Why the FT and the Economist sold for premiums

William Cohan writes for the New York Times about why the Financial Times and the Economist sold earlier this year for large multiples during a time of upheaval in the media industry.

Cohan writes, “At these prices, though, there is no guarantee that either buyer will make money on its investment. The newspaper business could be in the process of either a long-awaited turnaround or simply another downtick. Nikkei is borrowing the money for The Financial Times from a consortium of Japanese banks, albeit at historically low interest rates.

“Despite these risks, The Financial Times’s successful auction was fueled by the combination of its brand and its success in its digital business, Mr. Lee, of Evercore, said. In the last decade, The Financial Times’s digital subscribers have increased to about 535,000 from 76,000; a majority of its about £300 million in revenue comes from subscribers, not advertisers.

“John Ridding, chief executive of The Financial Times, said in an interview that the newspaper’s gamble in charging a high price for premium content, both in print and online, had paid off. And neither he nor his colleagues wanted The Financial Times to become some billionaire’s toy — it had to continue to be a relevant media property. ‘Some people thought that this was a trophy buy,’ he said. ‘I think the answer to that is firmly no.'”

Read more here.