In the wake of the recent sale of the Washington Post for the exorbitant price of $250 million to Jeff Bezos, the founder of Amazon.com, I am frequently asked if the New York Times will be sold. The reason I am asked is because I am the author of the 2012 book Endtimes? Crises and Turmoil at the New York Times.
The Washington Post
The Post has been the Times's great rival in reporting news about the US government and politics, although for a long time it ceded foreign news to the Times and never had anything like the Times's 25 foreign bureaus. Winner of 47 Pulitzers, it has been the second most important and influential newspaper in the US, especially since Woodward and Bernstein broke the Watergate scandal in the early 1970s. Along with the UK's Guardian, it broke the Edward Snowden-National Security Agency surveillance story. But the Post as a business has been decline for quite some time. Its circulation dropped from 832,332 average subscribers in 1993 to the current number of 474,767. Once numbering more than a thousand, the newsroom staff is about 640; for comparison the Times's is about 1100.
The Washington Post was part of a larger publicly traded company, namely, the Washington Post Company. In 1984, The Washington Post Company purchased Kaplan when it was a test preparation company. In recent years, the Post relied on Kaplan's higher education division, which runs for-profit colleges, to produce revenue to make up for its losses. By 2012 that division's operating income had plummeted to $27 million from $406 million two years earlier, a drop of 93 percent.
Like the Washington Post had been, the New York Times is part of a publicly traded company, namely the New York Times Company. But the Times Company has sold its other business, choosing the different strategy of concentrating on maximizing the profit of its core brand, namely the New York Times.
The New York Times's Financial Health
I am not sure the Times with its limited financial resources can survive long term without an influx of funds from a major investor, whether it be a wealthy private individual or some other large company with digital know-how or, less likely, transformation into a non-profit. I would not give credence one way or another to Arthur Sulzberger, Jr.'s recent denial that the Times is not for sale. His denial comes from his heart, but the Graham family was saying the same thing, even while negotiating the Post's sale. Like the Grahams, Sulzberger would certainly deny a sale until all the details were set.
We need to keep in mind that although the A shares of the New York Times Company are publicly traded, the family controls the B shares which elect the majority of the Board of Directors. What if, as in the case of the purchase of the Washington Post, a billionaire with whom the Times Company was comfortable offered far more than the Times was worth as if the purchase of the Times were a contribution to the public good in the manner of a major contribution to a museum or a university?
Central to trying to solve the newspaper's business problems was the Times Company's 2012 hiring of Mark Thompson, former BBC Director General, as CEO. Since Thompson's appointment, the Times Company's stock--along with the rest of the market-- has risen in value from single digits to about $11.40 as I write, but the stock is still only 2/9 of its high, and it hasn't paid dividends since 2008. Even now the Times Company's capitalization (number of shares times price) is $1.71 billion--compared to Facebook's capitalization of over $90 billion.
The exorbitant price that Bezos paid for the Post--plus assuming the Post's pension responsibilities--may make the Times Company stock more attractive to those who think Sulzberger, Jr. and his family will need to sell. Perhaps a sale is not likely in the immediate future, but the lack of dividends since 2008 are not a plus for the less wealthy members of the large family trust. Arthur himself sold 50,000 A shares, almost 25 per cent of his A share holdings, on Aug 8, 2013.
I have thought for a while that were the Sulzbergers to sell, Warren Buffett or Michael Bloomberg would be among the potential buyers of the prestige Times brand. Warren Buffett has bought 28 newspapers in the past few years and he owns the Buffalo News. Given the Times Company's low capitalization, it would not be a stretch for a very wealthy person to buy the Times, even at a premium. For such a person profits might be irrelevant or in Bloomberg's case--and maybe Buffett's too--the Times might be integrated in some form into his media empire. Once Bloomberg's mayoralty is over, he may want something influential and important with which to occupy himself.
