Boston Globe Likely To Fetch $100 Million
Bids for the Boston Globe are due in later today, and they aren't expected to be all that high.
The New York Times, which purchased the Boston Globe back in 1993, is going to be taking a very large loss on their investment. The only question at this point is just how big the loss will be.
The Boston Globe became a wholly owned subsidiary of the New York Times back in 1993 following a $1.1 billion transaction. The purchase made a great deal of sense at the time, but the bottom has since fallen out of the industry, taking newspapers valuations with it.
According to reports, the sale of the Boston Globe is likely to fetch between $75 million to $150 million, which is a far cry from the $1.1 billion that the NYT shelled out for the company twenty years ago. The numbers look even worse when you account for inflation - a $1.1 billion purchase price back in 1993 works out to roughly $1.8 billion in 2013 dollars.
Everybody knows the sad story of the newspaper industry, but let's reiterate.
The introduction of the Internet has changed how many people consume their news, especially those from younger generations. Instead of reading a standard newspaper on the way to work or at home on the weekends, many people are now using smart phones and lap tops to read the news. This has left newspapers scrambling to adjust, with many choosing to set up paywalls on their websites in an effort to try and stop their declining revenues. Many newspapers have been struggling mightily with this strategy.
Circulation numbers have been on a long and steady decline in the newspaper industry, which has, in turn, led to lower advertising revenues. Many newspapers across the country have been forced to close as a result, and those that have survived have seen their valuations drop considerably.
The major issue that the newspaper industry has right now - figuring out how to make younger people interested in their offerings, and figuring out how to extract revenues from these younger readers. According to industry reports, the average newspaper reader is well past the age of 55, and this is a big problem.
Until the newspaper industry can figure this out (if they can, and that is a big if), valuations will continue to drop, and we'll continue to see firesales like the Boston Globe.
Source: New York Post - Globe is Going Low
Filed under: General Market News