Many investors are staying away from newspaper stocks because the internet has taken away the previously wide moat of the business. However, Jim Cramer has recently turned bullish on The New York Times Company (NYSE:NYT) after the company announced that it planned to divest the Boston Globe in order to focus on its core business. According to him, The New York Times’ core business was not the print business anymore, but the content business. Is it a good stock to buy now? Let’s take a closer look.
The New York Times Company (NYSE:NYT), incorporated in 1896, is considered a global leader in multimedia news and information, with several businesses including newspapers, digital and investments. The business is divided into two main segments: The New York Times Media Group and New England Media Group. The majority of the company’s revenue, nearly $1.6 billion, or 80% of the total revenue, was generated from The New York Times Media Group, while the New England Media Group contributed nearly $395 million in 2012 revenue.
The company generated its revenue via two main sources: Advertising and Circulation. In 2012, the advertising revenue experienced a 6% year-over-year decline, whereas the circulation revenue increased 10.4% compared to 2011. Thus, in the full year 2012, the circulation revenue of $953 million surpassed the advertising revenue of $898 million. The growth in the circulation revenue was due to two factors: the growth in digital subscriptions and the increase in print circulation prices. Those were quite interesting business moves. The New York Times seemed to be focusing on and growing the digital business. At the same time, they were raising the circulation prices of the traditional print business. Charlie Munger, at the DJCO’s annual meeting, commented that The New York Times had a pretty modest prospect. It would continue to make pretty good money, but it was not going to make a whole lot of money. It had a decent niche so that people might be ready to pay $4 or $5 for its newspaper at the airport.
Recently, the company announced that it planned to sell The Boston Globe to limit its exposure to the declining print advertising business and to focus on its core business. In 1993, The New York Times bought the Boston Globe for $1.1 billion in 1993. Charlie Munger, at the DJCO’s annual meeting, thought that the company destroyed an enormous amount of equity by acquiring a newspaper in Boston that was losing money.