Gil Simon Long New York Times: Sohn San Francisco Conference 2018

We're posting up notes from the Sohn San Francisco 2018 investment conference.  Next up is Gil Simon of SoMa Equity Partners who pitched a long of New York Times (NYT).


Gil Simon's Sohn San Francisco Presentation: Long New York Times (NYT)

•    Conventional views: news is a commodity, consumers won't pay for news, advertising only way to scale
•    SoMa's view: consumers aware of 'fake news,' will pay up for trustworthy, differentiated content, most info still free but quality journalism worth paying for, direct subscription model better aligns publishers with consumers. Analogous to music industry streaming shift
•    At the very early innings of the evolution of the new business
•    Company with legacy, credibility and scale and has been around 170 years
•    Believes internet will go from headwind to tailwind for high quality journalism
•    2011 – implemented their first paywall (with 20 stories a month for free)
•    Shifting business model to creating journalism worth paying for
•    Broadening content to deep research, more multimedia content (The Daily by NYT is one of the top podcasts in the country
•    Very few publishers have crossed the chasm to monetizing print newspaper content – only FT, WSJ, Washington Post, and the New York Times
•    Recently tighter paywall to 5 free articles per month driving conversion to paid subs
•    70%+ subs are digital subs
•    80% of print subs have a digital login
•    See more revenue going towards subscription
•    Opportunity for margin expansion from ~12% today to 20% by 2022
•    Can’t be viewed as a legacy print media company; Underestimating future earnings leverage based on fixed costs of the newsroom
•    Believes that it is a double to $40-$50 in 2 years


Be sure to check out the rest of the Sohn San Francisco 2018 presentations.

Darsana Capital Boosts New York Times Position

Anand Desai's hedge fund firm Darsana Capital has filed a 13G with the SEC regarding shares of The New York Times (NYT).  Per the filing, Darsana now owns 5.8% of the company with over 9.41 million shares.

This is an increase from the previous 3 million shares Darsana owned at the end of the second quarter per their last 13F filing.  The new 13G indicates portfolio activity as of October 12th.

We've also highlighted some other recent portfolio activity from Darsana Capital here.

Per Google Finance, The New York Times is "a media company focused on creating, collecting and distributing news and information. The Company's principal business consists of distributing content generated by its newsroom through its print, Web and mobile platforms. In addition, it distributes selected content on third-party platforms. The Company includes newspapers, print and digital products and investments. The Company's businesses include newspapers, such as The New York Times (The Times); Websites, including NYTimes.com; mobile applications, including The Times's news applications, as well as interest-specific applications, such as NYT Cooking, Crossword and others, and related businesses, such as The Times news services division, product review and recommendation Websites The Wirecutter and The Sweethome, digital archive distribution, NYT Live (its live events business) and other products and services under The Times brand."

Harbinger Capital Sells New York Times (NYT) and Sable Mining (SBLM), Buys Crosstex Energy (XTXI)

Phil Falcone's hedge fund Harbinger Capital Partners has executed some sizable transactions recently. Rumors have swirled that the manager was winding down its Special Situations fund but that has been denied. Harbinger recently sold shares in two securities of note: New York Times Co (NYT) and Sable Mining Africa (LON: SBLM).

Regarding his New York Times stake, Falcone last week revealed he sold 7 million NYT shares at around $8.13 each. Harbinger originally acquired shares in 2008 when they were trading around $19 per share, so they've sold at a large loss. According to a 13D filed with the SEC, the filing was reported due to portfolio activity on November 24th.

Previously, Harbinger owned 7.4% of the company. With its latest sales, the hedge fund now owns only 2.6%, retaining 3.7 million NYT shares. This is the second time Harbinger has sold NYT in the past month or so. Not to mention, they sold some shares back in April of this year as well.

Turning next to Harbinger's next sale, the hedge fund has announced that it placed 205,756,827 Sable Mining Africa shares (LON: SBLM) with new and existing shareholders. Due to this transaction, Harbinger no longer owns an interest in SBLM shares. Previously, we highlighted Harbinger's Sable Mining stake here as they owned over 23% of the company. Alas, no more.

So Harbinger has definitely been selling positions off (they also sold some Inmarsat (ISAT) as well), possibly to free up cash for their concentrated bet on a 4G network via their LightSquared project, but that's pure speculation on our part.

