The acquisition this week of Baseline StudioSystems by The New York Times Company is eye-catching for its cash purchase price, reportedly at close to six time revenues. But the deal looks very much like a starry-eyed gamble by The New York Times.
Baseline StudioSystems, despite its focus on the entertainment business, is very much a B2B data provider. Baseline concerns itself with the business of entertainment, providing deep detail on credits, representation and intellectual property to entertainment industry professionals. It sells online access to this content to the trade on both a subscription and a la carte business.
Recently, Baseline has begun licensing portions of its database to consumer portal sites to help them build traffic around its entertainment content. For those sites willing to buy content that can be given away in order to build traffic, Baseline represents a good licensing option.
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In waltzes the New York Times, still fresh from buying About.com for a hefty premium, and snaps up Baseline. Clearly, The Times wants to be a major online player, and is willing to write big checks to get there. The difference of course is that About.com is an advertising-based B2C operation, a model the Times knows well. But Baseline is a subscription-based B2B business, a model the Times knows ... not at all.
From published statements, it would seem the strategy of the Times is to leverage the Baseline database to build a major B2C entertainment destination. Since this destination will be data-driven, it will quickly bump heads with Internet Movie Database, a unit of Amazon.com, that has spent the last ten years becoming a major B2C entertainment destination. Of course, Baseline is currently licensing its content to other sites that have ambitions to become significant providers of B2C entertainment information, so the Times will also quickly find itself competing with its own customers.
We've been staunch advocates of B2B data publishers jumping on B2C cross-over markets where they exist. But the Times is jumping into a business it barely knows, in a highly competitive market, and hoping it will all work out without killing the golden goose in the process. Perhaps I am not giving Times management enough credit, but success here won’t come easily.