In March 2011, The New York Times announced a major change to its website with the installation of a paywall that limits access to free content. "It’s an important step that we hope you will see as an investment in The Times," publisher Arthur Ochs Sulzberger, Jr. wrote to readers at the time.
This step by one of the world's preeminent newspapers came at the heels of a sharp and steady decline of the paper's advertising revenue. For the first quarter of 2011, The New York Times Company, whose publications include the International New York Times, reported operating profits of $31.1 million, a significant drop from $52.7 million, the first quarter figure from the year before.
By the second quarter of 2011, the picture was already looking more encouraging, with operating profits of $53.4 million.
This year company reported $207.5 million from advertising in the second quarter, a decline of almost 6%, but revenues from its digital platforms grew to constitute a quarter of its total ad revenues. During the same period, the number of digital paying subscribers jumped by 40% to about 740,000 people around the world. This contributed substantially to the 5% increase, to $45.1 million, in the company's newspaper circulation revenues.
The paywall wasn't the company's only innovation over the past two years. About a year ago, Sulzberger made the surprise appointment of a new president and CEO for the company: Mark Thompson. The appointment, which followed an eight-month search and resulted in the import of the 55-year-old British executive, surprised many. Thompson was one of the most powerful people in British media as head of the British Broadcasting Company - the kind of person featured on newspaper lists of the world's most influential people.
"Our board unanimously concluded that Mark is exactly the right person to lead The New York Times Company at this particular moment in time," Sulzberger wrote in a memo to employees about the appointment. Thompson's role was clear. He was to demonstrate to longtime newspaper people what could be done with digital platforms. In 2010, Sulzberger presented the possibility that the print edition of The New York Times could stop appearing by 2015, but in 2012, the paper had not yet managed to substantially increase its revenues from digital advertising and lacked a prominent presence when it came to smartphone and tablet applications.
At the BBC, Thompson ran eight television stations, 50 radio stations and the network's major website. In his new job, he was to show the newspaper how to supply content using a range of media simultaneously. He had led a video revolution at the BBC and under his leadership, the BBC launched its iPlayer, a video player that allows Britons to view television programming that they had missed - without a fee. The iPlayer was a hit during the Olympic Games last summer in London.
In an interview with TheMarker while on a visit to Israel in late October, Thompson refused to eulogize the print newspaper. Despite the decline in the number of people who prefer to hold a printed newspaper in their hands, he said, it appeared to him that the decline had stabilized. "And essentially, we're going to go on printing the newspapers as long as people want us to," he said, "and the indications are that that will be for many more years to come."
Demand for the print edition of The New York Times, he said, has remained stable. "This is not [the] experience of other newspapers," he said, noting that other papers have experienced severe difficulties. "We haven't really seen that. We've seen some loss of newsstand sales, but subscriptions to The New York Times have been pretty stable." And subscriptions to the Sunday print edition of The Times have actually increased since the paywall was introduced, he said.
Despite initial declines "print remains a very effective platform for many kinds of advertising," he noted, although only certain kinds. "For example, in the luxury and fashion categories, there's still very strong advertising demand for print, and I think print advertising is going to exist for many years to come." For about 20 years, print advertising generated 80% of advertising revenues; those days will not be returning, he acknowledged.
Although the numbers for paying digital subscribers is encouraging, the paper is still looking for ways to increase subscriptions to the digital edition. In October the paper presented a plan promoting digital subscriptions among people who pick up the print edition at the newsstand. The plan calls for newsstand copies to include a coupon for a free four-week subscription to the website and digital applications.
"Readers can do what they want," he said. "When readers get used to a particular sensibility of a particular news provider, they may find it both useful and attractive to be in an environment where you meet a particular set of editorial standards." Throughout the course of the interview, Thompson was careful to emphasize the journalistic quality of The Times. The "magic ingredient," as he called it, remains quality journalism.
