Some fun, dark, fantastic facts about The New York Times

credit: ACQUIRED

This is the note taking from ACQUIRED — The New York Times Company
Season 8, Episode 2 February 17, 2021

NYT was founded over 170 years ago before the civil war, and it’s been controlled by a single family, Ochs Sulzberger.

We go back to 1851 and the founding of the well-known, world-renowned New-York Daily Times. There were no cars when The New York Times was started.

In the year 1800, there were 200 newspapers in the US, and in the year 1860, there were 3000 newspapers in the US, these are the reasons:

• It was a media boom time in the US.
• There was a growing population in the country, vastly increasing literacy rates, urbanization.
• It got a lot cheaper to print newspapers, not only could you make more newspapers and people could start them, but you could sell them cheaper.

Founder — George Jones

former banker and merchant — finance, money

Jones was a former banker. He had also, though, worked as a business manager at Horace Greeley’s New York Tribune, which was then the premier paper in New York, and that was where he had met Raymond. Jones had family money and lots of connections about town from his wife’s family, Benjamin Gilbert, the well-known New York socialite.

Benjamin Gilbert puts up $25,000 of his own family money to finance this new venture. They want to get to $100,000 so he goes out and he raises the other $75,000 — that’s a lot of money in 1851 — from just some casual family connections he has. Several members of the J. Pierpont Morgan family end up financing this.

Founder — Henry Jarvis Raymond

Well-known New York journalist and politician — managing editor, the publisher

As of Henry Raymond, he’s known as the godfather of the Republican Party, is also the founder of The New York Times. All of this is happening concurrently.

Before he and Jones decided to start The Times, Raymond had actually left the newspaper business and he was a politician. He was a member of the New York state legislature, where he was a member of the Whig Party at the time, the precursor to the Republican Party, but he had stepped down and then he decided to start The Times with Jones, which they do.

Raymond is running The Times. While he’s still running it, he goes back into politics leading up to Abraham Lincoln’s presidential campaign. That’s when he and a couple of other people started the Republican Party. The platform, of course, is abolitionism and the abolition of slavery in the United States. That was the origin of the platform of the party.

Raymond becomes the second chair of the Republican National Committee. He’s the chair of the RNC while also publishing The New York Times. He helps push Lincoln into the presidency, and then actually after the civil war, he goes to Congress and he becomes a congressman.

First edition on September 18th, 1851 of The New-York Daily Times

“We, being The Times, shall be conservative in all cases where we think conservatism essential to the public good, and we shall be radical in everything which may seem to us to require radical treatment and radical reform. We do not believe that everything in society is either exactly right or exactly wrong. What is good we desire to preserve and improve and what is evil we want to exterminate or reform.”

by Henry Jarvis Raymond

The first 20+ years of The New-York Daily Times

• Within two weeks of starting, they hit 10,000 copies in circulation
• 26,000 in the first year
• September of 1857 — six years after they started — they dropped the daily and shortened the name to just The New-York Times, still with the hyphen.
• By 1858, circulation’s up to 40,000.
• By the time the Civil War started with the attack on Fort Sumter in 1861, circulation was 75,000. 10%+ of the city is taking The Times at this point.

Crazy founder story

Raymond handed out rifles to the whole staff to defend the building.

On July 13th, 1863, the Civil War had been going on for two years since Fort Sumter, but there wasn’t a draft for the army. In July, the government declared a draft, and there were riots in response to the draft in New York City. People are really upset. The mobs target the newspapers that are the mouthpieces of Lincoln and the Republican Party through the war.

A mob descends on The New York Times headquarters building and Raymond — because he’s buddies with Lincoln — gets the war department to ship a bunch of rifles and two Gatling guns to The Times because they know this is going to happen. He leads a defense of the building and the company. He hands out rifles to the whole staff. He’s manning one of the Gatling guns himself and he gives the order that if any of the mobs tries to break into the building, you’re to fire at will on these people.

