The new york times company: a case Study Analysis
Source: Ward’s Business Directory, September 201214
III. BUSINESS OPERATIONS: CURRENT PRODUCTS AND SERVICES
While the parent company of The New York Times has grown and diversified, it has stayed true to the principles to which the newspaper ascribed more than 150 years ago. Those principles are uppermost in the company’s corporate governance practices and are directly tied to the company’s journalistic roots: “The Company’s core purpose is to enhance society by creating, collecting and distributing high-quality news, information and entertainment.”15 These values also weigh significantly on the company’s business philosophy by offering content of the highest quality and integrity (the basis for its reputation and maintaining the public trust); fair treatment of employees based on respect, accountability and standards of excellence; creating long-term stockholder value through investment and constancy of purpose; and good corporate citizenship.16
We will look at some of those products later. Here, in Table 2, is a breakdown of the company’s operational structure. The chief executive officer of The New York Times Company oversees the managers of the company’s 11 primary divisions. The CEO reports to the company’s board of directors and its vice chairman. The primary division managers in turn oversee various sublevels of the corporate structure.
Management structure of The New York Times Company.
CFO Assistant Control
New York Times
International Herald Tribune
New England Media
CEO Legal Secretary & Assistant Legal
Vice Chairman of the Board
Board of Directors Communication
Development Research & Development Ops
Digital Ops/About Group Paid Products NYTimes.com
Human Resources Human Resources / Diversity
Compensation / Benefits
Source: TheOfficialBoard.com, September 201217
As CEO, Arthur Sulzberger Jr. oversees all primary divisions of the company and reports to the board of directors. The corporate structure is straightforward and caters to the company’s focus on its core products — print media. At the same time, this makes for a seamless connection between print and broadcast media services and the ever-more important division of digital media.
The New York Times serves more than the residents of New York City: Its reach extends nationally and globally. The newspaper boasts a print circulation of 779,731 daily and 1.26 million on Sundays. In addition, the company has found success since venturing into the digital news dissemination domain in January 1996 with the launch of its website, www.nytimes.com. The paper’s digital efforts since then have resulted in a 73-percent increase in overall daily circulation, print and online, year over year ending March 2012, and a nearly 50-percent increase on Sundays.18
he Times maintains a high online profile while positioning itself for improving revenue in this portion of the market. The newspaper had maintained free access to its online product prior to 2011 when it began structuring online packages from which customers could choose. At that time, the company allowed non-subscribers (to either the print or the online version) access to up to 20 stories a month for free. In mid-March 2012, a year after its launch of paid digital subscriptions, the company reported it had approximately 454,000 paid subscribers to its various digital packages, replica editions and e-readers. Included in this number are subscribers of The International Herald. At the same time the company announced it would cut back from 20 to 10 the number of free articles accessible to non-subscribers.19
IV. FINANCIAL PERFORMANCE
The meteoric rise of computer use by the consumer — with particular emphasis on smartphones and tablets — has driven an equally explosive increase in the number of venues from which consumers can get their news. Newspapers of every size and type have wrestled with this modern reality: that the world of print in which they long thrived was becoming less viable. Reinvention of its method of delivery — or, at the very least, an addendum to that delivery system — has become tantamount for survival. The New York Times Company’s products, while certainly in better financial shape than many newspapers to make this transition, are no less impervious to the storm. Table 3 below illustrates a recent decline in revenues.
New York Times Company Business Analysis.
Source: The New York Times (www.nytco.com)20
hough not reflected in this table, financials from quarter three of 2012 illustrate — dramatically — the importance of transition to digital. The company’s net income fell 85 percent from the same period in 2011, as reported in The Financial Times. Any gains in circulation revenue in the media group failed to offset the almost 9 percent decline in advertising revenues from the third quarter last year.21
The News Media Group, which includes print and digital properties, declined each of the past three full years back to 2009, although the drop in revenue was subtle. This trend continues nine months into 2012: According to Business Wire, the news media group’s total revenues for January-September 2012 were down 2.2 percent compared to the same period in 2011. More significantly, advertising revenue — which had dropped 6.9 percent in 2011 from 2010 — continued to fall during the same period in 2012, down 9.7 percent. Of particular significance to the News Media Group during this same period was the 9.5-percent decline in national advertising lineage, a key revenue draw that outpaces retail and classified ad lineage nearly three to one. On a positive note, thanks to steadily growing online subscriptions, circulation in this division increased 9.3 percent in the first nine months of 2012, compared to a year ago. Given the company’s continuing trend to promote its online product, as well as the stability of the brand, it is likely digital subscriptions will grow.22
Numerous factors come into play when reviewing any newspaper’s financial standing, advertising and circulation being the two most considered. While advertising and total revenue declined during that three-year period, decisions to divest some of its assets helped serve as a buffer for the company’s bottom line. As late as August 2012, the company decided to sell the About Group, parent company of about.com and other online sites, to InterActiveCorp for $300 million.23 This followed a December 2011 decision to sell its Regional Media Group to Halifax Media Holdings for more than $140 million.24
We live in an age when information is at our fingertips and instantly obtainable. If the day of the personal computer has given way to smartphones and social media, then surely the information dissemination model so long used by newspapers — print and advertising — will continue to be increasingly irrelevant. That said, there are multiple factors at play that warrant us to be optimistic, albeit cautiously, about the future of The New York Times Company and, specifically, its publications. Many of these factors are positive in nature; others, however, give reason for some concern as the company moves forward in an industry where many players are on unsure financial and viability grounds. We will look at the following as we consider the Times’ future: branding, SWOT analysis and other risks, demographics, and philosophy.