"If you want rumors about celebrities, The New York Times is a really bad place to look for them. We don't really do that, and there are plenty of websites that do do that. Even that's quite convenient. You know there's no point in bothering going to The New York Times if that's what you're after," he said. "We have a clear brand. We have certain propositions. We're a general interest news provider. We do a lot of different things, but one of the things we do is that we're about relatively serious news, basically. And in a way the hope is people find it useful to know - to know what our brand stands for, and to come to us when they want that. We're not trying to be all things to all people."
Thompson came to Israel to take part in the launch of the International New York Times, previously the International Herald Tribune. At the end of the event, a young man approached Thompson from the audience and showed The New York Times CEO a product developed by the Israeli startup where he works. The product creates video clips from text without the need for complicated editing.
Thompson acknowledged the need for more videos on the newspaper's website, adding that although profits generated by video are currently small, they are expected to grow substantially. Videos are particularly important for smartphone users, he said.
"We only have video on about 1.5% of our pages, and we need to increase the quantity, and we are also working hard to try and figure out what the best way [is] of using video, in particular in relation to news. We've got some outstanding documentaries. We've got some very good features, and we are doing some good news video, but we're just trying to make sense of how to use video - and when you use it separately, as cut pieces of video, and when you integrate it." He also noted the promise presented by multimedia use of video, alongside graphics and texts.
Nonetheless, when it comes to news, videos will not supplant the printed word, Thompson asserted. "A little in the way that when television arrived people said nobody would go to the cinema, and yet cinemas still exist and people do still go to the cinema." He extended the comparison to TV, DVD, Blu-ray, streaming of films online. "In a way, I think the story of media consumption and of advertising is going to be [about how] these different platforms all coexist," he said. "Print, conventional web, tablet, smartphone – they will coexist." But, said Thompson, newspapers need to think of themselves more as content companies with a variety of platforms.
The newspaper industry in the United States was shaken up in August with the announcement that Jeff Bezos, the founder of Amazon.com, was buying the Washington Post for $250 million in a surprising deal that will end the Graham family's 80-year legacy. The Washington Post deal isn't the only recent one of its kind. In August, the Boston Globe was sold by The New York Times Company for $70 million to John W. Henry, owner of the Boston Red Sox. Such changes in ownership reflect the financial challenges facing newspapers.
Immediately following the sale of the Washington Post to Bezos, there were rumors that Sulzberger was interested in selling The New York Times. The rumors were reinforced by news that Sulzberger had sold 50,000 shares of The New York Times Company, but Sulzberger himself denied the rumors and a spokeswoman for him said it was part of routine management of his portfolio, adding that he still had a substantial investment in the company's shares.
"It is true that fewer American newspapers are owned by families, many fewer than was once the case, but in the case of The New York Times, the Ochs-Sulzberger family remain completely committed to the newspapers, and we have six members of the fifth generation of the family [at the company]," Thompson said. "I think the Sulzberger family are going to be involved in The New York Times, both helping to create it as journalists and as executives, but also as owners of the company for many decades to come actually."
Changes in the media environment may have resulted in a transformation in how journalists work, but Thompson said some things do not change. "I think certainly the values should remain the same." The major change, he said, will be what happens after a news story is written. "In my mind, I see your story going out simultaneously many different ways, to different devices, different platforms, different partners - Facebook, Twitter. I sort of see the story suddenly having a very different life, and many different lives at the same time. But the problem is not the way you write the story, and the problem is not whether people would like to read it. It's how we all think through and manage the economics of that, and how much pricing power we're going to have in different markets, and what mixture of direct consumer revenue and advertising revenue [is] in these different channels, but I think in a strange way, the core is if you write good journalism."
Thompson also took some of his competition to task, particularly blogs that encourage user-generated content over editorial content from the blog site itself. "Many journalists have gotten into a psychology of thinking that the only kind of journalism that's going to succeed is bad journalism or amateur journalism, journalism done by non-journalists, and yet I think that in most activities that human beings engage in, if you do something really well, it will do better than if you do badly."