It’s crazy. No shots were actually fired, but they do successfully defend the building. The mob instead ends up attacking the Tribune and storming the Tribune’s building.

After two founders passed away

The New York Times is going to disappear.

After the civil war ends, Raymond passes away not long after in 1869. His partner, George Jones, then takes over as publisher and continues running it in a fine fashion. However when he dies in 1891, there’s a succession crisis. A group of staff, a group of reporters end up putting together a buyout and raise about a million dollars to buy The Times from the estates of Jones and Raymond. They start operating the company, but they’re all editors. They’re not business people, so they don’t really know how to manage the publishing or the business of the newspaper.

In 1893, there’s a financial crisis. The paper ends up going bankrupt. Circulation had fallen all the way down below 9000. It was up at 100,000+ during the Raymond and Jones days. Basically, The New York Times is going to disappear unless somebody comes in and saves them.

This is when Adolph Ochs enters the story and rescues The New York Times. This is really a second founding of the business.

Adolph Ochs

A kid of Jewish immigrants who started as a newspaper boy, he bought a local newspaper with a small amount of down payment, and turned around it, and eventually took over NYT.

He was born in Cincinnati, Ohio in 1858, seven years after the founding of The New York Times, to Jewish immigrants from Germany, in pretty poor. After the civil war, he has to work as a boy to help support the family. He gets a paper route for the Knoxville Chronicle and he ends up just falling in love as a young child with the newspaper business.

At age 14 in 1872, he drops out of school in Rhode Island, comes back to Tennessee, restarts working at The Chronicle, this time in the printing operations.

In Chattanooga, he knows that there’s an existing newspaper called The Chattanooga Times, but it’s not very well-managed. Young Adolph negotiates with the guys who own The Times in Chattanooga to buy the paper for a downpayment of $250. Effectively — for those in small cap private equity, they’ll know this term — a seller’s note of $5500. He gets them to agree for this tiny downpayment.

Within 10 years, he’s completely turned around the paper. It’s the premier newspaper in Chattanooga. He really believed in The Chattanooga Times as an unbiased paper of the people, representing a balanced view of the world. Chattanooga was the perfect place to pull that idea from.

How he took over NYT

“The yokel from Tennessee had accomplished the impossible. He had bought The New York Times using none of his own money.”

He then gets wind of the bankruptcy proceedings going on in New York for The New York Times. At first, he’s like, that’s too big. But some mentors convince him that he can do this. In 1896, he goes up to New York. He’s in his late 30s at the time. He shows up in New York, walks in the bankruptcy court.

He convinced the Chattanooga bank to wire money to a New York bank so that if in New York, people check to see like, are you wealthy, he had a bank account with money in his name. To the Chattanooga bank who he knew well, he wrote them a personal check and said, look I’m good for it. I promise. Just wire the money. I don’t intend to use it.

President Grover Cleveland visited Chattanooga during his campaign,, where Adolph Ochs, the key figure at The Chattanooga Times, met him as part of the welcoming committee. Ochs, trying to acquire The New York Times, later reached out to Cleveland for a reference. He wrote to the President, seeking an endorsement of his credentials as a dedicated and capable newspaper publisher, based on his record with The Chattanooga Times, to aid in his negotiations.

He walks in with a letter of endorsement from the president of the United States. Incredible. The bankruptcy committee accepts his plan. He pays $75,000 upfront to the creditors which he also has scraped together with borrowed money, because he owes $100,000.

After taking over

‘All the news that’s fit to print.’

Ochs lays out his plan for positioning The New York Times which is that they’re going to provide journalistic integrity and something that is “not going to soil the breakfast linen.”

He comes up with a motto to express this new positioning to the New York public, and he comes up with the phrase, ‘All the news that’s fit to print.’ He’s not too sure about it, though.