Lastly, Falcone's hedge fund firm also recently filed an activist 13D on Crosstex Energy (XTXI). Due to portfolio activity on November 16th, Harbinger has disclosed a 9.6% ownership stake with 4,500,000 shares. This is an increase in their position as they owned 3.8 million shares when they added to their XTXI position in August. Over the past three months, Harbinger has ramped up its position size by 18.2%. Harbinger paid $33,091,533 for the total shares reported.

Per Google Finance, Crosstex Energy is "is engaged, through its subsidiary, Crosstex Energy, L.P. (Partnership), the gathering, transmission, processing and marketing of natural gas and natural gas liquids (NGL). The Partnership operates two segments: Midstream and Treating. Its combined midstream assets consist of over 3,300 miles of natural gas gathering and transmission pipelines, nine natural gas processing plants and three fractionators located in two primary regions: north Texas and Louisiana."

New York Times is "a diversified media company that includes newspapers, Internet businesses, investments in paper mills and other investments."

Stay up to date on the latest hedge fund movements by scrolling through our coverage of SEC filings.

Falcone's Harbinger Reduces New York Times (NYT) Position

Phil Falcone's hedge fund Harbinger Capital Partners just filed an amended 13D with the SEC regarding shares of the New York Times (NYT). Per the filing, Harbinger has disclosed a 7.41% ownership stake in NYT with 10,757,386 shares due to portfolio activity on October 19th.

This is a decrease in Falcone's position because Harbinger previously owned 13,120,178 shares as of June 30th. This marks an 18% reduction in his position size. The hedge fund originally filed an activist 13D on NYT back in February of 2008 and they purchased shares at around $19.

Regarding the recent transactions, Harbinger's Master Fund sold 1,500,000 shares at $7.80 on October 19th. Harbinger also sold over 821,000 shares back in late August at prices of $7.16, $7.44, and $7.52. This comes after we've seen recent portfolio activity from Falcone where Harbinger sold some Inmarsat (ISAT) as well.

Taken from Google Finance, New York Times is "a diversified media company that includes newspapers, Internet businesses, investments in paper mills and other investments. The Company is organized in two segments: News Media Group and the About Group."

Scroll through our coverage of SEC filings to see what other top hedge fund have been investing in.

Phil Falcone's Harbinger Capital Shows Massive New Citigroup Position: 13F Filing

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund filings.)

Next up is Philip Falcone's hedge fund Harbinger Capital Partners. Harbinger is a multi-billion dollar hedge fund firm with a focus on both distressed assets and equity plays. They often take highly concentrated positions and so they're an easier fund to track. After horrible performance in 2008, Harbinger rebounded in 2009 and finished up 46.5% as noted in our hedge fund performances post. In terms of recent portfolio activity, we detailed Harbinger's new position in African Medical Investments and saw that they've been selling New York Times shares. Falcone's firm has actually been quite active and ambitious as of late as we learned they will be starting a 4G wireless network as they make a large bet on mobile data transmission.

The positions listed below were Harbinger's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Citigroup (C)
NRG Energy (NRG)
Bunge (BG)
Seagate (STX)
Trina Solar (TSL)
Consol Energy (CNX)
VIX Short-term Futures (VXX)
Harbinger Group (HRG)
Vantage Drilling (VTG)
Clearwire (CLWR)
Pioneer Drilling (PDC)
Calpine (CPN) Calls


Increased Positions
Strategic HL & RS (BEE): Increased position size by 252.8%
SPDR Gold (GLD): Increased by 145%
Corn Products (CPO): Increased by 141.9%
Exco Resources (XCO): Increased by 75.7%
Superior Well Service (SWSI): Increased by 33.6%


Reduced Positions
Harry Winston (HWD): Reduced by 60.1%
Istar Financial (SFI): Reduced by 54%
Sprint (S): Reduced by 33.8%
Freeport McMoran (FCX): Reduced by 11.8%


Positions They Sold Out of Completely
Calpine (CPN)
Walter Energy (WLT)
Interpublic (IPG)
Take-Two Interactive (TTWO)
Cloud Peak (CLD)
ProShares Ultrashort Financials (SKF)
Alpha Natural Resources (ANR)
August Resource (AZC)
ICO (ICOG)
Mgic Investments (MTG)
Delta Petroleum (DPTR) Notes


Top 15 Holdings (by percentage of assets reported on 13F filing)

