They call it ’structural change’ because it is exactly that – structural..and the hard edge of that comes in the financial numbers. Quite simply, the company that comes out at the end, doesn’t have the same financial constitution as the one that went into the beginning.
Something has to give – be that margins, top-line growth, or the dividend paid to shareholders. It is a process of financial recallibration; and right now, we can see a number of businesses facing the structural change brought about by digital disruption having to grapple with this.
It comes even more to the fore when these businesses have a load of debt and a cyclical downturn hits. Even the fear that they might breach their covernants is enough to send investors running [as Trinity and Yell can attest].
All of this became more than evident yesterday with the story in Bloomberg about pressure on the NYT Co to reduce their dividend, in order to stop their debt being valued as Junk as their earnings tumble.
The rock: reduce your dividend and see investors run away. The hard place: keep it high and see your debt completely downgraded. As Bloomberg reports, a raft of other newspapers have already reduced and cut their dividends.
Let’s see what the Times does, and the impact it has on its share price.
The point is – this is the proprietor of the biggest and probably best respected online presence in the world with NYT.com at the core, and everything from their dinky new iPhone app at one end to About.com at the other. They’ve taken 100 jobs out of the newsroom, and they are are anything but in denial of the web – yet their digital success doesn’t save them from this sort of crunchy dilemma.
I think this goes to the heart of the disrupted dilemma – sometimes doing everything just isn’t enough – especially when public markets are concerned.
Filed under: Media | Tagged: city, newspapers, nyt