t is difficult to put a dollar value on branding, but in the case of The New York Times (and tangentially its parent company), the name carries much weight when considering its future. The newspaper has a long and rich history as a member of the Fourth Estate, particularly enriched during the 34 years when Arthur Sulzberger was at the helm as publisher. Certainly high among his contributions was his decision in 1971 to publish the Pentagon Papers, detailing how the U.S. government had lied about the Vietnam War.25 The decision earned the newspaper a Pulitzer Prize, one of more than 100 the newspaper earned since 1918.26 Despite moments of journalistic scandal, including the 2003 revelation that reporter Jayson Blair had plagiarized or made up numerous stories, The New York Times name remains a positive in the sense of branding.27
SWOT Analysis and Other Risks
Newspaper executives continue to face tough personnel and staffing decisions as they confront the industry’s transformation from print to digital. The economics of newspapering were, at best, a roller-coaster ride during the past 20 years as the Internet provided more options for news readers; at worst, these times saw — and continue to see — newspapers cutting editorial staff to make up for lost print ad revenue, revenue not yet fully realized in the online platform. According to Times’ records, the company overall peaked in 2000 with 14,000 employees; by 2010, that number was 7,414, with staffing declines posted each year except for two years (2002-04) when additions to the About Group saw a slight increase.28
Thompson is scheduled to begin his duties at The Times on November 12, 2012. It remains to be seen if his appointment, which some analysts think might have contributed to an 85-percent plunge in third-quarter (2012) net earnings for the company, will stand.31
In the company report dated December 22, 2011, the SWOT analysis overview identified the following, illustrated in Table 4:
New York Times Company SWOT analysis overview.
Source: MarketLine, 201232
This SWOT analysis can offer a look not only at The New York Times, but at many newspapers, for many share similar positives and, certainly, many of the constraints, particularly in the financial, circulation and advertising sectors. Addressing such problems as poor credit ratings is a necessary honest approach to any company’s business position: In the Times’ case, this review of the 2011 year recognized the company’s credit rating increased the borrowing costs for future borrowing and also limited its financing options. It also pointed a finger at the susceptibility to continued or increased volatility or disruption in the credit markets that could adversely affect the company’s ability to refinance existing debt. On the positive side, the company had established a multi-platform presence by strengthening its posture in the digital business, witnessed the growing consumption of digital media among its customers, and saw a rebound in the advertisement spending and an increase in ad dollars spent online. Additionally, the company launched new pay models to better profit from the growth in digital business. The newspaper’s increase in online subscriptions in the past year gives validity to the decision in 2010 to erect a paywall and limit the number of free stories available to non-subscribers. In short, people are willing to pay for content online that once had been freely accessed.33
For nearly two decades newspapers have straddled the fence between traditional print publication and a digital or online presence. Much of that stems from a sort of perfect storm: print circulations in decline, falling ad revenues as a result of fewer subscribers (lower circulation numbers), and the increased competition from a variety of news sources, including aggregation websites. The company recognizes all these factors in its consideration of threats, and the resulting challenges are not for the timid. In its 2011 annual report, NYTC noted the launch of digital subscriptions at all three major dailies, “with the intention of developing a new consumer revenue stream while preserving our digital advertising business. Our ability to build a subscriber base on our digital platforms depends on market acceptance, consumer habits, pricing, an adequate online infrastructure, terms of delivery platforms, and other factors.”34 It further acknowledges the “increasing number of … options available on the Internet, and other news aggregation outlets, often offering their content for free. The point is well taken that consumers in a tight and uncertain economy might place more value on when, where, how and at what price they get their digital content than they do on the source or reliability of the content. When much is riding on the potential for digital-framed ad revenue, the potential loss in website traffic becomes a risk.35
