New York Times Co. Faces Leadership Vacuum After Robinson Ouster
The departure of New York Times Co. (NYT) Chief Executive Officer Janet Robinson last month leaves the company with a leadership vacuum amid falling revenue, profit squeezed by pension costs and pressure from family members to restore a dividend once worth more than $20 million a year.
Robinson, 61, was pushed out by Chairman Arthur Sulzberger Jr. and his cousin Michael Golden, said a person familiar with the situation. Golden, who is chief operating officer, just lost part of his responsibilities when the company sold the regional newspaper division he’d run and will take on new duties, said the person, who wouldn’t be named because the matter is private.
Times Co. is looking for a non-family member to be CEO, making it unlikely the 62-year-old Golden will take on that role, said two people familiar with the matter. Robinson will receive an exit package totaling more than $21 million, higher than previously reported, said the people, who wouldn’t be named because the information isn’t public.
The departure comes as Times Co. struggles with a slide in traditional print revenue on top of pension and interest costs that leave little to invest in its future. Last year, about 70 percent of its estimated $237 million operating profit went to pension contributions and interest costs, compared with 19 percent in 2007, according to company statements.
“It’s a disturbing trend, and it does call into question the long-term viability of the company,” said Robert Willens, an accounting specialist at consultant Robert Willens LLC.
Sulzberger, Golden and Robinson declined to comment.
Times Co., which is scheduled to announce fourth-quarter results on Feb. 2, is projected to report revenue for last year of $2.33 billion, a 2.7 percent decline from 2010. That would make the sixth year in a row of sliding sales.
Profit, excluding what the company calls extraordinary items, dropped in the first three quarters of last year, and is projected to slide in the fourth quarter, to 41 cents a share, from 46 cents a year earlier. Net income, without adjustments, rose in the third quarter due to charges in 2010 related to the Boston Globe and pension withdrawals.
Times Co.’s share price has fallen 84 percent since 2004, including a 25 percent slide over the last year.
“The stock is kind of stuck in no-man’s land,” and the absence of a CEO is part of what’s keeping it there, said Douglas Arthur, an analyst with Evercore Partners Inc. (EVR) “’Who’s the next CEO?’ That’s what everyone’s wondering.”
Sulzberger In Europe
Sulzberger said the board will conduct a search inside and outside the company for a new CEO. The 11 directors include four members of the Ochs-Sulzberger family, which controls the board with 90 percent of the Class B shares.
In the meantime, the 60-year-old chairman is serving as interim CEO amid internal concerns about his travels overseas, according to two people familiar with the matter. In the last 19 months, Sulzberger has attended at least a dozen conferences and panels in Istanbul, Beijing, Munich, London, Paris and Switzerland where his girlfriend, Claudia Gonzalez, works. His trips are aimed at establishing Times Co. as a global brand, said Robert H. Christie, head of corporate communications.
Sulzberger, who took over as chairman in 1997, has championed investments in digital technologies, including the effort to begin charging readers for access to the namesake newspaper’s articles on the Web. The so-called paywall, which went up in March, has bolstered advertising and lifted paying digital subscribers to 324,000 as of the end of September.
Still, the effort hasn’t been enough to offset the drop in print advertising. Evercore’s Arthur estimates it brought in about $33 million last year and expects $71 million this year.
“We’re in a very challenged sector,” Sulzberger said in an interview last month about how digital platforms could choke off access to news content. “We can’t pretend we aren’t.”
Times Co.’s flagship newspaper, which is driven largely by national advertising campaigns, isn’t benefiting as much from the resurgence in local retail advertising as Gannett Co. (GCI) and McClatchy Co. (MNI), Arthur said.
Total advertising revenue was down 8.8 percent to $261.8 million in the third quarter, with print dropping 10 percent and digital falling 4.5 percent. The company has lost more than 80 percent of its market value from a high of about $8.5 billion in 1999 to its current value of $1.18 billion. It has not paid dividends to shareholders for the past three years.
Some family members repeatedly pressed Robinson and Sulzberger to restore the payouts, according to person familiar with the matter who didn’t want to be named because the matter is private. In 2007, family members received $23.7 million in dividend payments, based on company filings and Bloomberg Data. In 2008, the last year the company paid dividends, the family received $20.5 million.
Family members have no intention of selling Times Co., Sulzberger said in the interview last month.
New York Times’s Independence
The company has reduced its debt by more than $500 million in the last 10 quarters, using proceeds from the sale of a portion of its stake in Fenway Sports Group, according to a report from CreditSights Inc. The company also re-paid the $250 million, 14 percent interest loan from Mexican billionaire Carlos Slim in August, three and a half years ahead of schedule.
Craig Huber, a media analyst who has followed the Times for 17 years, believes the company will continue to divest subsidiaries, pay down debt, and possibly wind up solely with its core asset, the New York Times newspaper and its related digital properties.
“I think anything and everything is for sale at the right price,” said Huber, now principal of Huber Research Partners in Greenwich, Connecticut. “The mission is to keep the flagship independent. The risk is that most of its revenue still comes from print, not digital.”
The company decided not to sell both the Boston Globe and the Worcester Telegram & Gazette newspapers when a bid emerged, according to The New York Times website. The company bought the Globe for $1.1 billion in 1993. The company also owns About.com, which it purchased for $410 million in 2005. Its regional newspaper group, which it sold to Halifax Media Holdings LLC for $143 million, had been its worst-performing unit with revenue falling an average of 12.5 percent year over year since 2006, according to an analysis by CreditSights.
Times Co. began offering buyout packages in October to eliminate 20 newsroom positions at its namesake newspaper and is also pushing for a pension freeze for some New York Times employees, a move that rankled the newsroom, according to Newspaper Guild of New York President Bill O’Meara.
The Guild, representing almost 1,100 employees at the New York Times, said the company sought to re-open negotiations a day after Robinson’s departure was announced, as part of its plan to cut long-term pension payments. Robinson’s exit package, which includes her pension, supplemental retirement income, consulting fee and stock grants, doesn’t sit well with newsroom employees, according to O’Meara. Even with a pension freeze for currently employed Guild members, O’Meara estimates Times Co. would still have to pay about $20 million to $25 million each year to honor prior obligations.
Key to the Times Co.’s future is finding a new CEO with digital expertise, said Ken Doctor, media analyst for Newsonomics and Outsell Inc.
“The question for Arthur now is, ‘How do they take the next step in the digital evolution?,’’ Doctor said. ‘‘How do they turn a company that is still largely a print plus digital enterprise into a sustainable company that’s just digital?’’
The company should focus on the flagship brand as the print enterprise inevitably declines, he said.
‘‘The sword that’s hanging over the neck of the next CEO is the death spiral of print advertising,’’ Doctor said. ‘‘That’s the challenge.’’
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