Competitive Intelligence

Wither The New York Times?: Life in the Era of News as Product or Credibility as Service

In the wake of the Jayson Blair scandal and the firing of Howell Raines, BusinessWeek took a look at the Suzberger family’s guidance of The New York Times through its latest series of challenges:

Since 1896, four generations of the Ochs-Sulzberger family have guided The New York Times through wars, recessions, strikes, and innumerable family crises. In 2003, though, Arthur Ochs Sulzberger Jr., the current proprietor, faced what seemed to be a publisher's ultimate test after a loosely supervised young reporter named Jayson Blair was found to have fabricated dozens of stories. The revelations sparked a newsroom rebellion that humiliated Sulzberger into firing Executive Editor Howell Raines. "My heart is breaking," Sulzberger admitted to his staff on the day he showed Raines the door.

It turns out, though, that fate was not finished with Arthur Sulzberger, who also is chairman of the newspaper's corporate parent, New York Times Co. The strife that convulsed The New York Times's newsroom under the tyrannical Raines has faded under the measured leadership of his successor, Bill Keller, but now its financial performance is lagging. NYT Co.'s stock is trading at about 40, down 25% from its high of 53.80 in mid-2002 and has trailed the shares of many other newspaper companies for a good year and a half. "Their numbers in this recovery are bordering on the abysmal," says Douglas Arthur, Morgan Stanley's (MWD.) senior publishing analyst.

Meanwhile, the once-Olympian authority of the Times is being eroded not only by its own journalistic screw-ups -- from the Blair scandal to erroneous reports of weapons of mass destruction in Iraq -- but also by profound changes in communications technology and in the U.S. political climate. There are those who contend that the paper has been permanently diminished, along with the rest of what now is dismissively known in some circles as "MSM," mainstream media. "The Roman Empire that was mass media is breaking up, and we are entering an almost-feudal period where there will be many more centers of power and influence," says Orville Schell, dean of the University of California at Berkeley's journalism school. "It's a kind of disaggregation of the molecular structure of the media."

Can the Times adapt? It appears to be working on doing just that:

New York Times Digital (which includes Boston.com as well as NYTimes.com) netted an enviable $17.3 million on revenues of $53.1 million during the first half of 2004, the last period for which its financials have been disclosed. All indications are that the digital unit is continuing to grow at 30% to 40% a year, making it NYT Co.'s fastest-revving growth engine.

Advertising accounts for almost all of the digital operation's revenues, but disagreement rages within the company over whether NYTimes.com should emulate The Wall Street Journal and begin charging a subscription fee. Undoubtedly, many of the site's 18 million unique monthly visitors would flee if hit with a $39.95 or even a $9.95 monthly charge. One camp within the NYT Co. argues that such a massive loss of Web traffic would cost the Times dearly in the long run, both by shrinking the audience for its journalism and by depriving it of untold millions in ad revenue. The counterargument is that the Times would more than make up for lost ad dollars by boosting circulation revenue -- both from online fees and new print subscriptions paid for by people who now read for free on the Web.

Sulzberger declines to take a side in this debate, but sounds as if he is leaning toward a pay site. "It gets to the issue of how comfortable are we training a generation of readers to get quality information for free," he says. "That is troubling."

What's a platform agnostic to do? The New York Times, like all print publications, faces a quandary. A majority of the paper's readership now views the paper online, but the company still derives 90% of its revenues from newspapering. "The business model that seems to justify the expense of producing quality journalism is the one that isn't growing, and the one that is growing -- the Internet -- isn't producing enough revenue to produce journalism of the same quality," says John Battelle, a co-founder of Wired and other magazines and Web sites.

Today, Sulzberger faces an even bigger challenge than when he took charge of the Times in the mid-1990s. Can he find a way to rekindle growth while preserving the primacy of the Times's journalism? The answer will go a long way toward determining not only the fate of America's most important newspaper but also whether traditional, reporting-intensive journalism has a central place in the Digital Age.

So, we’ll see if the Gray Lady can bring the ship about and adapt. After all, NYT isn’t really selling the news – its real product is credibility.

- Arik

Posted by Arik Johnson at January 8, 2005 10:50 PM | TrackBack