Of course, the family would never sell to Rupert Murdoch, whose name is akin to an obscenity in the Times newsroom and business offices.
What the Times Has Done to Keep its Product Relevant and the Limitations of its Strategy
It is true that Times--which I still consider "the worst newspaper in the world except for all the others"-- has done better than the Washington Post in responding to the digital revolution. Moreover, the Times is adjusting to the ever-changing newsgathering world. Rather than rushing to compete with CNN and other 24-hour cable news outlets, the Times sometimes has been content to publish the basic facts and wait some hours or even days to get the full story. In contrast to the fast-breaking news cycles of the digital world, the Times presents thoughtful, considered responses to events rather than posting in real time repetitious headline-grabbing news stories with slight modifications. This procedure helps the Times make fewer mistakes than those, like CNN and FOX, that stress real time reporting. A few days later the Times often looks back with in-depth interpretations that are midway between journalism and history. Linda Greenhouse's articles on the Supreme Court are a primary example of this.
Thus, it can be a plus that the Times's motto, "All the News That's Fit to Print," has been (silently) supplemented by the reconsidering implied by "More Later." Such was the case in summer 2013, when Egyptian President Mohamed Morsi was deposed by the military, when a Supreme Court decision set aside the voting rights bill, and when a Korean plane crashed at the San Francisco airport.
Thompson's strategy is to accentuate the Times brand and move away from other investments. This strategy means hosting talks, conferences, and cruises as well as selling wine and products with the Times logo. But it is not clear that revenue from these sources can sufficiently fund the current newsgathering enterprise, including the back-of-the back daily and Sunday feature sections (Business, Sports, Science, Dining, Home, etc.).
I have been reading the Times Company financial reports for many years, and I am not convinced it has found an economic model that works. The dismal first quarter 2013 earnings report mirrored the reports of past quarters for several years, and the more recent second quarter report was hardly better. In fact, compared to last year's second quarter, income from continuing operations was down almost 50 percent, $20.1 million, compared with $38.1 million. Still while the Post was losing $50 million, the Times Company is eking out a profit, although it difficult to separate the Times' finances from those of the Times Company (For a detailed discussion of the Times Company. finances--and its implications for possible future sale--see Tom McGeveran http://t.co/ANpK9ubNXU.)
The exception to the Times Company's bad financial news is the growth in paying digital subscribers to about 700.000. With the Times Company's characteristic optimism that for years has accompanied disappointing reports, CEO Thompson spoke on April 25, 2013 of ways to expand various options for the paywall. The Times had about 46 million unique users in May. But to really know how successful the paywall is, we need to ask how many users paid, how many used the monthly free allotment, and how many undermined the system by changing browsers or digital devices. Many of the paywall subscribers pay a much discounted price.
I wonder just how much more the Times can charge for its digital or its print and digital packages and whether it can finally succeed with circulation revenue exceeding advertising revenue, as is currently the case. Advertising revenue is declining, in large part because the loss in print advertising is not offset by online advertising; the latter is much cheaper than print advertising because it competes with itself. Why look in detail at an ad for Marriott that appears on the Times site when you can go directly for more information to the Marriott site? The figures vary but essentially for every $18 or so lost in print advertising, $1 comes back in Internet advertising.
In the past several months, Thompson has presided over the unprecedented buyouts of highly paid senior staff. In August 2013, the Times Company sold the Boston Globe to another man of great wealth, John W. Henry, who owns the Red Sox and the rest of the properties housed in the New England Media Group. The price was $70 million, a huge loss from the $1.1 billion the Times Company paid for the Boston Globe alone; moreover, the Times Company remains responsible for the Globe's pension liabilities. The Times Company has also changed the name of the iconic International Herald Tribune--which the Times Company owns--to the International New York Times, and the "global edition" now appears online along with the "US edition." It remains to be seen if these changes, along with the 2012 sales of Indeed.com and the About Group, will change the still unimpressive and struggling bottom line, and whether it is a good idea for the newspaper brand to become virtually the Company's sole product.
