There was much Twitter talk (even Rupert Murdoch, who is good friends with Bloomberg, weighed in) and chatter in the blogosphere last week when news came out about Michael Bloomberg’s efforts to acquire The New York Times. According to reports, Bloomberg had initiated acquisition talks back in 2013 (after the Washington Post was sold to Amazon for a paltry $250 million) but was rebuffed by the Sulzbergers, who own the Times.
The economics of the media business might be to blame for the Times’ refusal. Unlike other businesses, the content business is notoriously unquantifiable. It is not easy to measure or quantify labor, since it is neither physical labor nor does it result in a tangible output such as a manufactured product. This might also be a prestige issue for The New York Times. But, the synergy might not be such a bad idea, especially when you consider the product and economic benefits with this acquisition.
1. A cash injection
For starters, the acquisition could end up providing the Times with much needed cash to seriously innovate its business. In its latest earnings report, The New York Times company reported an increase in digital subscribers and advertising. But, digital advertising is cheap and depends on volume for profits. This means that The New York Times would have to significantly sacrifice its brand identity and include more advertisements to quell the decline in print advertising, which still accounts for three-quarters of the paper’s revenue.
The publication has developed other sources of revenue, such as events, travel tours, and apps, to offset its print decline. The problem with these sources of revenue is that they push the Times from its core competency — media — into a highly competitive space. For example, potential competitors to the Times’ cooking app include niche websites and apps to generic free content and Youtube videos (which, by the way, also includes premium content, such as the one that the Times is peddling). There is little to no differentiation between these apps.
Bloomberg is able to subsidize its news business (which, according to reports, runs losses in millions of dollars), thanks to its blockbuster product – Bloomberg terminals. Although The New York Times company is not unprofitable, its money reserves are dwindling with each quarter. Combining forces with a profitable business makes much more sense than asking billionaires for loans.
2. Product synergy
The acquisition could also bring significant product and content synergies between the two organizations. For example, the Times has built an excellent data column in Upshot. The same team could easily do a great job with the vast amounts of data available to Bloomberg through its research and terminals. The Times investigative unit, which has already won several Pulitzers, would be an asset to Bloomberg. The end result would be a better and superior product than the one that each company produces independently.
The big question is: Will the Times bite?