Bailout

Blogonomics: Dealbreaker

By Felix Salmon

Dealbreaker would be a very smart fill-in acquisition for the New York Observer. Bess Levin is already sharing bylines with Jessica Pressler, and the two of them working together at the same shop would be pretty unstoppable.

Nicholas Carlson reports that the Observer has agreed to pay a six-figure sum for the franchise, which seems reasonable to me. The brand is valuable — significantly more valuable than Levin would be on her own. On the other hand, everybody knows that Dealbreaker becomes essentially worthless if Levin leaves. So, sensibly, she’s demanding to get paid.

If I were Levin, I’d want a three-year contract commensurate with the sale price of Dealbreaker. Say a $100,000 signing bonus, and then a salary of $200,000 a year for three years. Contracts by their nature have to be lucrative things, because they carry an opportunity cost: if the Daily Show, say, came calling offering a television-size salary, Levin would have to say no if she was already under contract.

A $200k salary would put Levin on a significantly higher salary than Pressler, and indeed than most other NYO staffers — but that’s what happens when stars get brought on in an acquisition. If the Observer worries about such things, then fine — they should just pay her a higher signing bonus, or else promise her a big retention bonus after three years. There are lots of ways to structure these things.

I look forward to all of this being worked out, because if Dealbreaker isn’t sold to the Observer, there’s a risk that it’ll just disappear entirely if and when Levin decides to leave for greener pastures. For Dealbreaker performs a very valuable service: not only does it lay bare the id of Wall Street, but it also publishes a lot of quarterly letters from hedge funds. That service is hard to monetize, but it’s unique, in the financial blogosphere (Zero Hedge sometimes does it, but not nearly as reliably), and would be sorely missed if Dealbreaker were to cease publication.

Update: Oh dear, that’s embarrassing, I clearly didn’t have enough coffee this morning. Somehow I got the Observer mixed up in my mind with New York Magazine. Whoops. Ignore all references to Jessica Pressler, who is New York Mag, not New York Observer. But relatedly, Barry Ritholtz is already bidding $100k plus equity for Levin sans Dealbreaker.

Full post as published by Macroprudential on October 04, 2010 (boomark / email).