Thursday, April 24, 2008

Deadly duel for N.Y. tabs

Those saying Rupert Murdoch wants to buy Newsday to squeeze the New York Times are missing the point: His immediate goal is weakening the New York Daily News so he can, once and for all, dominate the Big Apple.

While a beefed-up Murdoch presence in the New York market undoubtedly would cause new troubles for the already troubled New York Times Co., the publisher with even more heartburn than Arthur Sulzberger Jr. has got to be Mortimer Zuckerman, the owner of the Daily News.

The extent of Mr. Z’s concern may be revealed shortly, if he comes forward as widely expected with an offer to top the $580 million that Mr. M reportedly has offered Sam Zell for the Long Island tabloid. Tribune Co. is being forced to sell Newsday to scrape up cash to service its hefty debt.

As the biggest-selling daily paper in metropolitan New York, the Daily News – not the Times – would have the most to lose if the Post and Newsday were successfully teamed under News Corp. Indeed, a well-executed combination of the Post and Newsday could pull enough money out of the metro advertising market as to literally suck the life out of the Daily News, which, like the Post, is known to make little or no money.

While the consolidated daily circulation of the Post and Newsday would power the two papers into unrivaled leadership in the market, the potentially decisive factor in the life-and-death battle among the tabloids would be the huge lift in Sunday circulation enabled by the combination. Sunday matters above all else, because it’s the day of the week that typically generates about half of the advertising revenue for a newspaper.

As you can see from the circulation figures in the graphic below, the combined Sunday sale of the Post and Newsday (less a bit for overlapping circulation) would put the papers in some 44% of the middle-income households in the market. The broadest and deepest penetration in the metro area would give News Corp. a major advantage in selling advertising at a time when newspaper revenues are generally contracting.

By successfully shifting sufficient market share away from the Daily News to its twinned-up tabloids, News Corp. could put the Daily News in the position that it could not survive without an ever-growing subsidy from its owner, Mr. Zuckerman.

As the 188th wealthiest man in America, Mr. Zuckerman is estimated by Forbes Magazine to be worth $2.4 billion, so he could prop up the Daily News for quite some time. But Mr. Z would be going up against Mr. Murdoch, who, as the 33rd richest man in the country, has not only $8.8 billion in personal wealth but also heads News Corp., which puts another $16 billion in cash and other assets at his command.

Sunday circulation wouldn’t be the only factor in a war of attrition between the billionaire publishers. Another major weapon in News Corp.’s arsenal would be the 314.2k copies of AM New York that Newsday distributes every weekday. The free tab would enable News Corp, to gnaw away at Daily News circulation sales while consolidating an ever-larger portion of the available advertising dollars.

If you reverse the circumstances and postulate that the Daily News bought Newsday, the outlook would be nearly as dire for the Post – but for the fact that Mr. Murdoch appears to have the resources and determination to keep his paper alive for as long as he pleases.

With the fate of each of the other tabloids depending on who wins Newsday, Mr. Z and Mr. M are likely to up the ante for a few more rounds before the matter is decided. Nothing would make Sam Zell happier.

4 Comments:

Anonymous Anonymous said...

You are much more confident of Mr. Z's money-raising skills than I would be. His magazine US News and World Report is visibily reeling for lack of financing, and his property investments are already leveraged. So where does he get the $560 plus to trumph Mr. M? Also Mr. Z knew the Newsday sale was coming months ago, and could have moved in early when Mr. M was preoccupied with smoothing over the Bancrofts in order to buy the WSJ. If he couldn't do it then, he can't do it now.

4:09 PM  
Anonymous Anonymous said...

A lot of foolish stuff has been written over the past few days about the financial implications of a Murdoch purchase of Newsday, but you've figured it out to a T. This is a spot on analysis. That loud splat on 33rd St. is the sound of Mort jumping from the highest available window.

5:28 PM  
Anonymous Anonymous said...

It's just simpler if I contribute to this blog like this....

To:Eleanor Fox
From: anonymous
Re: Associated Press article: "On the antitrust front, Murdoch's ownership of Newsday would be less likely to present significant regulatory hurdles, even though it operates in an adjacent area to the New York Post, said Eleanor Fox, a law professor at New York University and expert in antitrust law."
------------------------
FYI...
Similar to Rupert Murdoch's News Corp., Newsday, since its days under Times Mirror to now, protected and strengthened its "virtual monopoly" on Long Island.

Among its Long Island assets, Tribune Co. owns two chains of shoppers covering all of Long Island under the name Star Community Publishing Group.

One chain is a combined group of half-tab publications mailed to every home on Long Island under the titles Shopper's Guide, Huntington Pennysaver and Yankee Trader.

The other is a full-tabloid shopper delivered throughout Long Island and the entire borough of Brooklyn (I am not certain about how much of Queens, although I am certain of their presence in that borough).

Recognize that Newsday is the sole daily newspaper on Long Island and possesses the only two publications that are each distributed to every home island-wide. Although other competitors exist, Newsday has actively sought to acquire any publications that covered all of the two counties that comprise Long Island.

Now consider that the New York Post also acquired in the past year two chains of weekly newspapers: the award-winning Times-Ledger newspapers based in Bayside,Queens and the Brooklyn-based Courier-Life newspapers. For the record, Courier-Life and Newsday Marketeer are presently using the same distribution company to distribute their papers in Brooklyn.

News Corp. has a "no-stone-unturned" strategy here in controlling the television market in New York with two stations, two dailies and two chains of weekly shoppers and two chains of weekly newspapers. Additionally, Tribune Co. has a variety of niche publications in the automotive, parenting and employment markets, plus Distinction magazine, which is distributed to homes in very affluent communities on Long Island.

QUESTION:
Does the proposed acquisition include all the Long Island publications with Newsday?
-----------

The above was information that I volunteered to a number of writers after surfing the web to shore up additional information about the proposals Sam Zell has on his table. I volunteered this information because, although not as glamourous as being a daily newspaper, the two weekly chains of shoppers enabled Newsday to control the highly-profitable distribution of retailer circulars for decades. Unless a publisher has complete weekly coverage of both Long Island counties in their entirety, a publisher has no chance of obtaining any contract from any major retailer. Newsday owns the only two sets of publications that cover the entire island. Sole daily, sole island-wide weeklies. Just more for Rupert Murdoch to have.

11:09 PM  
Anonymous Leon said...

i really do not get this about this post So where does he get the $560 plus to trumph Mr. M? Also Mr. Z knew the Newsday sale was coming months ago, and could have moved in early when Mr. M was preoccupied with smoothing over the Bancrofts in order to buy the WSJ. If he couldn't do it then, he can't do it now. So What

12:19 PM  

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