He runs a prize competition for anybody in New York who can come up with a better slogan, offering $100 prize for the winner. They run it, get lots of entries, the winner is chosen, and the official motto of The New York Times is going to be, ‘All the world’s news, but not a school for scandal.’

He’s like, that’s nice, I’ll pay you $100, but I’m keeping my motto.

He also comes up with an informal credo for the company and for the newsroom, which is

‘To give the news impartially, without fear or favor, regardless of any party, sect, or interest involved.’

Dropped the price and gain controlling

When your back is against the wall, you have to make something work. You have no resources and you’re running out of money. That’s when genius happens when you’re forced into these constraints.

Ochs was so financially motivated to sell more copies since there’s a key clause in his newspaper purchase deal: if he could make the newspaper profitable for three straight years, he’d gain additional shares from escrow, granting him controlling ownership. Initially a minority owner without control, Ochs needed the paper to be profitable for 36 consecutive months. There was confusion over whether this meant 36 months or three calendar years, which led to a legal dispute. Ochs’s strategy to achieve this was to reduce the selling price to boost circulation and, consequently, profits.

• Grows 3X in his first year. Back up to 30,000 circulation.
• By 1899, it’s at 76,000, so back above the 75,000 that it had been.
• Crosses 100,000 in 1901, 200,000 in 1912
• by the 1920s after World War I, he’s up at over three quarters of a million circulation, and has become the dominant, not just paper in New York but probably the most prestigious, most respected, most widely-known American journalistic organization

The birth of the modern Times

Ochs made a really big bet on whether we should be producing more business content and people will be willing to pay more for it because it is either actually a business expense or it inspires them that they could do more with their business. They were the first big American newspaper to target businessmen at that time.

The headquarter, Time Square

The Times Tower, The New York Times, Time Square

In 1904, The New York Times moved its headquarters to The Times Tower at 1475 Broadway, situated in what was then known as Longacre Square, which was later renamed Times Square in honor of the newspaper. The entrepreneur Adolph Ochs, never missing a chance for promotion, celebrated the move with a fireworks display. This festive event evolved, and from the New Year’s Eve of 1907 to 1908, Ochs introduced the tradition of dropping a large electric ball atop the building, a custom that has continued to become synonymous with New Year’s Eve celebrations in Times Square, all thanks to Adolph Ochs.

The stock tickers too were originally The New York Times that implemented that on the outside of their building.

Ochs passed away in 1935

Hardcore sexism

They faced a succession issue because he had only one child, a daughter named Iphigene. Despite her capabilities, the prevailing sexist attitudes of the time, including those of Ochs himself, made it unthinkable for her to take over the company.

If she had been born probably 30 years later, which is when Katharine Graham was born, she would have been Katharine Graham at the Washington Post, before Katharine Graham. But there was just no countenancing by Adolph or anyone else involved in the company, that she should take it over.

Adolph Ochs avoided making a direct decision about his successor for The New York Times. When he passed away in 1935, his will left the decision to three individuals: his daughter Iphigene, her husband Arthur Sulzberger, and Ochs’s nephew Julius. Each had one vote to decide the next publisher. Arthur Sulzberger eventually became the publisher, with Ochs having arranged the voting in such a way that Iphigene’s choice would be pivotal, ensuring that Arthur would be motivated to be a good husband to her.

Gray Lady

The nickname of The Times

It had originated from a term used for the Bank of England, with some suggesting it reflects the newspaper’s appearance filled with dense, gray text.

Another theory is that Iphigene is the Gray Lady. She was a presence on the board and the link to Ochs and the moral fiber of the company for 90 years until 1990.

Her decision to back her husband Arthur Sulzberger for publisher set a precedent for contentious succession decisions within the Ochs-Sulzberger family. This initial choice created a divide that persisted, with the publisher role traditionally passing to male heirs, even though many daughters were equally related to the founder, Adolph Ochs.

This set a pattern of inheritance that prioritized certain family branches over others, causing internal family conflicts over the generations.

