News Corp (NWS) has pulled its bid for Tribune Co’s Newsday, the NYT says. The Long Island, NY, paper, which has the 11th largest circulation in the U.S., will likely go to Cablevision (?) for $650 million. This looks like another sensible move by Murdoch.
Why Cablevision (CVC) wants Newsday so badly is a mystery. The company controls cable TV on Long Island, so perhaps there is some synergy there (turn the paper’s reporters into TV stars?), but hard to see how Newsday would complement Cablevision’s other assets: Madison Square Garden, the New York Rangers, and the New York Knicks.
More importantly, it’s not clear why Cablevision is eager to enter a business that appears to be going out of business. Newsday seems thus far to have survived unscathed (not clear why), Sam Zell is selling it because he needs cash to offset the diving margins at most other papers in the Tribune empire.
Newsday is said to generate $500 million in revenue and $80 million in profit. Cablevision’s bid is therefore a reasonable 1X revenue and 8X profit. Over the next five years, that revenue could get cut in half as the paper’s advertisers shift dollars online, but if Cablevision can cut costs and build a strong online business, the price could end up being worthwhile.
Before Cablevision arrived on the scene, Murdoch and Mort Zuckerman (Daily News) were fighting over Newsday with matching $580 million bids.