1. Citigroup (C): 15.2%
2. Sprint (S): 10.1%
3. New York Times (NYT): 10%
4. NRG Energy (NRG): 8.5%
5. SPDR Gold (GLD): 7.2%
6. Exco Resources (XCO): 6.9%
7. Corn Products (CPO): 6.5%
8. Bunge (BG): 5.2%
9. Complete Production (CPX): 4.6%
10. Calpine (CPN) Calls: 4%
11. Freeport McMoran (FCX): 3.4%
12. US Airways (LCC): 3.2%
13. Terrestar (TSTR): 2.2%
14. Seagate (STX): 2%
15. Trina Solar (TSL): 1.7%

Please keep in mind that these equity holdings are by no means representative of Harbinger's entire portfolio. They undoubtedly also hold numerous distressed plays and positions in other markets that aren't required to be disclosed. That said, we do get an interesting look at some of their long US equities exposure which totals $1.9 billion.

Harbinger started a few massive new long positions in the first quarter, most notably in Citigroup and NRG Energy. They also disposed of longstanding stakes in Calpine, Walter Energy, and Take-Two Interactive. The latter is interesting because we've seen corporate activist Carl Icahn adding TTWO shares and actively trying to drum up shareholder value. And while Harbinger sold completely out of CPN common stock, they also added a new position in CPN call options so they still have some exposure there.

One interesting talking point is Harbinger's use of exchange traded funds presumably as hedging tools. They've held a position in SPDR Gold Trust (GLD) for a while but heavily added to it in the first quarter. They also started a brand new stake in VXX, an ETF based on the volatility index (VIX). As volatility increases (as it definitely has as of late), VXX increases in value. In essence, Harbinger is looking for hedges against panic and for assets that might increase when equity markets are declining.

Lastly, we highlight Harbinger's continued stake in numerous natural resource plays. They've owned and have been in & out of various plays but seemingly like Freeport McMoran and Cliffs Resources the best.

Assets reported on the 13F filing were $1.9 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, John Paulson's hedge fund Paulson & Co, Chase Coleman's Tiger Global, and Roberto Mignone's Bridger Management. Be sure to check back daily for new hedge fund updates.

Falcone's Hedge Fund Harbinger Capital Sells New York Times (NYT) Shares

Phil Falcone's hedge fund Harbinger Capital Partners just filed a Form 4 and an amended 13D with the SEC regarding shares of The New York Times Co (NYT). In the disclosures, we see that Harbinger sold 1,500,000 shares of NYT at a price of $12.30 on April 20th. The next day, they sold 1,750,000 more shares of NYT at a price of $12.55. After these transactions, Harbinger still owns 13,636,799 shares of The New York Times. So while they definitely still own a sizable stake, this means they sold 19.2% of their position. According to the 13D filing, Falcone's hedge fund is left with a 9.43% ownership stake in the company. This is the second time in recent weeks that they've sold NYT shares and we detailed their previous sales.

Falcone's hedge fund focuses on event driven, bankruptcy, and value plays as they seek "alpha-generating ideas that are uncorrelated to investment cycles." Falcone has been quite busy as of late as we recently saw Harbinger start a stake in Palm (PALM) as the company has positioned itself to be sold. Harbinger also revealed plans for a 4G wireless network in a move we've never seen a hedge fund make before. The hedge fund was up 1.77% for the year at the end of March as noted in our first quarter hedge fund performance numbers post.

Taken from Google Finance, The New York Times Co is "a diversified media company that includes newspapers, Internet businesses, investments in paper mills and other investments. The Company is organized in two segments: News Media Group and the About Group."

To see the rest of Falcone's equity investments, head to Harbinger's portfolio.

Falcone's Harbinger Sells New York Times (NYT) Shares

Philip Falcone's hedge fund Harbinger Capital Partners just recently filed an amended 13D and a Form 4 with the SEC in regards to shares of The New York Times (NYT). As per the Form 4, we learn that they sold 1,500,000 shares of NYT on March 26th at a price of $11.20. After the sales, Harbinger is left with 16,886,799 shares remaining. As per the amended 13D, we now see that this totals a 11.68% ownership stake in the company. This is obviously a decrease from the last time when we saw their NYT stake in Harbinger's portfolio. These recent sales come after Falcone's hedge fund reduced their NYT stake back in December and in November as well. So, the selling continues at a very controlled pace and we'll keep our eyes peeled for any future hints of just position size adjusting or a turn in sentiment.

