Some online writers do reference subscription services. Knowing how strongly people react to being excluded, I think writers who cite paid services are absolutely nuts. Even if it isn’t consciously acknowledged, readers will enjoy your site less if it points out something they can’t have.

Both The New York Times Company and Dow Jones (DJ) went the route of buying an established online destination. I’m always skeptical of these kind of me too acquisitions. These businesses did need to go online, but they needed to do it in their own way. The acquisitions will probably work out better than I thought they would. But, I still think the real value is in the brand.

Is the New York Times Company cheap? It’s close. If you agree with me about the potential for a real national news brand, the stock looks cheap. Otherwise, it looks about fairly priced.

Newspapers have been beaten down a lot recently, but they were so well-loved to begin with that they aren’t at the kind of levels that guarantee market beating returns regardless of how well they’re run. That’s happened in other businesses. You could extract more cash from a dying business than the stock was selling for. That isn’t the case here. The stock is currently priced as if it were a continuing (albeit mature) business.

If the New York Times is truly a dying business, it isn’t worth the current price. But, if there is real value in the brand, it’s a bargain right now.

I’m not confident in the decision making at this company, because I’ve seen how capital was misallocated in the past. Many of these questionable investments were small relative to the value of the core franchise. But, that doesn’t excuse the lack of focus and the lack of a true owner oriented culture.

The favorable economics inherent to the business are no excuse either. There are very profitable companies out there that aren’t nearly as profitable as they could be. For instance, Campbell Soup (CPB) consistently earns good returns on capital; but, I haven’t seen any evidence that those returns were the result of skillful capital allocation. I think much the same is true at the New York Times Company. A great franchise helps cover-up less than optimal uses of capital – and the Times’ management has benefited from inheriting a great franchise.

If I were confident about the way this company will be run and the way capital will be allocated, I’d be buying shares right now. There’s real value and real opportunity in this franchise. But, I’m not sure there’s the will to do what needs to be done.

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