Not long ago, The Financial Times would have been the crown jewel of any media company, instantly conferring prestige and influence on its owner. Now, given the likely bidders, one of the world’s most respected and distinctive financial newspapers could end up as a trophy to help sell more computer terminals.
Michael R Bloomberg is weighing the wisdom of buying The Financial Times Group, which includes the paper and a half interest in The Economist, according to three people close to Bloomberg who spoke on the condition of anonymity to divulge private conversations.
Bloomberg has long adored The Economist, and his affinity for the paper, at least as a reader, has deepened lately. Its bisque-coloured pages, once rarely seen in the thick stack of newspapers Bloomberg carries under his arm all day, have become a mainstay. Friends say he favours its generally short, punchy and to-the-point articles, which match his temperament.
In October, Bloomberg visited the London headquarters of The Financial Times, a few blocks away from Bloomberg LP’s giant new London complex, which is still under construction. When an editor asked if he would buy the paper, Bloomberg replied, “I buy it every day.”
He has spoken openly with friends and aides about the potential benefits and pitfalls of making such a costly acquisition in an industry he admires deeply as a reader but sneers at as a businessman, these same people said. And he has recently taken to rattling off circulation figures and “penetration” rates for the paper. “It’s the only paper I’d buy,” he has said to one associate. “Why should I buy it?” he has asked another.
His ambivalence speaks to the troubles facing the newspaper business, and to the complex motivations of the mayor himself. Drawn to power and prominence, Bloomberg is wrestling with his affection for the paper as its potential publisher and his wariness of an investment that could mar his company’s reputation for achieving outsize profits. Pearson, the parent company of The Financial Times Group, does not break out separate financial results for the paper, but analysts estimate that it loses money. A spokesman for the mayor declined to comment on his conversations about the paper.
For Thomson Reuters, the other likely bidder, the calculation is somewhat different.
Unlike Bloomberg, who started his financial information company in 1982, James C Smith, president and chief executive of Thomson Reuters, came up through Thomson’s regional newspapers and has ink in his veins.
A replica of an old-fashioned printing press is on display in his corner office overlooking Times Square.
But the company has been hurt financially after its newest desktop terminal product struggled to catch on.
In the first nine months of 2012, the company reported revenue of $9.88 billion, a 3-per cent decrease from the period a year earlier. A company spokesman declined to comment.
The Financial Times could expand the Thomson Reuters brand and give its reporters additional exposure since, unlike Bloomberg, which bought Businessweek in 2009, the company does not own a regular magazine. Thomson Reuters, partly a British company, and The Financial Times also have large footprints in Asia.
But first, the paper needs to be put on the block.
Pearson is about to lose two of its top executives, raising speculation the paper could be for sale. Analysts value The Financial Times Group at about $1.2 billion, well within the reach of Bloomberg LP, which in 2011 had revenue of $7.6 billion, and Thomson Reuters, which posted revenue of $13.8 billion.
The paper has a successful digital strategy, and analysts have said that its strict online pay wall is considered a financial success. But like most newspapers, it is struggling in an industrywide decline in print advertising revenue. In the three months ending October 1, the paper’s total paid circulation exceeded 600,000, more than half of which was from digital subscriptions. In its most recent earnings report, Pearson said it expected profit to decline because of a sluggish advertising market and “the shift from print to digital.”
Marjorie Scardino, Pearson’s longtime chief executive, who once said the paper would be sold “over my dead body,” is departing on December 31. Rona Fairhead, chief executive of The Financial Times Group, will leave at the end of April. Both executives had championed the print businesses. A successor to Fairhead has yet to be named, though one person close to the company pointed to John Ridding, the chief executive of the paper.
One media banker with knowledge of the company expects the paper to be shopped around early next year. John Fallon, who is to take over from Scardino on January 1 as chief of Pearson, rose through the educational business and does not share his predecessor’s fondness for print. In October, the company merged its Penguin publishing house with Random House, owned by Bertelsmann of Germany.
