A Whole New Game

 

EXECUTIVE SUMMARY

THE COMPANY
The National, New York City
Concept: Publish a national daily sports newspaper

Projections: Losses of about $16 million in first year, break-even in fourth year; 1 million circulation and pretax profit approaching 14% in about five years

Hurdles: Getting people to buy another newspaper; providing competitive coverage with a smaller staff; sustaining up to $100-million loss before break-even


THE FOUNDERS
Emilio Azcarraga, 58
Majority stockholder

The National's deep pockets belong to Mexican media impresario Emilio Azcarraga, a tenaciously secretive man believed to be worth from $1 billion to $10 billion. Azcarraga's Mexico City-based media company, Televisa, has 90% of the Mexican market and exports to the United States, Europe, and Asia. The empire also includes film production, real estate, insurance, hotels, and videocassette manufacturing. Despite his low profile, Azcarraga has contacts at the highest levels of Mexican political life, ensuring him control of a business that in this country would have long ago been busted up by the Federal Communications Commission and the Justice Department.

Peter O. Price, 49

Publisher, president, and co-owner

Publisher Peter Price's edges are less rough, his pockets less deep. A graduate of Princeton and Yale Law School, he is no stranger to publishing ventures. With his wife he started Avenue, an upscale monthly magazine that chronicles trends and lifestyles in the United States. When Rupert Murdoch sold The New York Post recently, Price became its publisher. That complex deal took all of three months to complete. "A lot of very big deals are very compressed and very spontaneous," he explains. Then there is The National, which Price acknowledges is in a different league. "I've been through big deals before, but not on this scale, and not with something so conceptual. We're dealing with pure concept."

FINANCIALS

The National Projected Operating Statement

($ thousands) Year 1 Years 3-4
(Launch) (Break-even)
Number of markets 15 25

Average daily circulation $225,000 $740,000

Number of employees 250 450

Sales
Circulation revenue $35,100 $115,440

Advertising revenue 11,700 49,474

Gross Sales 46,800 164,914
Cost of sales

Circulation/distribution 10,530 34,632

Ad expense 3,276 11,544

Production (paper, printing) 9,828 38,326

Gross Profit 23,166 80,412
Expenses
Salaries & benefits 18,750 36,000

Promotion 10,000 10,000

General & administrative 10,764 34,631

Net Profit (before taxes) (16,348) (219)
*Source: Inc. estimates, based on information from The National and industry sources

PRINTING MONEY
If The National reaches 1 million circulation, its year-five projection, and hits a 65%/35% circulation to ad revenue ratio, each copy would generate $.77.

Paper and printing $.16

Circulation/distribution .15

Salaries and benefits .13

G&A, including rent and depreciation .15

Profit .10

Ad discounts and commissions .05

Promotion .03

Total revenue from one copy sale is $.77

WHAT THE EXPERTS SAY

COMPETITOR

BRIAN TOOLAN

Assistant managing editor, Philadelphia Daily News, a sports-driven tabloid relying mainly on street sales; former sports editor

The National will have to force itself into the customers' hands every day. The only way it can do that is by breaking news, having information other papers don't have, and looking terrific. It's impossible to have compelling, exclusive material six days a week, 52 weeks a year. To sell 1.3 million copies per day they're going to have to average 54,000 sales in each city. In Philadelphia, the fourth-largest newspaper market, USA Today sells between 17,000 and 22,000 papers a day, and that's after eight years and tons of promotion dollars.

This paper is also going into markets where the best daily newspapers are. The National is going to be outgunned in every instance. In Chicago, New York, and Los Angeles, it will have bureaus with 10 to 12 staffers in them, competing with papers with staffs of 40 and 50 in just the sports departments.

I think it's a misjudgment to place entertainment value on writers. People in New York know who Mike Lupica is, but if you asked 100 people in Denver or St. Louis who he is, they wouldn't know. Writers build a reputation by writing about local issues, teams, and personalities.

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