New York Times Sends Out The Strongest Message Possible That Its Future Is In Digital By Putting the “For Sale” Sign On Its Profitable TV Properties To Raise Money For Digital Now Rather Than Later

The Times has made its decision – digital is its future and while its nine network-affiliated TV stations are actually producing quite well, that revenue is half of what the company is already seeing from 35 Web sites, including About.com. Digital is displaying all the right signs that profits will keep growing rapidly while TV has heavy chains dragging it down as advertisers reallocate some spend towards digital.

So, following the new trend started recently by Dow Jones when it announced its Ottaway papers were up for grabs in a survival of the fittest scenario there, so the Times has decided a similar scenario for its broadcast operations. The group is up for sale. It should not be a firehouse sale since the stations are predicted this year to earn around $33 million in operating profit based on 150 million in revenue.

Wall Street likes such moves that should improve shareholder value. The Times’ shares jumped the day after the announcement by 3.90% to $23.15, an increase of 87 cents. Not bad considering the share had ended the day before at $22.28, less than $1 above its 52-week low of $21.54. The Times has been under intense pressure from its shareholders to do something to get the share price up. Share buybacks and strong cost-cutting thus far have not produced the desired results. But Wall Street likes to look forward and further digital investments for the moment at least are in favor.

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This is going to put even more pressure on the Tribune Company that it should dump all its broadcast properties. It has sold two of 26 so far this year to raise cash to help pay off debt from its $2 billion share buyback, but Tribune has resisted calls from its largest shareholder to put all of television on the bloc, hoping that the launch of the new CW television network will be just the right medicine for 16 affiliated Tribune TV stations. But if CW falls flat then CEO Dennis FitzSimons will be under tremendous pressure to dump the broadcast group.

And its not that Tribune doesn’t accept that digital has a huge role to play in its future. Within three years FitzSimons says he wants the current 7% of total revenues now coming from digital to increase to at least 12% and just this week Tribune Interactive appointed two senior executives. But whereas Times CEO Janet Robinson was ready to bite the bullet and dump television FitzSimons hasn’t gotten that far, yet.

The Times “sell” decision has not been one that has been on the table for a long time. As recently as June, Chief Financial Officer Leonard Forman told the New York conference of the Newspaper Association of America that the Times had no plans to sell off broadcast. Something obviously happened in between.

That something could well be the 63% jump in revenue in the 2nd quarter at its about.com online information network, with predictions the rest of the year will do even better. You just don’t see 63% quarterly increases in print or television.

Everyone is looking at MySpace and the $550 million that Rupert Murdoch paid for it that today is considered to be close to a steal. One reason given for Sumner Redstone firing Viacom’s CEO, Tom Freeston, is because Murdoch beat Viacom to MySpace. What does seem clear is that there are very big players out there with very deep pockets ready to make major investments in digital, and if you want to play with the big boys then you need to fill the treasure chest. With the $410 million cost of About.Com still being absorbed the Times knows the entry price to major new digital investments is going to be very high and thus there goes broadcast.

The Times is going to miss that broadcast revenue in the short-term. In 2005 the company’s overall profitability was just 7.7% on gross sales, very much weighed down by poor performance in the newspaper group including not just the New York Times but also the financial disaster going on at the Boston Globe and the New England newspaper group. The television group, on the other hand, produced a healthy 22% return on its sales dollar.

A better case could probably have been made to dump the New England newspapers, but the Times is a newspaper company at heart and it apparently believes it can solve those New England problems, especially maximizing convergence with digital.

Getting rid of TV stations these days seems the prudent thing to do. Emmis Communications has sold 14 of its 16 stations and is looking for buyers for the other two. Media General sold three CBS affiliates, and Tribune has sold two with the possibility of the other 24 being put up for sale if management’s current business plan doesn’t work out.

Janet Robinson summed up the Times’ game plan. “We believe a divestiture (of broadcast) would allow us to sharpen our focus on developing our newspaper and rapidly growing digital businesses, and the synergies between them, thereby increasing the value of our company for our shareholders.”

And let’s face, that’s what any business should be doing – predicting how it will earn the most money in the future and doing now what it takes to ensure that future.

New York Times Sends Out The Strongest Message Possible That Its Future Is In Digital By Putting the “For Sale” Sign On Its Profitable TV Properties To Raise Money For Digital Now Rather Than Later

The New York Times’ Broadcast Media Division currently produces around 4% of the company’s total revenues. Digital is already responsible for more than 8% of total revenues and that number keeps growing by the month. Where do you think the smart investment money should go?