When Hearst shuttered the Seattle Post-Intelligencer‘s print operations and cut the news room 88% — from 165 to 20 — the AP reported:
“Hearst Corp., which owns the 146-year-old P-I, said Monday that it failed to find a buyer for the newspaper, which it put up for a 60-day sale in January after years of losing money.”
That’s not exactly true. Investors were lined up to buy the Seattle Post-Intelligencer, it’s just that their offers weren’t any good.
How bad were they? We asked one source familiar with a group of local investors who submitted a bid to describe the size of their offer.
He said it was “the price you would offer for GM right now.”
We pressed him further.
“Let’s just say it was less than $10.” Basically, a group of local investors offered to take over the P-I, assuming its debt and costs.They wanted to try and keep it running as a newspaper. Our source asked to remain anonymous because he and his group might make a run at another newspaper somewhere else.
Bob Broadwater, managing director at Broadwater & Associates, the investment bank Hearst charged with finding a buyer, confirmed Hearst had offers, telling us “There was no satisfactory offer, probably because [the P-I] loses substantial money.”
Know what’s funny? There’s a pretty good argument that Hearst probably should have taken the offer, as lousy as it was.
- Our source figures taking the local investors’ deal would have saved Hearst $10 million to $30 million this year.
- Hearst didn’t take this offer because it figures it can survive that kind of cash hit while turning SeattlePI.com into a profitable online-only pub.
- That’s probably a pipe-dream. Hearst’s core-competency is manufacturing newspapers, not solving the online publishing problem. There are few examples of businesses that successfully evolved out of dying industry into a new one. Did any of the railroads manage to become profitable airlines? No.
- This has nothing to do whether or not management “gets it” or not.
- Hearst would create the most value for shareholders by shedding unprofitable properties like Seattle P-I entirely and turning over the earnings from its remaining, profitable, newspapers to shareholders in the form of a nice, healthy dividend.
- For a good example of this theory in practice, look to Earthlink, which is keeping shareholders happy collecting lots of cash from its dying dial-up ISP business.