Yet again, Harbinger has sold shares at a loss. They initially acquired their stake between $15-20 per share almost two years ago when they invested over $500 million. While no one can deny the NYT is a tremendous brand and there is an asset there, we've wondered whether or not newspapers are a dying industry. They certainly have some business model problems to address in the near future. While Harbinger has sold shares numerous times, it appears as though they are still confident in the name as they still own a large stake.

Harbinger of course is a multi-billion hedge fund focused on both distressed debt and equity plays. They often take large, concentrated positions in companies and this NYT stake is the perfect example. Other recent news out of the hedge fund includes word that Harbinger plans to build a 4G wireless network. Additionally, last week we found out they had boosted their stake in Sable Mining.

Taken from Google Finance, The New York Times is "a diversified media company that includes newspapers, Internet businesses, investments in paper mills and other investments. The Company is organized in two segments: News Media Group and the About Group." For other investments Falcone's hedge fund has made, you can view the rest of Harbinger's portfolio here.

Phil Falcone's Harbinger Capital Bets Big on Sprint Nextel (S): 13F Filing

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Next up is Philip Falcone's hedge fund Harbinger Capital Partners. Falcone runs his $6 billion hedge fund with a focus both on distressed and equity plays and often takes concentrated positions in companies. And, that last reason is exactly why we track them. Even though we can't see their distressed plays (they aren't required to disclose them), we can track their equity plays that they have high conviction in. You aren't going to devote large portions of your portfolio to one company unless you truly believe in your thesis. After having a dismal 2008, Harbinger had a solid showing last year as they finished up 46.5% as we noted in our 2009 hedge fund performance numbers post.

The positions listed below were Harbinger's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.


Brand New Positions
Sprint (S)
Exco Resources (XCO)
Take Two Interactive (TTWO)
SPDR Gold Trust (GLD)
Corn Products (CPO)
US Airways (LCC)
Superior Well Services (SWSI)
Cloud Peak Energy (CLD)
Alpha Natural Resources (ANR)
iStar Financial (SFI)
Delta Petroleum Bond
The rest of the new stakes were each less than 0.25% of reported holdings: ICO Global (ICOG), MGIC Investment (MTG), & Strategic Hotels (BEE)


Increased Positions
Harry Winston Diamond (HWD): Increased by 587%
Walter Energy (WLT): Increased by 128.5%
Complete Production (CPX): Increased by 44.5%
Mercer International (MERC): Increased by 11.7% (we detailed their convertible bond exposure)


Reduced Positions
Interpublic Group (IPG): Reduced by 46.5%
Freeport McMoran (FCX): Reduced by 38.2%
Calpine (CPN): Reduced by 28.1%
Media Gen (MEG): Reduced by 18.1%


Removed Positions (Sold out completely):
McDermott (MDR)
Solutia (SOA) ~ we saw this coming with their previous repetitive sales
Zapata (ZAP)
Gentek (GETI)
USEC Bond International Coal (ICO)


Top 15 Holdings by percentage of assets reported on 13F filing

1. Calpine (CPN): 18.47%
   
2. Sprint Nextel (S): 15.35%
   
3. New York Times (NYT): 12.71%
   
4. Walter Energy (WLT): 10.42%
   
5. Complete Production Services (CPX): 5.31%
   
6. Interpublic Group (IPG): 4.81%
   
7. Exco Resources (XCO): 4.75%
   
8. Freeport McMoran (FCX): 3.82%
   
9. Take Two Interactive (TTWO): 3.26%
   
10. SPDR Gold Trust (GLD): 3%
    
11. Corn Products (CPO): 2.35%
    
12. US Airways (LCC): 2.17%
    
13. Terrestar (TSTR): 1.66%
    
14. Harry Winston Diamond (HWD): 1.57%
    
15. Superior Well Services (SWSI): 1.37%
    

Harbinger runs quite a concentrated equity portfolio and remember that a lot of their holdings are also in distressed assets, Falcone's specialty. They turned over their portfolio quite significantly in the fourth quarter as a large portion of their top holdings are brand new positions. Most notable will be their stake in Sprint (S) which takes up over 15% of their reported assets. But also take not of their Exco Resources stake (XCO). We did, on the other hand, already know about their new Superior Wells position. This just goes to show that you have to track all SEC filings, not just the 13F's, as hedge funds will often give you glimpses into their portfolio on a much more real-time basis.