The posting of content on social media has also substantially changed how people receive the news. A media consumption survey conducted in October by the U.S.-based Pew Research Center reveals that 47% of American adults are consumers of news from Facebook, though only 4% said Facebook was their most important news source. Of those polled, 78% said they read news items on Facebook incidentally, after going onto the site for other reasons.
The findings also revealed that Facebook leads users to news sites they might not have visited otherwise. Only 20% of respondents said they read stories based on the news organization behind the story, while 70% indicated they click on news stories based on their interest in the topic.
One of the major arguments against the efficacy of consuming news via Facebook is that users frequently just read the headlines rather than the entire article. To that Thompson asks: "How sure are you that when people read [a] physical magazine, the majority aren't doing something similar?"
He drew a comparisons from his broadcasting career, in particular, with his experience making and commissioning documentaries in the U.K. "It's not different from anywhere else in the world. [For a] typical 50-minute documentary, the average viewing time," he said, "is about 9 minutes, not sequential. So not 9 minutes together, but 9 minutes in chunks. Only about 20% of people were watching the entire program, often less than that," he said. "And I would say that it's starker with digital media."
"But the truth is that people often feel pressed for time and quite often only sample journalism; however, there are one or two platforms, and The New York Times is an interesting one, where people, certainly anecdotally - and I don't know that it's ever been tested - do appear to read a lot. But they read a lot on the website," he said.
"Twitter is by its nature - it’s a snack. It’s a little series of little mouthfuls rather than the complete meal, but many people come to New York Times stories from Twitter and they seem to read the entire story," Thompson said. "One of the dangers of journalism is if people only want a sentence, then a 1,000-word article is going to be wasted, and will never get read, if you only read a single sentence."
Mid-October saw the release of the final issue of the International Herald Tribune before it became the International New York Times. A major part of the issue was devoted to its history, from the front-page headline about the German invasion of Poland in 1939 to the pictures of Martin Luther King, Jr. and Andy Warhol reading the newspaper. When asked about the switch in the branding of the Herald Tribune, Thompson replied: "You know we're not a small organization but we're not very big. We're going to end up with fewer than 4,000 employees, and we're not part of a big conglomeration of media brands. We're, as you know, a small journalism player that would succeed better with one brand internationally than with two." He pointed out that this reflects the approach of the BBC, CNN, Al Jazeera, the Associated Press, and Reuters, which all use a single brand around the world. "The idea is simply that you find the same brand at home and abroad, in newspapers, on the web, on tablets, on smartphones. That makes sense to me."
"Some people knew that the International Herald Tribune was the global version of The New York Times" he said, "[but] many people didn't know that, and we did some very careful market research and listening to audiences, and in the end, people respect The New York Times brand and we think it’s the right brand."
Thompson said it was part of a process that included the sale of the Boston Globe and placing the company's products under one roof. Investors seem to be counting on Thompson's approach. When he started work in November of last year at The New York Times Company, its stock was trading at a low, but it has since jumped in value by about 66%. "Broadly I think that we are telling a fairly simple story about what we think the value of the company is and what the future of the company should be, and my conversations with investors suggest that people find that convincing. But it's true that we're adopting a very different strategy from other newspapers."
"We believe in investing in journalism, and as far as possible maintaining the strength of our newsroom rather than trying to cut massive costs out of our newsroom," he said. "If you are a Swiss watch company, you've got to be very careful about damaging the quality of the watch, because if you do that, people won't buy it," Thompson said.
"If you want to be a very cheap electronic watch company, it’s a different story, and your business model will be about selling millions and millions of watches. We're in the Swiss watch business in journalism - very labor intensive, beautifully made, high quality, journalism. And you've got to be careful that you don't ever mess with the watch - the core of it." Despite the new devices and platforms, said Thompson, the fact remains that great journalists need time and space to do their work. This may be something that fewer and fewer news organizations provide, but that doesn't deter Thompson: "We think that's a point of commercial competitive advantage."
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