Given that Thompson himself is a controversial figure--both because he has denied any knowledge of rumors of sexual abuse of minors by a BBC on-air employee named Jimmy Saville and because he seems to have made some controversial business decisions at BBC--we may wonder if his appointment as CEO may yet backfire. While Thompson is far from beloved in the newsroom, and made his share of enemies in the United Kingdom, the only vote that matters in determining whether he keeps his position is that of Arthur Sulzberger, Jr. although technically the Times Company Board of Directors could insist on his removal. But with some on Wall Street seeing financial progress, it would take evidence of serious malfeasance to unseat Thompson.
Ultimately The Times Company needs to figure out how a digital newsgathering operation can be financially successful. What we do know is that, given similar means and education, younger people spend less time reading news than older people, that online readers spend less time reading newsgathering sites than print readers, and that people of every age spend less time with news sites than they once did.
Newsgathering Ownership and the Public Trust
Bezos undoubtedly will bring Internet acumen and marketing skill to the Post. But will he understand the great muckraking role of newspapers in a free society, which is to expose the news that others are trying to suppress? Or as UK newspaper baron Alfred Harmsworrth (Lord Northcliffe) put it, "News is what somebody, somewhere is trying to suppress; the rest is advertising."
Perhaps someone of immense wealth unconcerned with profit and loss can operate without cost sharing with other media and without drastically cutting back the print version. But I am uncomfortable with the ultra rich buying newspapers as if they were sports franchises. Will they use them for the public good or to further their own political interests? Bezos describes himself as a libertarian, but so do Ron and Rand Paul. Bezos's relatively modest political contributions tend towards a liberal agenda; he and his wife financially supported gay marriage. John W. Henry's politics also seem to be in the liberal tradition of the Boston Globe.
But do we want wealthy hobbyists of any political stripe for whom the newspapers are at best a charitable contribution to be the sole owners of major newspapers rather than those with a journalist or publishing background? Or do we want them owned by a major Internet company like Google for whom it would be a tiny subsidiary? In the case of the iconic Times, would it be better to consider or a shift from a private to a public mode in which the Times was owned by a non-profit consortium for which PBS and the BBC provides a partial example and which may be one reason why Thompson was hired?
The Times Company should be thinking of other revenue sources and revenue models. Most of the foreign news in this country comes from the Times and is recirculated in lightweight form by the major radio and TV networks and cable news stations. Notwithstanding the New York Times News Service which gets paid only when articles are reprinted--rather than substantively cannibalized for content--the Times gives away its enormous investment in foreign news. The Times staffs its foreign bureaus with the people and resources to cover in depth complex stories like those emanating from Afghanistan, Pakistan, Syria, and Somalia. These places require security, embedded indigenous reporters, translators, armored vehicles, and even medical personal for reporters who surreptitiously enter battle zones. Were those who use the Times foreign news to contribute substantively to these costs, the Times Company would have an additional and important revenue source.
With the rising cost of newsprint, one future print model for the current Times ownership might be a short newspaper on the model of the International Herald Tribune plus an optional separately marketed weekly magazine or perhaps even a daily magazine for those who pay for such an option. This might be workable in part because print advertising revenue is still lucrative; in fact, a few newsgathering companies that had once abandoned or cut back on print, including the New Orleans Times-Picayune (which had cut back to three days a week) and the Philadelphia Inquirer (which had stopped its Saturday print edition), are now returning to print, even if in abbreviated form.
Author of the well-received 2012 book Endtimes? Crises and Turmoil at the New York Times, 1999-2009 (Excelsior Editions of SUNY Press), Daniel R. Schwarz is Frederic J. Whiton Professor of English and Stephen H. Weiss Presidential Fellow at Cornell University. He can be reached at drs6@cornell.edu and followed on twitter at www.twitter.com/
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