Most people will take notice of Harbinger's new stake in the gold ETF: GLD. So many hedge funds have some exposure to gold these days it's not even funny. We found two of Harbinger's new stakes intriguing. Firstly, Falcone has joined Carl Icahn in buying TTWO shares. Additionally, like David Tepper's Appaloosa Management, Falcone bought shares of airline LCC.

We saw some notable sales as Harbinger sold completely out of Solutia, something we saw coming as we detailed their seemingly constant sales of SOA. We had also seen Falcone's previous sales in CPN as well, so that wasn't surprising to see. It was interesting to see the hedge fund shed a good portion of their FCX position as they hadn't held it very long. Overall, Harbinger increased exposure to basic materials and sharply decreased exposure to Utilities.

All data used for this article comes from Alphaclone, our source for backtesting strategies and sorting through all the hedge fund portfolio maneuvers with ease. Assets reported on the 13F filing were $1.78 billion this quarter compared to $1.48 billion last quarter, a 20% increase. Remember that these filings are not representative of the hedge fund's entire base of AUM.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, Warren Buffett's portfolio, John Paulson's hedge fund Paulson & Co, Lee Ainslie's Maverick Capital, Dan Loeb's Third Point, Eddie Lampert's RBS Partners, David Ott's Viking Global, Chris Shumway's hedge fund Shumway Capital Partners, and Chase Coleman's Tiger Global. Check back daily for our new updates.

Philip Falcone's Harbinger Capital Trims Two Positions

Philip Falcone's hedge fund firm Harbinger Capital Partners just recently filed two separate amended 13D filings to detail changes to two of their portfolio positions. Firstly, we see that Falcone and his hedge fund have sold even more New York Times (NYT) shares. We just recently covered their NYT sale and it seems they are selling for the third time in the past four months. Most recently, they have sold 2,651,635 shares at a price of $8.35 according to Form 4 and amended 13D filings with the SEC. The transaction took place on December 1st, 2009 and they are now left with 18,386,799 shares in total which translates to a 12.79% ownership stake. So while they definitely still have a sizable stake in NYT, their two recent sales are notable.

In the past, we've taken a step back and wondered whether or not newspapers are a dying industry. Their business model uncertainty still continues and many are concerned. Yet again, Harbinger has sold shares at a loss. They initially acquired their stake between $15-20 per share almost two years ago when they invested over $500 million. Their current stake is down from their previous high of around 20% ownership of the company. We'll have to see if they continue to sell going forward, as in the past they had sought suitors for their NYT stake. We also note that Mexican billionaire Carlos Slim has a hefty position in NYT as well, so there are definitely some prominent players in NYT.

Secondly, Harbinger Capital Partners has again sold more shares of Solutia (SOA). This wind down has seemingly been in slow motion as they have been selling shares in SOA since back in June of this year. Their most recent sales were at the beginning of November and this time is no different. As per their recent amended 13D filing with the SEC, Philip Falcone's hedge fund now shows a 4.4% ownership stake in Solutia (SOA) with 5,391,200 shares owned. This means that within the past month, Harbinger has sold 2,867,853 more shares.

Philip Falcone runs his $6 billion hedge fund with a focus both on distressed and equity plays and often takes concentrated positions in companies. For more of their recent activity, we put up a post detailing a portfolio update and also covered the execution of their Calpine offering (CPN) as well. For more on Harbinger, you can check out some of their UK positions too.

Taken from Google Finance, The New York Times Company is a "diversified media company, including newspapers, Internet businesses, a radio station, investments in paper mills and other investments. The Company is organized in two segments: News Media Group and the About Group. Additionally, the Company owns equity interests in a Canadian newsprint company, a supercalendered paper manufacturing partnership in Maine, and Metro Boston LLC, which publishes a free daily newspaper in the greater Boston area."

Solutia is "a global manufacturer and marketer of a variety of chemical and engineered materials that are used in a range of consumer and industrial applications. The Company maintains a global infrastructure consisting of 25 manufacturing facilities, six technical centers and over 29 sales offices globally, including 14 facilities in the United States. The Company’s segments are Saflex, CPFilms and Technical Specialties."