According to information obtained by Mediamark Research and Intelligence, The New York Times was read or viewed by more than 4.5 million people during the spring of 2012. Of that number, readership by gender was 50-50, with a median age of 51 years and median household income of $99,669. Also, about 60 percent of Times’ audience were college graduates “plus” (bachelors or higher), 42 percent were professional/managerial, and 13 percent were top management level.36 While these figures are not surprising on their face, given The Times’ status and national reach, it stresses the importance of The Times’ pushing the digital platform as both a readership venue and a source of revenue. The audience that supplants the aging baby boomers who are Times’ subscribers and readers increasingly are more likely to look for their news online rather than print. To this end the company continues to transform “from a newspaper company to a multi-platform news and information company,” according to company documents.37 Additionally, in its effort to open the newsroom doors to the public, NYTimes.com launched in 2010 TimesCast, a daily video report that features interviews with editors and reporters covering major news stories, and scenes from staff meetings among top editors discussing possible front-page content. Such interactive structure adds transparency to what for generations had been seen, rightly or wrongly, as an ivory tower mentality among members of the Fourth Estate. This interactive discipline is seen elsewhere in The Times’ products, through online blogs written by staff reporters and correspondents, membership packages that allow subscribers to post commentary on stories and opinion pieces, and reporters encouraged to engage their readers via Twitter, Facebook and other social media.38
Arthur Sulzberger died on Sept. 29, 2012, at age 86. He retired in 1992 and was succeeded by his son, Arthur Sulzberger Jr. The young Sulzberger’s predecessors were newspapermen, but Sulzberger Jr. described himself as a “platform-agnostic” multimedia man, perhaps the perfect man for the job in a constantly transforming industry.39 As Steve Jobs was a visionary in his field, so in some respects Sulzberger Jr. has been to The New York Times Company. He has maintained his father’s fervent belief in the principles that guide journalistic integrity, and has married that to the pressing needs of newspaper survival in the digital age. He is not afraid to consider all options that might lead to a better newspaper and an improved company. Several examples:
• Ensuring viability in expanding technologies, in October 2012 The Times announced a new app, featuring the newspaper’s latest content, designed and formatted for optimal reading experience on Windows 8. This outreach to fans and users of Microsoft-related products also included the newspaper establishing its own channel within the Bing News app, which is pre-installed on all Windows 8 devices, including desktop and laptop computers, and the Microsoft Surface tablet.41
In conclusion and to reiterate, the future of The New York Times Company, like its flagship product, should be viewed with optimism, with a dash of caution added. There remains uncertainty throughout the newspaper industry about the viability and continuation of the traditional news delivery system, and forces from competition, variable and /or declining print circulation numbers and advertising revenues, the need to add to or let go of related properties or joint venture assets all figure into the mix of this company’s future.
o be sure, for The New York Times, its dismal third-quarter net revenues sparked cause for concern, despite its successful digital-and-print subscription model and international expansion. In late October of this year, Rick Edmonds, writing in his blog for Poynter.org, cautioned that, “If the top dog stumbles after a new round of advertising setback, the rest of the pack seems even more vulnerable.” Whether it was intended as a backhanded compliment, it speaks to both the seriousness of the issue to The Times and how, as The Times goes, so goes the industry. Company officials blamed the loss on lack of business confidence in many segments, but also on other factors: the lack of major movie releases (entertainment), weak department store retail sales, and the lack of new development in the New York market (real estate). Add to this, Edmonds wrote, that The New York Times differs from many daily papers because of its greater dependence on national advertising lineage. On the upside, he noted the company’s digital-only subscription base continues to grow. The Times — and the industry — will need “strong digital-only gains and income from other digital ventures” to make up for losses in retail advertising.42
To its benefit The New York Times remains a brand to which many people relate, and its parent company has shown an understanding of the need for its news products to transition to a new delivery system, one that caters to today’s generation of news consumers. It closely monitors all of its segments from both financial return and customer benefit perspectives, giving no reason to believe it cannot survive the industry’s turbulent waters. The company is not afraid to face challenge and adapt, a philosophy that began with the first editions of The New York Daily Times.
In a 2005 interview with Business Week, Arthur Sulzberger Jr. said:
Within our lifetimes, the distribution of news and information is going to shift to broadband. We must enter the broadband world having mastered the three key skill sets — print, Internet, and video — because that’s what’s going to ensure the future of the news organization in the years ahead.43
http://www.nytco.com/company/business_units/index.html. Retrieved Sept. 29, 2012.
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