Ochs Family Trust Anchors Editorial Independence of The New York Times

The only way his descendants can maintain the wealth associated with The Times, their ownership of The Times, all of the dividends, all the wealth that comes with it, is by not selling it, and by supporting this mission. Anything that goes against that would violate that.

Adolph Ochs established a family trust to ensure the continuation of The New York Times’ editorial independence and integrity.

It ensured —

• The family continues to own The New York Times.
• The mission of The New York Times to continue as an independent newspaper entirely fearless, free of ulterior influence, and unselfishly devoted to public welfare, that is the purpose of the trust.

Sulzberger Era at The New York Times: Expansion and Impact During WWII

The best of The Times’ history and also the worst all in World War II

Arthur Sulzberger’s tenure as publisher of The New York Times from 1935 to 1961 marked a significant transition for the paper, modernizing its content and expanding its reach. His most notable achievements occurred during World War II when he chose to prioritize war reporting over advertising, despite the rationing of paper and ink. This decision established The Times as the premier source of wartime news, reflecting a pattern of investing in high quality journalism when the industry is going through terrible financial times — a strategy that The Times has maintained to this day.

During World War II, while The New York Times was acknowledged as a leading war reporter in America, it notably underreported the Holocaust. The reason that they did — the Ochs and Sulzberger families were Jewish families, that is a Jewish family that controls the paper. In their bid to avoid appearing biased, they minimized the Jewish identity of Nazi victims in their reporting, for instance, referring to Jewish victims as “Europeans.”

It’s a really striking example of fear of anti-Semitic backlash, preventing speaking out about anti-Semitism. Obviously, it doesn’t just have to be anti-Semitism — this can be applied to all injustice — but the idea that both the Sulzberger family would come under fire but also that the newspaper would lose credibility.

The fear of that loss of credibility leading to and turning a blind eye at some of the most horrific events in human history. In a reflective article written by Max Frankel, a former executive editor, in The Times’ 150th-anniversary issue in 2001, he acknowledged this significant failure to report adequately on the extermination of the Jews as a paramount horror of the war.

Despite the darkness of this chapter in its history, The Times eventually did undertake a self-critical examination of its wartime reporting. This introspection is seen as a commendable act, demonstrating the capacity of the institution to critically evaluate its past actions, own up to its shortcomings, and thereby commit to better journalistic standards in the future.

The New York Times’ Historical Struggles with Gender and Racial Equality

Today, of course, Dean Baquet’s a Black man, the Executive Editor, the CEO of The Times is a woman.

The first woman reporter joined The Times in 1912, Jean Grant, to report on Society. She had to fight her way into this city staff, and then the management made it clear, you will never be an editor here, that’s just not going to happen. She ended up leaving the organization, started New York Magazine, and then became a leader in the women’s rights movement. For decades, women were relegated to basically just a society and style sections.

The New York Times wouldn’t hire its first black reporter until 1945. That person wouldn’t even last that long. Then in 1974 women reporters filed a class action lawsuit against The Times for discrimination and wage bias. In 1977, minority reporters sued for the same thing. The Times settled on both of those cases.

Punch Sulzberger Succeeds as NYT Publisher After Dryfoos

Continuing the Legacy: Arthur ‘Punch’ Sulzberger Takes Reins of The New York Times After Dryfoos’s Sudden Death

Arthur “Punch” Sulzberger succeeded Orvil Dryfoos as publisher of The New York Times in 1963 after Dryfoos’s unexpected death, marking another chapter in the Sulzberger family’s legacy at the helm of the newspaper. This followed a brief tenure by Dryfoos, who was likened to a short-term James Bond actor, underscoring the rapid succession changes within the family-run business. Despite the impactful ideas and potential from the women in the family, with Marian Sulzberger’s idea for People Magazine as an example, it was ultimately the youngest son of Arthur Sulzberger who took over, continuing the male line of succession.