Hedge Fund Harbinger Capital Sells New York Times Shares (NYT)

Philip Falcone's hedge fund firm Harbinger Capital Partners recently filed an amended 13D and a Form 4 with the SEC, updating their stake in The New York Times Co (NYT). Due to activity on November 17th, 2009 they are now showing a 14.64% ownership stake in NYT. They now hold 21,038,434 shares and this is a decrease from their previous position. On November 17th they sold 2,500,000 shares at a price of $9.00 per share, bringing them to their share total to the amount listed above.

This is not the first time that Harbinger has decreased their stake, as we previously covered them selling shares of NYT before. We have also taken a step back and wondered whether or not newspapers are a dying industry? They certainly have some business model problems to address in the near future. It would seem that yet again, Harbinger has sold shares at a loss. They initially acquired their stake between $15-20 per share almost two years ago when they invested over $500 million. Their 14.64% ownership stake is down from their previous high of around 20% ownership of the company. We'll have to see if they continue to sell going forward, as in the past they had sought suitors for their NYT stake. We also note that Mexican billionaire Carlos Slim has a hefty position in NYT as well, so there are definitely some prominent players in NYT.

Philip Falcone runs his $6 billion hedge fund Harbinger Capital Partners with a focus both on equity plays and distressed plays and often takes concentrated positions in companies. For more of their recent activity, we recently penned a post detailing a portfolio update on Falcone's hedge fund and also covered the execution of their Calpine offering (CPN) as well.

Taken from Google Finance, The New York Times Company is a "diversified media company, including newspapers, Internet businesses, a radio station, investments in paper mills and other investments. The Company is organized in two segments: News Media Group and the About Group. Additionally, the Company owns equity interests in a Canadian newsprint company, a supercalendered paper manufacturing partnership in Maine, and Metro Boston LLC, which publishes a free daily newspaper in the greater Boston area."

Are Newspapers a Dying Industry?

The recent news out of Sun-Times Media adds yet another name to the list of pre-bankruptcy/bankrupt newspaper chains. Not only are newspapers seeing decreased advertising revenue and decreased circulation, but many are trying to stave off crushing debt loads. Even newspapers who have relatively successfully navigated things thus far are showing some signs of weakness. The Wall Street Journal has benefited by providing focused, niche content and by recognizing the digital shift. As such, they began to provide digital content and immediately started monetizing it. But, although they've had relative success there, they are still fighting for readers as they offer a 75% discount. Undoubtedly, something will have to give and certain names in the industry will have to start selling off assets, go private, or morph/evolve into a non-profit or new media company.

If you have been following our twitter updates, you would have seen us shorting New York Times (NYT) back at $7.70 and covering down at $4. Currently, we are not involved and figured it would be prudent to survey the macro landscape as it relates to the industry. Then, in a future post, we'll survey the NYT in particular (which we've highlighted before due to the ownership presence of hedge fund Harbinger Capital Partners and Mexican billionaire Carlos Slim). We want to focus on them due to the fact that their current status is very representative of many other industry players. Their battle with monetization and various business plans is well documented so far. Undoubtedly, something will have to give and certain names in the industry will have to start selling off assets, go private, or morph/evolve into a non-profit or new media company.

The industry itself is facing a few key issues including crushing debtloads, decreasing revenues/circulation/readership, a secular shift, and a battle with their kryptonite: monetization. We want to start by pointing out the excellent article out of Slate last week on this very topic. Basically, Daniel Gross lays out the facts that the newspapers filing for bankruptcy are ones that have been stockpiled with debt and/or idiotic management decisions. He highlights great points that many have analysts have brushed aside. But, he also admits that some industry players (mainly smaller ones) are in trouble. The core of the problem here is the debtload many newspapers face. It doesn't help that they've been hit with the perfect storm of debt loads, decreasing revenues, decreasing circulation/readership, and the worst economic situation since the great depression. We're in the eye of the storm and this hurricane has simply taken their problems and magnified them tenfold.

The problem though, is what will they do when things stabilize and return to 'normal'? If the economy were to recover tomorrow, then advertising revenues would pick back up (which would help their cash cushion and delay their debt-duel a little bit longer). But, they still have the problem of decreasing circulation and/or readership. Readers are trading physical papers in favor of online media. And, if this truly is a secular trend, then newspapers have a much larger problem at hand. How can they monetize things besides advertising? The New York Times' struggle is the perfect example of this very problem. Do they charge for some content? All content? Who knows? It's a tough sell in an environment where information becomes freer by the day.

