We’re big fans of the New York Times (NYT), and we don’t want to see it die. Thus, we’re interested in any/all intelligent plans to save it (if you have some, please forward).
Doug McIntyre at 24/7 Wall St suggests that the NYT should start by spinning out its digital operations in an IPO. We normally agree with Doug’s thinking, but we disagree with him on this one. Doug’s logic is that the NYT’s digital operations are growing, unlike the NYT as a whole, and would be worth more than a third of the company’s overall market value. A digital IPO would also presumably create an attractive currency (stock options) with which to attract talent and make acquisitions–both of the latter being big considerations for every traditional company that spun out in “Internet” version of itself in the late 90s.
Alas, the practical challenges here would outweigh the benefits.
First, there’s the cost allocation…
How could you accurately account for the cost of the company’s print content (which is a major draw for the web sites)? Any accounting that showed Digital being profitable would be misleading: the company would just be piggybacking on costs incurred by the print publications, and, over time, as the print company declined, it would have to bear more and more of these costs itself.
Second, there’s the internal confusion and strife. Which company would the Times’ reporters work for? Would these decisions be made on a head-to-head basis? Which stock would the reporters be paid with? Who would manage Digital? Would this team make more than the team at the print business? What would happen when an independent Digital decided that the best strategy was to replace much of the NYT content with cheaper, third-party alternatives? This might be good for Digital, but it wouldn’t help the NYT much. (It might still be a smart move–just hard to pull off without alienating friends, colleagues, and partners).
The only way such a spin-out would work would be if Digital was almost completely independent–free to use the brand and content to compete with the print publication, poach employees, make competitive acquisitions, replace NYT content with third parties, etc. Failing this, a Digital IPO would work about as well as Barnesandnoble.com’s IPO–which is to say it wouldn’t.