Red Sox Owner to Put Turnaround Savvy to Test With Globe
Billionaire sports team owner and financier John Henry, who helped the Boston Red Sox capture the World Series in 2004 and 2007 after an 86-year drought, will attempt another comeback with Boston’s hometown newspaper.
Henry agreed to buy the Boston Globe from New York Times Co. (NYT) for $70 million in cash, according to a statement last week. The price is a fraction of the $1.1 billion the Times Co. paid for the Globe in 1993 before the newspaper lost half of its circulation amid an industrywide advertising slump.
In acquiring the Globe, Henry becomes the latest billionaire to take on the struggling newspaper market -- a group that includes Warren Buffett and real estate investor Sam Zell. The 63-year-old Henry will bring a knack for statistical analysis that helped earn him a fortune as a commodities hedge-fund manager and enabled him to build a sports empire on two continents.
“This is a thriving, dynamic region that needs a strong, sustainable Boston Globe playing an integral role in the community’s long-term future,” Henry said in a statement over the past weekend. “In coming days there will be announcements concerning those joining me in this community commitment and effort.”
Despite his deep experience in managing businesses, Henry is a novice when it comes to newspapers. He faces a challenging advertising environment affecting the entire newspaper industry as well as difficulties unique to the Globe.
The Boston entrepreneur has agreed to buy a business that had a 7 percent sales decline in the first half of this year to $179.7 million. The Globe group, which also includes the Worcester Telegram & Gazette, had a 10 percent drop in ad revenue to $82 million and a 2 percent decrease in circulation sales to $74 million in that same period.
“Henry has to figure out what’s going on with the circulation business if he’s going to turn it around,” said Ken Doctor, a media analyst with research firm Outsell Inc., calling the Globe’s recent 9 percent decline in print circulation “catastrophic.”
The Pulitzer Prize-winning newspaper also has much higher operating costs than other publications due to its union agreements, Doctor said.
“Given the high cost structure and the pressure of declining revenues, that’s a bad combination,” Doctor said.
If the way Henry managed the Boston Red Sox is any indication, he could bring in his own management team, Doctor said.
Christopher Mayer, the current publisher of the Globe, is seen as an innovative manager, Doctor said. Mayer has added new business lines such as a growing printing unit.
Epstein, who had become the youngest general manager of a baseball team in the history of Major League Baseball when he joined the Red Sox in 2002, eventually left the team to become president of the Chicago Cubs baseball team.
“There’s a lot Henry will have to get figured out with the Globe,” Doctor said.
Henry declined to elaborate on his plans for the newspaper.
Buffett’s Berkshire Hathaway Inc. has spent more than $342 million on 80 newspapers -- including its hometown paper, the Omaha World-Herald -- in recent years. Terry Kroeger, who runs the operation for Buffett, said they hope to generate profits by refocusing newspapers on urgent, local news that readers can’t get elsewhere.
“We’ve got to evolve with what people are looking for, and I think our industry has done kind of a crappy job with that,” Kroeger said in an interview published in December.
The Globe sale was one of two large media transactions that were announced over the past weekend. IBT Media, owner of the International Business Times, said it was acquiring Newsweek from IAC/InterActiveCorp, splitting it from the Daily Beast brand. Terms of the deal weren’t disclosed, according to a statement from IBT.
Henry has a net worth of at least $1 billion, according to the Bloomberg Billionaires Index, and was listed as the 18th-most powerful Bostonian by Boston Magazine last year. He got his start in baseball as a child, keeping scores and calculating batting averages in his head for his local Little League team in Forrest City, Arkansas. Although Henry attended the University of California, he said he spent too much time playing guitar and touring with a band called Elysian Fields to bother graduating.
By 22, he was ejected from the blackjack tables in Las Vegas for counting cards. He began trading corn and soybean futures to protect his family soybean business after his father died when he was 25. Henry set up a small office in Irvine, California, in 1981 investing family money from the farm in agricultural commodities, expanding into other types of investments and eventually taking on outside clients at what would become John W. Henry & Co., which is now based in Boca Raton, Florida.
The billionaire entered Major League Baseball in 1991 by acquiring 1 percent of the Yankees. In 1999, he bought control of the Florida Marlins for $158 million.
After failing to persuade politicians to back taxes to finance a new stadium, Henry put the Marlins up for sale in 2001 and joined with Larry Lucchino, former chief executive of the Baltimore Orioles, and television producer Tom Werner to pursue the Red Sox.
They won the team with a $660 million offer to the Yawkey Trust in December 2001 and said they’d assume $40 million in debt. In 2004, the club won its first World Series championship in 86 years and added a second title three years later.
Under Henry’s ownership, the franchise had a record streak of 820 consecutive sold-out games at Fenway Park, which ended on April 11. Boston ranked 11th in Forbes Magazine’s 2013 list of the world’s 50 most valuable sports teams at $1.312 billion.
Henry is also the principal owner of Fenway Sports Group, one of the largest sports, media and entertainment companies in the world.
In 2010, FSG bought Liverpool Football Club, the 18-time English soccer champion, and its Anfield stadium. The company also owns the New England Sports Network and a 50 percent share in Roush Fenway Racing, a NASCAR racing team.