The Biz Blog

New York Times Co. management is set to discuss miserable second quarter results in a Wednesday morning conference call. Count on someone to ask why the company doesn't sell the Boston Globe and its regional newspaper group, then redeploy the proceeds in fast-growing Internet ventures, as a group of dissident shareholders has suggested. 

 

For one thing, there is no particular market right now for distressed newspapers. The Times Co., like its peers, is stuck with making them work. For a second, the Times has spent aggressively on growing its flagship NYTimes.com and its About.com subsidiary (online guides to specialty topics).  And Internet properties with anything like a revenue stream command huge premiums.

 

I would like to dump a little more cold water on the quick fix cure of aggressive diversification by looking at how some of the successes became successes. In short, it took time -- decades not years.

 

The Washington Post Co. bought Kaplan in 1984. The revenue growth that has made it a bigger venture than the company's newspaper took place mainly in this decade. But the seeds of many lines of business beyond traditional test prep, along with an international presence, were being planted earlier.

 

Scripps' successful cable networks (recently spun into a separate public company) have a similar history. The first of them, Home and Garden Television (HGTV), was started by CEO Ken Lowe, then a young programming executive, in 1992. The Food Network was launched a year later, and Scripps acquired a majority share in 1997.

 

That was also the year Cox began the Auto Trader guides, which took five years to turn a profit.  (Internal venture capital may not be so patient under the strains of 2008). The company actually has 50 years in the used car business with a separate subsidiary, Manheim Auctions. Also, it controls a huge network of cable systems, the Travel Channel and Kudzu, one of the first groups of local search-only sites. 

 

I don't want to argue that newspapers can never innovate quickly. Gannett, Tribune and Knight Ridder bought CareerBuilder, as the industry's answer to Monster in 2002, and has grown it to a real competitor with robust volume.

 

Admitting to "the clarity of hindsight," retired publisher James Hopson argues in the current issue of The American Editor, that many newspaper companies have blundered over the last 10 years by buying more newspapers when they could have better invested in growth businesses. No argument there, though I think the rate of newspaper decline is faster than most anyone saw and picking winners, even in fields like cable or the Internet, is no tap-in.

 

But I think Hopson stubs his toe by suggesting that "a winning strategy" now is to "diversify away from newspapers ... in companies that have caught the wave of changes in audience and advertiser behavior" even though they "may be expensive." Like what, for instance? Google?   

 

I'm all for newspaper organizations directing cash flow to new ventures big and small, inside the box and outside, exploiting core competency in news or playing off a different customer relationship.  But even the smash hits (and newspapers cannot afford to buy those) take some time to pay off.  Ask the folks running Facebook, MySpace and Twitter.

 

So I'm prepared to give Times Co. CEO Janet Robinson a little cheer Wednesday when she says the company has done a fair job of executing its critics strategy -- divesting inessential businesses like television and investing in orderly growth of varied digital enterprises.