Newspapers are fighting three concurrent battles that are all a function of each other. They can't truly fix their business woes until they find a way to increase revenues and monetize their digital content. Cash infusions are merely a quick fix and most likely do not solve their long-term problems. Newspapers are like drug addicts because that quick ‘hit’ of cash feels good, but they are still left wanting and needing more. Assuming the trend plays out, more and more readers will shift to digital and they have to find a way to make money from that. This brings us to the second battle: monetization. This in and of itself will probably be the trickiest for them. They can shift with the trends and give readers what they want, but can they make money off of it? The answer thus far is: not really. We'll simply have to wait and watch this giant tug of war of trial and error before we can gain more insight. Lastly, you have the battle with readership and circulation. Circulation for the most part is down, and readers/subscribers of print versions are down. To compensate for this, they've ramped up their digital content, staying in line with the trend. But, this reverts back to their problem of truly monetizing the digital content through various (thus far ineffective) business models. Not to mention, they are trying to do so in an modern-day world where information is everywhere and more often than not, it is free.

The uphill battle they face is depicted (ironically enough) by the NYT. Below, you'll see their illustration of changes in circulation and revenues across the country:

(click to enlarge)

Go here if the graphic is still too small to read after enlarging. Obviously, the industry has a lot of headwinds and the fact that stubborn majority owners control many of them doesn't seem to be helping things (if you're a shareholder). While companies like the NYT have made strides in raising cash to fight off near term maturities, they are seemingly just drawing out the inevitable battle with their debt destiny.

Simply put, it is way too early to gauge if newspapers are a dying industry. And, those attempting to proclaim their death prematurely are oblivious to the daily evolution of all forms of media. We do not think that newspapers as an entire industry will succumb to this economic quicksand. Don't get us wrong though, we're bearish on the industry longer-term and feel they are battling a rising secular trend without a concrete gameplan. As many traders say, "The trend is your friend." Until it's not.

That's the wrench in this whole equation: trends and innovation. Newspaper companies could come out tomorrow and completely revolutionize and revitalize readership and their streams of income with some new amazing "thing" that no one could have ever predicted. It’s not likely, but stranger things have happened. We would be inclined to present an alternative outcome for the industry. While the physical newspaper itself may in turn slowly die, the industry as a whole will be forced to morph and evolve into a new means of distribution, a new medium/platform, and a new business model. If they don't, and the debt finally crushes them, then they'll die. That's the catch. Everyone is on the lookout for the death of the industry, when they instead should be focusing on who will morph and evolve, and who won't. There will be survivors, but they most likely won't be a 'newspaper' in the true sense of the word.

With this we arrive at no firm conclusions and a lot of "we'll wait and see." This is mainly because media in and of itself is constantly evolving and changing. The ball is in their court and we have to wait for their move before declaring death to their industry. We like to look at it as more of an evolution and metamorphosis with hints of Darwinism. The physical newspaper itself may die, but the industry players will be forced to morph into some new iteration of a media player. We've already begun to see the big push in terms of digital content. But, what's next? Those who figure it out will survive. In the end, it's all about the numbers: their debtload, the number of readers, and how much revenue they can generate. However, one cannot overlook the non-numerical input: secular shifts & trends. And, right now, the trend is most definitely not their friend.

Carlos Slim Discloses 16.21% Stake in New York Times (NYT)

Amongst all the reports that Carlos Slim's companies were going to give the New York Times (NYT) $250 million at (crazy) 14% interest, we finally get a raw number as to his position in the company. In a 13G filed with the SEC, Carlos Slim has disclosed a 16.21% stake in NYT with 25,754,000 shares of class A stock.

This adds to his investment arsenal of a 17.8% stake in Saks, and a 7.64% stake in Bronco Drilling, among other things.

Carlos Slim is a well-known Mexican businessman who amassed his wealth through telecom. He is known for his association with America Movil (AMX), Telcel, and Telefonos de Mexico (TMX) and was the second richest man in the world as of 2008. Slim has been busy in the markets recently.

Taken from Google Finance,

The NYT is "is a diversified media company, including newspapers, Internet businesses, television and radio stations, and investments in paper mills and other investments."

Disclosure: market folly was short NYT at the time of writing. Holdings can change at any time.