Television Comes into Play

People don’t come to The Times for news. They come for judgement.

Punch ends up being Publisher like his father for almost 30 years. He remained publisher until 1992. He really led The Times through a lot of change, but he was 63 when he took over. What is a huge, huge change besides all the change that’s happening in the 60s in America. Television is out there. Not only this is The Times’ heavy competitor, the whole medium has a competitor now.

The best way to differentiate from TV news was that they needed not just to report the facts anymore. What the differentiation that newspapers had was they could go deeper. They could interpret the facts, the meaning behind the facts, and tell people why this is important and why this is happening. That was really a big change for The Times newsroom.

Moving away from just presenting facts, the paper began to incorporate context and judgment into its stories, aiming to help readers understand the meaning behind the news. This shift aimed to offer not just information but also the newspaper’s assessment of its importance and implications, despite the fine line between interpretation and editorializing. This change required a stronger emphasis on vigilant editing and the introduction of the op-ed page, where external voices could contribute to the broader discourse, ensuring a diversity of perspectives alongside the paper’s analysis.

New York Times Goes Public in 1969

For Fuel Acquisitions, Not Family Succession

They went public in 1969 with a dual-class share structure that allowed the family to maintain control over the board by having disproportionately larger voting rights with their shares. Contrary to the belief that the public offering was due to family succession and the need to divide wealth among descendants, the real reason for going public was to acquire a liquid stock that could be used to finance acquisitions. They did not require public status for liquidity since dividends were sufficient for the heirs. With the publicly traded stock, they purchased several TV stations and named the collection the Broadcast Media Group. This group was later sold in 2007 to Oak Hill, a private equity firm, for approximately $600 million

Missed Cable Opportunity and Internet Struggles

NYT Reclaims Electronic Rights for Digital Launch

They over-diversified, acquiring numerous TV stations, local newspapers, and magazines. However, it wasn’t for lack of awareness; Junior was conscious of the Internet’s potential and they attempted to adapt by partnering with AOL to launch the @times channel, which wasn’t successful. In 1995, they brought in Martin Nisenholtz to spearhead a new electronic media division, capitalizing on his experience in interactive marketing.

In 1983, The New York Times sold the electronic rights to their content to LexisNexis, meaning they did not own the rights to their own archived material. The Times managed to negotiate rights for new content, but the archives remained inaccessible to them until 1994. In 1996, The New York Times reclaimed these rights, allowing them to launch nytimes.com with full access to both new and archived content.

Rocky Digital Debut: The Case Against Early Subscriptions

Using GIF to display content ont the website.

The launch of nytimes.com faced initial hurdles with its business model, as the team grappled with whether to charge for digital content. Martin Nisenholtz, an influential figure in the site’s development, opposed a subscription fee due to the site’s poor quality at launch. The first version of nytimes.com lacked a content management system (CMS), relying on a simple GIF image to display content, which mirrored the print layout. The team decided against charging users, opting instead to build an audience and familiarize them with the website. This decision had long-term effects, contributing to the expectation of free content on the Internet, in stark contrast to The Wall Street Journal’s successful implementation of a paywall, which was largely supported by corporate expenses.

NYT’s Digital Hesitation vs. Murdoch’s Bold Cable News Play

The New York Times on one end and Fox News on the other end

It’s not entirely fair to say the New York Times was caught off-guard by the digital and cable news revolution. Back in the early Internet days, everything was up in the air; nobody was sure how the tech was going to shake out. While the Times was slow to jump into the digital space, it wasn’t just them — most of the industry was trying to figure it out.

On the flip side, Rupert Murdoch was way ahead of the game. He saw the value in cable news way before it was a sure bet. He launched Fox News aiming at an audience he felt was overlooked, the conservatives. Murdoch was super strategic about it, too. He got Roger Ailes, who was Nixon’s TV guru, to run the show. They even flipped the script on cable companies by paying them at first to carry Fox News, betting on building a loyal audience that would pay off later. And it did, big time. Fox News hit the top spot and stayed there for years, pulling in billions.

