Credit crunch? What credit crunch?

The New York Times is about to test the proposition that the credit markets are just-fine-thank-you-very-much:

The New York Times Company's 10Q (NYT) contains more details on the company's cash crunch.

Specifically, the company must deliver $400 million to lenders in May of 2009, six months from now.  The company has only $46 million of cash on hand, and its operations will likely begin consuming this meager balance this quarter or next.  The company has been shut out of the commercial paper market, but has a $366 million short-term credit line remaining that it entered into several years ago, when the industry was strong. It has not yet drawn this cash down, and given the current environment and the trends at the company, we would not take for granted that it will be able to do so.

The New York Times is in discussions with its lenders about the May payment, and management thinks it will be able to work something out ("We expect that we will be able to manage our debt and credit obligations as they mature." Note the use of the word "manage" as opposed to "meet.")

Blodget goes on to note that "Given the current circumstances, if we were that bank, and we were as strapped and scared as most banks are these days, we would certainly be reading the fine print to see what sort of 'material adverse change' clauses the contract might include".  Not a good time to have Rupert Murdoch gunning to replace you as America's premier national newspaper.

The New York Times is, in part, a victim of its own success.  Its web operation is awesome.  It also sort of makes it unnecessary to subscribe to the paper.  And so far, no company has figured out how to monetize web page views sufficiently to pay for an operation of the NYT's scale. 

One might ask if the same doesn't apply to my employer.  Well, not really.  We don't have massive overhead like the New York Times does; we commission articles, not staff them.  Obviously, everyone in media worries about ad sales and how to monetize the web, but we're not trying to run a massive newsgathering operation.  Besides, people are much more attached to physical magazines than to newspapers (except for the Sunday Times, which occupies its own iconic slot in yuppie life.)

Over the last decade, the New York Times has tried to grow its way out of the obvious problems facing the print media:  new sections, more pages, more distribution, more web operations.  It looks like that strategy is now hitting the wall.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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