Sunday, January 21, 2007

Owners fight as "Israeli" flounders

Costs are higher than expected and revenues are less than expected. That's the story at the free daily "Israeli" and its two owners are fighting in court for control. Reporter Carmel Ben-Zour of described the situation succinctly:
    The free newspaper "Israeli" is losing $700,000 a month: It has $250,000 in revenues a month, and spends over a million dollars. According to the paper's business plan, which has been presented to the court, the paper was expected to lose $7.2 million from its start in November 2005 until the end of December 2006, and break even in November 2007. It was scheduled to lose only $307,000 a month at the end of 2006.

    The paper's owners, Sheldon Adelson and Shlomo Ben Tzvi, are in Tel Aviv District Court fighting over the future of the paper. For now the court recommended that they continue discussing a mutual sale or try binding arbitration. It seems the sides are seriously considering the arbitratration option. One of the major reasons for the large losses is that while the business plan spoke of printing costs of 6.4 cents per paper, the actual costs were 25-35 percent higher. Also, advertising revenues are significantly below the expectations laid out in the business plan. The two sides will meet again in court today [Jan. 20].

What did we learn here? The two partners wouldn't be fighting if they thought "Isreali" was hopeless. They know it could work, but it needs to stem its losses and sell more ads. However, the publicity about the paper's financial problems may be queering ad sales.