the billion-dollar pool would not build up until after 1997.
The billion-dollar figure was just “a financial calculation of how much we can afford to spend within current parameters of our debt limits,” Medenica says.
The time frame raises questions about NYT’s commitment to the strategy should markets change again. One banker said market circumstances were sure to change over the next couple of years and that the announcement seemed designed more to ensure NYT was alerted about possible deals.
It has had that impact. Medenica said he had received “very interesting” calls in the past few weeks “although I’m not sure that a major opportunity has emerged.”
Wall Street would be nervous if the Times were to buy a TV station now, given the state of the market. But Medenica says, “We will be disciplined; we will not overpay.”