Billion-Dollar Electronic Investment p. 11

By: George Garneau New York Times Co. plans to spend that amount over the next
six years to buy TV and other electronic media businesses sp.

IN A SWEEPING, strategic shift of its newspaper-dominated businesses, the New York Times Co. said it will invest over $1 billion buying TV and other electronic media businesses.
A year after it spent $1.1 billion to buy the Boston Globe, the Times Co. announced plans to spend between $1 billion and $1.5 billion over six years on broadcast TV stations, cable TV channels and new media.
Addressing analysts at the annual PaineWebber Media Conference in New York, Gordon Medenica, Times Co. operations and planning vice presdent, said the company is "too dependent on print media" ? even after unloading its women's magazines earlier this year.
The diversification is designed to decrease the company's dependence on print media for 90% of its profits to about 25%, and to boost the share of profits from electronic media to 25%, from its current 10%.
The Times Co. owns five TV stations and two radio stations. In print, it owns the Times, Globe, 23 other dailies, five nondailies, 50% of the International Herald Tribune, and 10 magazines. The vast majority of its $2 billion in annual revenue derives from print.
Analysts, who had questioned the lack of investment in faster-growing television and new media businesses, generally welcomed the plan to build a "new" New York Times Co.
"It's not too little, but it's a little late," said Kevin Gruneich, an analyst with CS First Boston Corp. in New York, adding, "Better late than never."
He said the Times Co. needs to diversify its portfolio and applauded the plans to leverage its skills in broadcasting.
Unfortunately for the Times Co., acquisition plans coincide with escalating prices, in terms of cash flow multiples, for broadcast television stations. That means that TV stations will cost more than they would have just a couple of years ago.
Medenica said the company wants to build a platform to exploit local information content, including possible "linkages" between newspapers and TV stations.
The company expressed confidence in the "long and profitable future" ahead of newspapers ? and did not rule out "attractive newspaper acquisitions when, and if, they come along," Medenica said. The catch, he added, is the fact that strong newspaper franchises rarely come up for sale.
In contrast, the company planned "pro-active" acquisitions in electronic media. In the short term, that means local TV stations, especially midsized ones, and cable channels. The company wants to extend its reach to 6% of the national TV market, up from the 2% its current stations reach. It views local TV stations as relatively low risk with a secure long-term future that won't be eroded further by cable or by online media.
It has ruled out broadcast networks and cable systems.
The plan is founded on the ability of current businesses to generate their usual, large volumes of cash and on long-term debt growing to 30% of capitalization, a debt ratio considered healthy.
The Times Co. has already waded into cable programming with its recent acquisition of 40% of the Popcorn Channel, which plans to launch next year a channel for previewing trailers of first-run movies at the same time local theater listings scroll along the bottom of the TV screen.
Longer-term plans call for investment in new media ? including online services and CD-ROM information products ? to play a larger role. Part of the scheme includes accelerating spending on new media projects to between $30 million and $40 million over the next three years.
On the same day, Dec. 6, the Globe announced plans to start an information service for computer users after June 1995.
A subsidiary, Boston Globe Electronic Publishing Inc., headed by David L. Margulius, will develop interactive news and advertising services in such fields as local entertainment, regional travel, local news, shopping, and real estate advertising. The paper said it was talking with technology and marketing partners.
Times Co. president and CEO Lance Primis said the Times, which has already started an entertainment service on America Online, planned to distribute help-wanted classified ads on the Internet, beginning early next year.
He said the Globe's help-wanted ads will likewise go online, and the regional papers will start information services, beginning next year.
Primis said that through a renegotiated agreement with Mead Data Central, which markets information from the Times and which is in the process of being sold to the British-Dutch firm, Reed Elsevier, the Times Co. regained rights to resell content of the Times for 30 days after publication, compared with one day. The new deal gives the Times Co. far more to work with if creating information services from the paper and will double its database revenues over seven years, he said.
Primis also said the Times is developing a digital photo archive.
?( New York Times Co. president and CEO Lance Primis) [Photo & Caption]