In an interview in October, Fallon said The Financial Times was a “valued and valuable” asset that fit nicely into Pearson’s overall business. He added that “the portfolio of Pearson, it’s constantly changing and evolving” and “we never rule out anything.”
Charles Goldsmith, a spokesman for Pearson, said in an e-mail that the company “has not initiated any sort of sale process for The Financial Times and has no plans to do so.”
Ian Whittaker, a media analyst at Liberum Capital in London, said of Pearson: “My gut feeling is that if Bloomberg came in with a crazy bid, they’d probably accept it, but there’s no compelling reason to sell at the moment.”
Even before the departures at Pearson, Bloomberg LP had commissioned a study to assess whether The Wall Street Journal, The New York Times or The Financial Times would potentially become available. Only The Financial Times emerged as a possibility, according to three people briefed on the findings who, like others, declined to be identified discussing private conversations.
Officials at Bloomberg LP said top executives had only discussed a possible deal for The Financial Times in hypothetical terms, awaiting a decision from Bloomberg, who controls 90 per cent of the company’s shares. “Only one person makes the decisions about acquisitions and that’s Mike,” one executive said. A Bloomberg spokesman declined to comment.
In a brief interview at a party last week, Bloomberg sounded like a man who had carefully studied the paper’s business. “The FT sells more papers in the US than The Wall Street Journal does in Europe,” he observed.
He eagerly described his method of reading The Financial Times, starting with its left-hand column, and praised its short articles, which begin and end on the front page. “There are no jumps,” he said, using a newspaper term.
He expressed reservations about any deal that would involve owning just half of The Economist. Under the co-ownership agreement, The Financial Times Group has no input into The Economist’s coverage. “You don’t have control. Why would you want that?” Bloomberg asked.
Factions within his company have argued that it would be smarter to buy a digital property, pointing to the Web site LinkedIn as an example. Daniel L Doctoroff, a confidant of Bloomberg and the chief executive of the company, is said to be particularly skeptical about the value of buying a newspaper.
Shortly after a Bloomberg News series on how profit-making colleges exploited low-income students was named a finalist for a Pulitzer Prize in the prestigious public service category, Doctoroff dropped in on reporters in the company’s Boston bureau.
“He basically said newsprint is passé and pooh-poohed acquiring any print publications,” said one employee who was loath to speak publicly about internal discussions for fear of offending the company’s top management.
Inside Bloomberg, the primacy of its terminals — the superfast, financial data-splicing computers that sit atop traders’ desks on Wall Street — is unquestioned. Roughly 85 per cent of Bloomberg’s revenue comes from its 315,000 terminal subscribers, who pay $20,000 a year for “the Bloomberg.” That revenue pays for the news operation’s generous employee benefits and underpins Bloomberg’s $25 billion fortune.
The debate over whether to buy The Financial Times highlights an internal tension within Bloomberg’s giant news operation: Is it intended to be an amenity for those who lease terminals or a robust international media organization whose content reaches millions of readers beyond the financial world?
Bloomberg News reporters complain frequently about the lack of a widely read platform for their storytelling, a reality highlighted by the relatively slight day-to-day attention paid to the mayor’s own foray into opinion journalism, Bloomberg View, which appears on the Bloomberg terminals and website. The editorials and columns housed at Bloomberg View would reach a far bigger audience in the pages of The Financial Times, reporters at the company argue.
Those who favour buying the paper said that, even if it failed to make money, it would fit neatly into Bloomberg’s core business, giving the company a prestigious international outlet for its expanding body of journalism.
Over time, and with investment from Bloomberg, The Financial Times could develop a broader readership in the United States, with the goal of becoming the No 1 newspaper for American business readers, filling a gap left after News Corporation reimagined The Journal into a general interest paper.
Bloomberg seems to recognise that a decision on whether to buy a newspaper involves more than financial sense. At a book party at the Bloomberg Family Foundation in May, he recalled a recent dinner party conversation.
“Someone said the only people buying newspapers these days are billionaires with egos,” Bloomberg recalled. “And then he looked at me and said, Like you, Mike.’ ”
© 2012 The New York Times News Service