NYT’s 90s Spree: From The Boston Globe to Popcorn Channel

It was juicing the stock and it was juicing revenue. The Times today has less revenue than it had during this go-go era.

The New York Times in the 90s and early 2000s made several eclectic investments that raise questions about their capital allocation strategy. In 1993, they acquired The Boston Globe for a staggering $1.1 billion. However, the diversification into cable with a 40% interest in the Popcorn Channel, which showed movie previews and local movie times, appears peculiar and disconnected from their core business.

Their investment activities extended into sports, with nearly a 20% stake in the Boston Red Sox and involvement with a NASCAR team, hinting at an ambition to penetrate various entertainment sectors. This phase also saw them acquiring a collection of magazines, including Golf Digest and Golf World, and numerous local newspapers, like The Santa Barbara News-Press, which seems to echo a strategy of wide-ranging but unfocused expansion.

By 2005, the NYT made a notable entry into the digital space by purchasing about.com for $410 million, marking an effort to branch into the tech industry. However, this era is often looked back upon with criticism, as the relevance and synergy of these investments with the NYT’s primary business model were not clear. It suggests an era of aggressive, perhaps haphazard expansion, with the effectiveness of these decisions remaining debatable.

NYT’s Risky Bet

$3 Billion Stock Buyback with Debt Amid Booming Revenue Fails to Raise Dividends, Leads to Revenue Crash in Crisis

In the 90s and 2000s, The New York Times took on heavy debt to buy back $3 billion of stock, betting on future profits. This aimed to prevent share value dilution. Despite high revenues, the buybacks didn’t up family dividends, leaving benefits largely on paper due to their non-sellable shares. This led to questions about the rationale behind such financial moves.

In the mid-2000s, The New York Times had strong revenues but was also accumulating debt. They moved into a pricey new headquarters in 2007, just before the 2008 financial crisis. This timing was unfortunate, as the crisis hit their ad revenue and subscription base hard, leading to a 25% revenue loss over two years.

Struggles with Tech Shifts and Fiscal Crisis

lagging behind two major tech waves: cable and the internet

The New York Times, facing a tumultuous economic climate, saw the launch of the smartphone and app stores revolutionizing content consumption. While they had started a digital newsroom, it was starkly separated from their traditional journalism efforts, signaling a divide within the company. Those on the ‘business side’ like digital product designers and programmers were seen as separate from the core journalistic activities. Amidst the financial strain and a rapidly changing tech landscape, the Times found itself lagging behind two major tech waves: cable and the internet. As 2009 arrived, these challenges culminated in a significant impact on the company.

NYT Lands Carlos Slim Loan and Sells HQ in Leaseback Amid Crisis

Carlos Slim — the largest individual shareholder

In 2009, The New York Times faced significant financial challenges, prompting it to secure a $250 million high-interest loan (14%) from billionaire Carlos Slim, who also obtained warrants for an additional 10% of the company, ultimately becoming a major shareholder. Amidst the crisis, the company eliminated dividends, straining family shareholders who had seen stock buybacks in previous years. In a strategic move to raise cash, the Times sold part of their newly built headquarters and leased it back, with an option to repurchase it at a favorable price years later, which they did, capitalizing on the appreciation of New York real estate. This sale-leaseback deal was one of the more astute financial decisions by the Times, as it allowed them to regain their property at a price far below market value.

NYT Raises $1 Billion Selling Assets to Offset Revenue Decline

The New York Times, faced with a severe revenue decline from $3.25 billion to $1.4 billion, embarked on a series of divestitures to generate cash and reduce debt. They sold their radio stations to Disney for $45 million, offloaded regional newspapers for $143 million, parted with their stakes in the Red Sox and Fenway for $225 million, and sold about.com to IAC at a loss. They also disposed of The Boston Globe and other New England media assets for much less than a billion dollars. These strategic sales, culminating around 2013, resulted in approximately $1 billion in asset liquidation, primarily directed at debt repayment.

