Media

ValueAct takes 7% stake in New York Times with call for new approach


ValueAct Capital, the activist hedge fund, has acquired a 7 per cent stake in The New York Times Company and is putting pressure on the media group to boost digital sales by pushing subscribers towards a higher-priced bundle of its products.

Shares in the global news media group popped about 10 per cent as investors welcomed the move to force The New York Times to find new ways to boost its profitability.

News media companies have been under pressure in recent months as a more uncertain economy, which includes the highest inflation rates in decades, has slowed down advertising revenues and forced them to redouble efforts to build subscription revenues.

“Our research suggests that most current readers and subscribers are interested in the bundle and would pay a large premium for it but are not aware the offering even exists,” ValueAct said in a letter to The New York Times.

“This is an opportunity we believe management needs to drive with urgency, as it is the biggest lever to accelerate growth . . . and ensure the long-term strength and stability of the platform.”

Any change will require the backing of the Ochs-Sulzberger family, which has owned the newspaper for more than a century and retains effective control of The New York Times through a dual-class stock structure. The family holds all of the class B voting shares that allow it to elect about 70 per cent of the board.

The New York Times has been one of the breakout successes of digital news, more than doubling its total subscriber base to 9.2mn in less than four years. Through acquisitions and aggressive expansion, it has built a stable of digital products spanning news, games, sport and cooking, with an aim of reaching 15mn subscribers by 2027.

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Part of the challenge for the group is to encourage the 6.1mn subscribers for its core news offering to buy a more expensive all-access bundle, which would include games, a cooking app and The Athletic, the sport website it acquired for $550mn this year. At present The New York Times makes $8.83 a month from the average user, well below the price point for its all-access membership.

Meredith Kopit Levien, chief executive, told investors earlier this month that she planned to “lean even more heavily into selling the bundle”, both to new readers and existing subscribers on introductory offers. “We expect much of the revenue benefit from this to begin in 2023, as we follow our proven playbook of moving subscribers from introductory offers to higher prices over time,” she said.

ValueAct, which has historically been considered a less aggressive activist investor for being more co-operative with the management teams where it invests, has recently placed big bets on 7-Eleven’s owner Seven & i Holdings and fintech groups Fiserv.

Despite pushing the bundle of services, ValueAct has not made any requests to reorganise the business, start a strategic review of certain assets or return cash to investors, which are commonly made by hedge funds it competes with. The New York Times has no debt and $453mn of cash and marketable securities on its balance sheet.

“A generational shift is under way where US consumers prefer to consume high-quality news digitally — across websites, social medial channels, mobile apps, podcasts, email newsletters, push alerts, and other surfaces — which can only be satisfied by a scaled franchise with a trusted brand like NYT,” ValueAct said in the letter.

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“While most of its fragmented competition is challenged for growth, NYT is building a bigger, more profitable, and more defensible business,” the hedge fund added.

The New York Times said that it was aware of ValueAct’s investment. “As we do with other shareholders, members of our management team have had conversations with ValueAct to hear their views and share ours,” the company said. “The board and management team will continue to make decisions that we believe are in the best interest of the company.”



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