It is strange that the New York Times (NYSE: NYT) would want to sell its local media group. Local papers are, in most cases, doing better than large metropolitan ones. Yet, Halifax Media Holdings probably will buy 16 papers from the large, New York-based company.
The NYT local media group had $60 million in revenue last quarter, which was down about 6%. The Times has already taken a $152.1 million impairment for the division, a sign that it does not have much of a future. Considering the cost structure the Times probably employed at most of its local papers to keep them up to Times’ standards, their future profitability was at risk. However, Halifax Media will cut costs sharply to fit its model of inexpensive editorial.
Halifax Media knows how to bring expenses down to the bone, as many similar companies like Gatehouse and Journal Register have. Newsrooms at the papers these firms own are staffed by a very few people. “Citizen journalists” contribute free blogs. Full-time reporters record their own video and camera shots. It is a world of journalism that reporters and editors at the New York Times would not recognize.
The Times most likely could not stand the damage that would be done to its reputation if it cut a huge portion of the workers at its local papers. That would be a signal that quality journalism had met its match at the local level, even for the New York Times.
Local newspapers operate with several advantages. Internet competition in local markets is not as strong as its is on the national news stage. Local TV does not exist in some smaller markets. Many local newspapers no longer deliver seven days a week. Some have cut to three or four days, which forces readers to online editions.
The local newspaper business can be very profitable. But the costs to run these businesses must be very low. The Times was not willing to match what companies with comparable products will do.
Douglas A. McIntyre