Five Questions With….

Leonard P. FormanMember of Veronis Suhler Stevenson’s board of advisors and ex-CFO of The New York Times Co.1. Media-specialist LBO shop VSS has told us before that it won’t go near metropolitan dailies. Now it’s recruited you. Why?

I’m not sure I would go near metropolitan dailies either. But I’m not from the newspaper. I’m from the Times company, and we have had a pretty broad portfolio. I ran the Times’s magazine group. I was head of corporate development and head of strategy, and was also the CFO. Before that I worked with Henry Silverman when Telemundo was created. I’ve also done some start-up work in the early days of the Internet.

2. Speaking of the Internet, VSS recently sold German newspaper Berliner Zeitung, generating a 3x return on equity. One part of the firm’s strategy was to expand the company’s online business. What is the right online approach for subscription-based publications?

It really depends on the specifics of the publication. Ultimately, content providers will charge for all or some portion of their content. It’s just inevitable. But business and financial publications have more of an opportunity to charge than general content publications. The New York Times is trying to strike a balance between subscription prices for some of its products, versus The Wall Street Journal, which is charging for all of it. When advertising is growing by 25 percent to 30 percent, you don’t want to eliminate eyeballs, which subscription charging does, but when the Internet advertising business becomes more mature, you’ll need to look for alternative sources of revenue.

3. What is the low-hanging fruit in media?

I don’t know if there is any low-hanging fruit. Most companies have been forced over the last four to five years to cut costs. There’s very little near-term obvious ways to grow revenues. Many advertisers are struggling themselves. Part of the problem with companies in traditional media is that their own customer bases are having problems.

4. What’s the advantage of the LBO model in the media?

From someone who’s been in the public sector, the pressure to meet targets and how you’re penalized if you don’t meet targets is pretty intense. Being out of the public lair has huge benefits for making the transition from one business model to another without meeting quarterly targets. That doesn’t mean you don’t have strict financial metrics, but investors will understand you have a three- to five-year horizon. Being a public company today, you have investors that want you to pump up the stock in the near term even if it will kill you in the long term. We’ve all seen stories in the paper about investors saying, ‘Buy shares back.’ Buying shares back solves a short-term problem, but it hurts if you’re trying to invest in the company.

5. Any thoughts on Reuters being bought by Thomson, the publisher of Buyouts magazine?

It’s a huge deal. Very interesting. I don’t think it’s a news deal. Its about serving a particular segment of the market with a whole range of products. That’s very different than two news organizations combining.