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Daniel R. Schwarz

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Can the New York Times Company New CEO, Former BBC Director General Mark Thompson, Solve Its Financial Problems?

Posted: 08/28/2012 11:59 am

"We have people who understand print very well, the best in the business. We have people who understand advertising well, the best in the business ... Our future is on to video, to social, to mobile. It doesn't mirror what we've done. It broadens what we are going to do." -Arthur Sulzberger, Jr, chairman of the New York Times Company and publisher of the New York Times, Aug, 14, 2012)
"We hope and believe the website -- whether by selling ads or by selling subscriptions -- will make money. The long-range future of the New York Times and of quality journalism depends on that. -Bill Keller, "Talk to the Newsroom," April 10, 2006

Because of my recent book, Endtimes? Crises and Turmoil at the New York Times, and because I have been writing about the Times and newsgathering media for the Huffington Post, I have been asked in the past few weeks about the significance of the appointment of Mark Thompson, former BBC director general, as the new president and chief executive of the New York Times Company.

The New York Times Company -- owner of the New York Times as well as the International Herald Tribune and the Boston Globe -- has long been occupying two somewhat separate realities, the information reality and the business reality. As a newsgathering company, it continues to do excellent work, notwithstanding major glitches in the past 13 years, most notably its claim that Iraq had weapons of mass destruction, as well as occasional mishaps in print and on its web site. The business reality is another story, as the New York Times Company has struggled for survival and flailed around looking for solutions, the most recent of which is the appointment of a new CEO whose experience as BBC Director is in television, internet, and radio rather than print.

As former managing editor, Arthur Gelb said to me some years ago when the Company's financial issues began to be obvious, the way to understand the Times as a news organization is to "follow the money."

In recent years the New York Times Company stock has plummeted from the low 50s to the single digits. Its financial statements, even while trumpeting better results, have rarely shown a substantive profit, and its dividends have been cut to zero. This has resulted in a significant loss of net worth and income for the members of the family trust that, by owning the B shares, controls the Company.

Last year the Company reported 27 cents per share on a loss of over $40 million. This was the third time in six years the Times Company reported a loss, including a loss of over $500 million in 2006. In the second quarter of 2012, the Company reported an $88 million loss. It had to sell and lease back its share of the impressive New York Times building that was opened with such fanfare a few short years ago.

What I missed in the announcement of Thompson's appointment is specific emphasis on product or newsgathering. Leaving aside the grammatical confusion of the antecedent "it" in my opening quote, what does Sulzberger mean? Is the Times planning on presenting more of its product in video form? Is that what its readers want or do they get enough video from other sources? Certainly, the Internet site has increased its video component, but don't readers want words whether online or in print? I am doubtful that the Times Company, with its very limited resources, could launch a TV network.

Print and digital Times readers and those in the financial community evaluating the Times Company's future prospects might ask, "Why Thompson?" One answer is that he cut a billion dollars from the BBC budget, while presiding over an enormous operation that even with staff reductions had about 23000 employees. But we need to recall the BBC is a non-profit organization and the Times Company needs to make a profit.

So, again, why Thompson, who was admittedly successful in presenting the recent Olympics but lacks the Times experience that previous CEOs had. Nor does he have experience in dealing with the profit and loss statements of a publicly traded company. Can he expand the Times' digital audience and hence its advertising base? The main source of revenue for BBC is a household licensing fee, but the Times has to be sold to advertisers and its products need be sold to consumers.

What the Times Company hopes is that Thompson will create a profitable digital business model -- the Times' Holy Grail for almost a decade -- by continuing to develop its digital products, by figuring out a combination of paywall and advertising revenue that contributes to that model, and by expanding the Times and International Herald Tribune's reach globally. (The Times recently announced an online edition in China.) Recently, two new members with tech backgrounds, Joichi Ito and Brian P. McAndrews were added to the Board of Directors, and Thompson will also be a member of that group.

While the more than 500,000 subscribers to the paywall contribute an important revenue stream, the Times Company and its newsgathering operation still face enormous challenges. For one thing digital advertising is comparatively less revenue friendly, in part because it competes with web sites a click way. If a reader sees an ad on the site for a particular product -- say Marriott hotels or the new Cadillac -- he or she often goes to the site of the company rather than read the ad. Furthermore, digital readers spend less time reading, listening, and viewing than print readers and they are less likely to share ads with other readers. As Martin Nisenholtz, until late 2011 the Times Company's senior vice president for digital operations, told me in 2006: "Most people read the web much more in a targeted way" than print readers.

Finally, the Times gives away its enormous investment in foreign news basically for free. It alone in American media not only sustains 26 foreign bureaus but also staffs them with the people and resources to cover in depth complex stories like those emanating from Afghanistan, Pakistan, and now Syria. These latter places require security, embedded indigenous reporters, translators, armored vehicles, and even medical personal in battle zones. Most of the foreign news on the networks and in U.S. newspapers comes originally from the Times.

Without a contract for a year, members of the union -- namely, the Newspaper Guild of New York -- representing the Times editorial and reporter staff must be chagrined to learn of Thompson's generous pay package, with bonuses that could take him into the $6 million range. We might recall, too, that the aforementioned staff has shrunk from 1,450 to about 1,100.

Guild members -- and most readers -- will not enjoy reading about the Times Company's $24 million dollar severance package that Thompson's predecessor, Janet Robinson, received after leaving the company Dec. 15, 2011 under circumstances that were never disclosed. Nor will they appreciate the generous pay package received by Thompson, which with bonuses could reach $6 million, more than six times his compensation while running BBC. To some, the hiring of Thompson while still paying Robinson an outlandish sum, will recall paying fired football coach an exorbitant amount while at the same time giving a lucrative package to the new one.

So do I think Thompson will preside over a financial turnaround? Doubtful. Will the Times as a newsgathering operation survive in some form? Yes, and probably in print for the foreseeable future, perhaps in some years down the line as one the last papers standing. But ultimately The Times Company needs to figure out how a digital newsgathering operation can be financially successful. I am not sure anyone can do that on the scale on which the Times operates without some cost sharing with other media or a shift from a private to a public mode owned by a non-profit consortium for which the BBC provides a partial example and for which Thompson ultimately may have been hired.

Author of the recently published 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

 

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