TELECOM Digest OnLine - Sorted: Newspaper Chains Pay Up for Web Companies


Newspaper Chains Pay Up for Web Companies


Lisa Minter (lisa_minter2001@yahoo.com)
23 Feb 2005 07:17:55 -0800

By Martha Graybow

NEW YORK (Reuters) - Newspaper publishers, often seen as stodgy and
slow-growing, will pay whatever it takes to grab a bigger piece of the
fast-growing online advertising market -- if two recent deals are any
indication.

The New York Times Co.'s $463 million purchase of financial Web site
MarketWatch Inc. have raised eyebrows because the deals are much more
richly valued than traditional newspaper acquisitions.

But analysts say the prices may be what newspaper companies must pay
if they want to bulk up their Internet operations. Because few
Internet content companies are for sale, they say, publishers are
jumping on what they can find.

"Internet valuations are back in a big way," said Morgan Stanley
analyst Douglas Arthur. "There are not that many properties out there
that have survived through the bubble still intact, with a reasonable
business model and good share of traffic on the Web, and apparently,
they are going to go for a big price."

Analysts say The New York Times, which is buying About.com from
magazine publisher Primedia Inc., is paying a hefty price for the
consumer-focused Web site by virtually any measure.

Primedia is getting 30 times About.com's 2004 earnings before
interest, taxes, depreciation and amortization, a key industry measure
known as EBITDA. The New York Times said that multiple falls to 23
based on 2005 projections of financial results.

In contrast, newspaper chain Lee Enterprises Inc. recently agreed to
pay about 13.5 times EBITDA in its $1.4 billion buyout of Pulitzer
Inc. one of the biggest newspaper deals in recent years.

But the Internet also is growing much more quickly than newspapers,
which have been mired in an ad slump over the last several years and
are struggling with declines in readership.

The Internet is the fastest-growing advertising outlet, even though
the dollars are minuscule compared with other big media like
television and newspapers.

In other recent deals, The Washington Post Co. recently bought Web
magazine Slate from Microsoft Corp. to get more online readers and
ads. The company did not disclose the purchase price, which some have
estimated at less than $20 million.

More deals are expected. Possible targets include financial news site
TheStreet.com which recently hired bankers to consider options that
include a sale.

Ryan Jacob, portfolio manager of the $70 million Jacob Internet
Fund, said other attractive companies that could be eyed as
acquisitions include CNET Networks Inc.
which operates a technology news site, and women-oriented iVillage
Inc.

CNET and iVillage appeal to advertisers because they target very
specific audiences, said Jacob, whose fund owns small stakes in both.

Analysts say that while premium Internet companies may be commanding
high prices, newspaper chains also must prove to investors that these
deals pay off.

The About.com agreement is "a major 'show me story"' for The New York
Times, Credit Suisse First Boston analyst William Drewry said in a
research report to clients.

Debt rating service Standard & Poor's on Friday changed its outlook on
The New York Times to negative from stable, citing the About.com
deal. A negative outlook indicates there is a greater chance of a
rating downgrade over the next two years, which could raise borrowing
costs.

New York Times stock closed down $1.05 at $37.20, while
Primedia shares gained 15 cents to $4.20, both on the New York
Stock Exchange.

NOTE: Read NY Times, National Public Radio News, Christian Science
Monitor and other publications on line here each day, with no login
or registration requirements. Check out our feature 'Telecom Digest
Extra' each day at http://telecom-digest.org/td-extra/nytimes.html .
New articles daily.

*** FAIR USE NOTICE. This message contains copyrighted material the
use of which has not been specifically authorized by the copyright
owner. This Internet discussion group is making it available without
profit to group members who have expressed a prior interest in
receiving the included information in their efforts to advance the
understanding of literary, educational, political, and economic
issues, for non-profit research and educational purposes only. I
believe that this constitutes a 'fair use' of the copyrighted material
as provided for in section 107 of the U.S. Copyright Law. If you wish
to use this copyrighted material for purposes of your own that go
beyond 'fair use,' you must obtain permission from the copyright
owner, in this instance Reuters Limited.

For more information go to:
http://www.law.cornell.edu/uscode/17/107.shtml

Post Followup Article Use your browser's quoting feature to quote article into reply
Go to Next message: Lisa Minter: "Virus Arrives in E-mail Allegedly Sent by FBI"
Go to Previous message: Lisa Minter: "Singapore Unveils Plan to Battle 'Cyber Terror'"
TELECOM Digest: Home Page