Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=218069
Story Retrieval Date: 5/18/2013 10:57:52 AM CST
Courtesy of flickr user Joe Shlabotnik
After more than a century and a half, the Grey Lady is undergoing a serious makeover.
To survive within an industry many fear may be nearing its death throes, New York Times Co. is slimming down and redirecting focus onto its most valuable asset: its good name.
The approach is both back-to-basics and future minded, an expansion at the same time as a contraction. While shedding its other media assets and refocusing on its original brand, the company is taking pains to market that brand internationally, to use it as a vehicle for new digital initiatives and to replace ebbing advertising dollars with higher circulation revenue.
“The key areas in which we are focusing [include] expanding our portfolio of pay digital products, growing our international footprint to exploit the strong global resilience of the New York Times brand, developing a more strategic video capability, building on our mobile initiatives and expanding our conference and event business,” recently appointed CEO Mark Thompson said in a fourth-quarter earnings conference call with analysts.
No newspaper has loomed larger in American cultural consciousness than the New York Times, which boasts more Pulitzer Prizes than any other news organization. In the early 70s, the paper braved legal action to publish the Pentagon Papers, exposing the government’s botched and misguided involvement in Vietnam.
But the Times hasn’t been able to escape the calamitous decline of the newspaper sector. Lately, critics worry that downsizing has left the Times less able to engage quite as critically with the high-stakes issues of the day: The paper dismantled its environmental desk in January, and announced Monday that it would be putting an end to its environmentally focused “Green” blog. The news follows a string of highly publicized string of buyouts and layoffs that thinned the ranks of veteran editors at the beginning of the year.
That the owner of the country’s most storied paper must struggle to remake itself is a sign of how drastically the digitalization of news content has damaged the newspaper business. The ubiquity of free online stories has taken a massive bite out of advertising and circulation revenue; blogs that aggregate and summarize traditional news outlets’ stories are rendering those outlets obsolete. According to the Newspaper Association of America, ad revenue declined by more than half between the third quarter of 2003 and the third quarter of 2012.
The decline has been dramatic. As recently as 2005, the Times’ shares were trading above $40; they have swooned since then, and have been stuck below $10 in recent months. But company Chairman Arthur O. Sulzberger Jr. is far from throwing in the towel on the company his family has controlled almost since its inception,
“The decision I’m most proud of I haven’t made yet,” Sulzberger said in a recent interview with two Wharton professors. “What I see as most exciting is the chance for international growth digitally.”
Yet the Times needed to shrink before it could think about any kind of growth. The company announced on Feb. 20 that it is selling the Boston Globe, for which it paid a cool $1.1 billion in 1993, when the publishing industry was in its salad days; today, according to most industry analyst estimates, the company stands to fetch between $1 million and $2 million from a sale.
The proposed sale would be the latest in a series of divestitures that have left the Times with little except its namesake newspaper: Over the past couple of years, it has sold everything from its stable of regional newspapers to its stake in the Boston Red Sox.
The company still owns the International Herald Tribune, but revealed plans on Feb. 25 to rebrand the Paris-based global newspaper as the International New York Times.
The renaming of the Herald Tribune is only one manifestation of the company’s bid to capitalize on international demand for its brand. “Essentially, with minimal marketing activity, the company has begun to attract subscribers from outside the U.S.,” Thompson said in the conference call. “So we think that the potential to tap into larger reservoirs of potential users and subscribers is there.” The company launched a Chinese-language website in June of last year.
Analyst John Eade of Argus Research Corp. said he thinks the Times’ newfound faith in international markets is a logical approach. “If overall advertising growth is rising in the U.S. at, I don’t know, 2 or 3 percent per year, in line with GDP, it’s growing probably 10 to 15 percent in emerging economies like China, Brazil and Australia,” he said. “So I think it makes sense for the Times to look overseas for growth.”
Eade also noted that while overall domestic advertising growth is comparatively weak, the figures for newspaper advertising specifically are downright depressing: At the Times, 2012 ad revenue was down almost 6 percent from 2011. Although the company is getting more advertising at its website, advertisers won’t pay anything near the price of print ads for online versions.
To help offset the impact of the ad drought, the company is channeling efforts into growing online circulation. That fits the skill set of Thompson, who is widely credited with facilitating the digital expansion of the BBC, where he served as director general before being hired by the Times last year.
“For the first time in our history, annual circulation revenue surpassed those from advertising,” he said when the company released its year-end financial results. Circulation revenues jumped more than 10 percent between 2011 and 2012, largely driven by an increase in digital subscriptions and a higher print edition price.
Eade said he sees digital subscription numbers continuing to swell, but Rick Edmonds, a media business analyst for the Poynter Institute, said he is unsure circulation will be able to make up for ad declines in the long term. “All revenue dollars are not equal – there’s a little way in which they’re trading down, and that will be an issue over time,” he said. “They need to catch some kind of updraft in advertising.”
The fourth-quarter and full-year figures revealed that the Boston Globe was struggling more than the company’s eponymous paper, lagging far behind in terms of digital subscriptions. When asked during the conference call how the company planned to turn the weak numbers around, Chief Financial Officer James Follo equivocated.
“It’s clearly not as impactful to that business as NYTimes is,” he said. “We don’t really see the dynamics of that changing. We see it as an incremental business.”
Two weeks later, the Globe and the other publications within the New England Media Group were up for sale.
“I think was okay to own those papers twenty years ago, thirty years ago, when the newspaper business was still a good business, before the Internet,” Eade said. “But it doesn’t make sense now, and I do think their focus should be on their strongest brand, which is the New York Times.” He thinks the company should just chalk up the Globe as a bad investment and move on. “It’s not like they can go into Boston and rebrand the Boston Globe the Boston New York Times,” the analyst said.
Edmonds, however, expressed concern that the company no longer has the cushion of remaining saleable properties. “With the sale of these assets – which makes sense – the cupboard is pretty much bare now,” he said. “Unless there’s some way they could further sell shares in the building, they don’t have much left if the company hits a bump.”
Besides shedding non-core assets, the Times is spotlighting its central brand by extending it to new initiatives outside the newspaper industry box. At the end of January, for example, the company unveiled timeSpace, a new program that places digital startups within the Times’ headquarters to develop and share their products in dialogue with the paper’s staff.
“To the extent that industry leadership is a part of their brand, I think being involved in that fairly concrete way, in their building, is a logical move,” Edmonds said. “They may get some projects that they’re able to draw on.”
So far, the Times’ new direction seems to be filling investors with tentative optimism. In the past month the company has seen its battered stock price inch higher. As of Thursday afternoon, it was at $9.604, closer to its 52-week high ($11.07) than its low ($5.88).
The company’s twelve-month trailing price-earnings ratio is 11.07, compared with the S&P 500’s 15.24.
Eade has given the Times’ stock a hold rating, and is fairly optimistic about its prospects. “I think what the company is going to try to do is engage more with the various constituencies it serves – whether that’s contacts in Washington, or readers around the country or around the world,” he said. “And I think you’re just going to continue to see more interactivity.”
In other words, the New York Times Co.’s future will be more about scaling down and reaching out. “I think they’re going to try to just dig deeper into the talent resources and brand they have,” Eade said.