Posted 8:03 AM by steve

A common mistake many reporters make when writing about business is not understanding the difference between a business that is in trouble because its business operations are losing money (such as is the case with GM, Ford and Chrysler), a business that is in trouble because its operations are profitable but not profitable enough to cover its debts (such as is the case with the Tribune company), and a business that is in trouble only because its operations are profitable, and profitable enough to cover its debt service, but not profitable enough to satisfy its ownership (such as is the case with Dell Computer, where Michael Dell has just replaced another set of executives because they weren't successful enough).

An example of this is found in this article that concludes that because the NYT is having trouble coming up with the money to meet its debt service, the NYT is facing the elimination of, at a minimum, its print editions.

But why conclude this? The NYT remains a profitable company, albeit not as profitable as it was pre-Internet and pre-economic trouble. And it's possible that the NYT can emerge intact from its troubles as a more streamlined operation and with a profitable print edition.

However, in order to scrounge up money to cover its debt obligations, ownership will look to sell off profitable pieces of the empire and will take other short term steps to raise capital that harm the long term outlook of the company. In other words, they'll probably kill the company trying to save themselves.

Ownership can 'save' the NYT... but in order to do that, ownership will have to sacrifice its perks (management control) by handing over equity to its creditors. Were the NYT to do so, eliminating its debt and the accompanying debt service, its profits would be sufficient to allow it to stay in business for a long time to come.

But ownership won't do that, they care more about their pockets than they care about the NYT as an institution. It's a reasonable position to have, but maybe we can stop hearing the false claims that management is only looking to protect the NYT; they're looking to protect something all right, but it's not the NYT.