THOMSON'S PENDING EXIT MEANS THE REST OF US CAN GET MORE

Shedding papers isn't a new thing, just new to a firm drawn to the Web

"The sky is falling! The sky is falling!"

-- Chicken Little

With its announcement earlier this month that it would sell all but one of its newspapers, Thomson Corp. of Toronto had many in the media business running around like the persnickety puny poultry of parable.

The phone rang here at NewsInc. World Headquarters over and over again: If Thomson was leaving print to focus on on-line businesses, doesn't that spell the end of the newspaper business?

No, and it doesn't even spell the end of Thomson in the newspaper business. To own and successfully operate the Globe and Mail, Canada's original national daily, is no mean feat and would tax the resources of any company of any size.

Certainly the roots of Thomson are newspapers; when the founder was knighted by the British realm, he was, after all, called Lord Thomson of Fleet (as in Fleet Street, the legendary London byway of newspapers). But Thomson has been bigger than just newspapers for a long, long time. Excluding the Globe and Mail, Thomson Newspapers had estimated revenues of $810 million in 1999; the company's overall revenues were more than $6 billion. My calculator says that newspapers accounted for 13.5 percent of Thomson's overall revenues.

According to Thomson Chief Executive Richard Harrington, about 50 percent of last year's revenues for the company – excluding newspapers – came from electronic services with more than $330 million in Internet-related products. Harrington says he anticipates that within five years, more than 80 percent of the company's total revenues will come from electronically based products.

So it's not as though Thomson is abandoning newspapers as much as Thomson is focusing on the bigger piece of its business – that of digitally delivered business-to-business information.

Inside, we offer several angles on the Thomson story. Senior Editor Pete Wetmore talks with Thomson executives as well as a newspaper broker, while Correspondent Christopher J. Feola views on-line implications in the New(s) Media column. (Conflict-of-interest alert: I have consulted with Thomson Newspapers on technical issues.)

But, for all intents and purposes, there are 20 newspaper properties out there for sale right now; Thomson is selling 11 Strategic Marketing Groups (SMG) – which are geographic clusters of dailies and weeklies – and nine stand-alone properties, some of which include dailies and weeklies.

If Thomson's exit from newspapers were a signal that this is the end of newspapering as we know it, nobody would want it's papers. Yet, the estimated value, based on a formula of 10 times earnings before tax and interest expense, is $2.2 billion. If you consider other factors instead – including efficiencies gained if you were to roll some existing nearby properties into an SMG – it's easy to get a spreadsheet to spit out a number closer to $3 billion.

That means that anybody with $150 million in their back pocket is going to be looking hard at each of these properties. And you can tick off a list of virtually every newspaper company that has access to $150 million as easy as I can. Hell, just open up the Newspaper Association of America's Facts About Newspapers 1999 and turn to Page 19. See the top 20 newspaper companies? Any of them is a potential buyer of a Thomson property. Many will buy more.

Does the Thomson move mean that the media business is becoming so complex that it might be a good idea to concentrate on only one or two specific areas? Hmmm. In the mid-'90s, Knight Ridder liquidated the very type of business Thomson has elected to concentrate on – so that it could become a pure-play newspaper and new media company. Last year, Pulitzer spin off its television stations – so that it could become a pure-play newspaper and new media company.

The chicken is wrong: The sky is not falling. But that sky is definitely changing color and composition.

– David M. Cole

Inside ...

• Thomson to sell papers by market group as it heads for the Web
• Reuters' leap to Web will make it a retailer of financial data
• Increased gas prices not causing circulation chiefs woes – yet
• One-buy, one-bill networks help national ads after ’99's gains
• Papers offer a variety of 'Net wares, including print – and web – service
• Toward land of not-so-free – data, that is
• Persons

From NEWSINC., Feb. 28, 2000, Copyright © 2000, The Cole Group. All Rights Reserved.