Paywall Strategy Gets Subscribers But Halves Web Traffic

Prompts Internal Innovation Review

The New York Times introduced a metered paywall in 2011 after announcing it a year prior. Initially, users had access to 20 free articles per month, with the top news section on mobile apps remaining free. Despite skepticism, the paywall strategy began to show promise, accruing 400,000 digital subscribers in the first year and reaching 900,000 by the fourth year. However, to increase subscriptions, the number of free articles was halved to 10 in the third year.

The paywall generated revenue but significantly reduced website traffic, which halved from 160 million to 80 million monthly visitors between mid-2011 and 2013 as users sought news elsewhere. In 2014, A.G. Sulzberger, a fifth-generation member of the controlling family, was tasked with analyzing the company’s strategy. His assessment, known as “The Innovation Report,” was intended for internal use but was leaked publicly, highlighting the company’s challenges and need for strategic innovation.

David Perpich Steers NYT Paywall Success

Bringing together the digital and traditional newsrooms

David Perpich’s role in spearheading the metered paywall at The New York Times and its relative success positioned him as a key figure within the organization. His work contributed to the company’s digital strategy, which was crucial as the industry faced challenges from declining print revenue and the need to adapt to an increasingly digital world.

The launching of the NYT Now app was part of a broader initiative to diversify The Times’ digital offerings and revenue streams. Bringing together the digital and traditional newsrooms was a strategic move to unify the company’s journalistic efforts across different platforms, aligning with the goal of enhancing digital innovation and product development.

A.G. Sulzberger Starts Innovation Report

“The New York Times is winning at journalism. At the same time, we are falling behind in the second critical area — the art and science of getting our journalism to readers.”

AG Sulzberger, part of the family that has owned The New York Times for generations, played a pivotal role in transforming the company’s operations and mindset.

He spearheaded The Innovation Report, a critical self-assessment which concluded that The Times needed a fundamental change in how it operated rather than just new products. The report highlighted the necessity for journalists to extend their role beyond publishing to actively consider distribution and engagement strategies. This shift was aimed at adapting to the digital age, where content distribution and audience engagement are integral to success. Sulzberger’s efforts are likened to those of Adolph Ochs, suggesting that modern journalists must also encompass the roles of marketers and publishers to ensure their work reaches and resonates with audiences effectively.

We’re not going to sink to the clickbait level of everyone else. We are going to continue to produce great journalism with an intense focus on integrity, and also fix our business

The New York Times, facing declining traffic and revenue, set out to transform its business without sacrificing journalistic integrity. AG Sulzberger and his team chose to innovate from within, aiming to maintain their commitment to quality journalism while adapting to the digital landscape. They sought to differentiate from competitors like BuzzFeed and Vox, who were gaining traffic by repurposing NYT content with more engaging headlines. The strategy focused on integrating tech, product, and marketing expertise into the newsroom, fostering a holistic approach to content creation and distribution. This initiative was seen as ambitious and risky, as it went against the grain of prevalent industry practices of prioritizing clicks over content quality.

They learn the lesson of not missing technology waves

Cooking app, Crossword app, The Daily podcast — hugely successful

The New York Times strategically embraced technology waves by launching successful apps such as the NYT Cooking app in 2014 and the Crossword app in 2016. These apps have been highly lucrative, with the Crossword app alone generating $30 million annually from a mixture of historical and new puzzles. The “other digital” revenue category, encompassing these apps, is expanding rapidly with a 60% year-over-year growth rate and boasts significant profit margins due to low marginal costs.

Furthermore, the introduction of The Daily podcast on February 1st, 2017, marked another pivotal moment for the NYT. With 100 million downloads in its first year and surpassing a billion downloads by 2019, The Daily not only became one of the world’s largest podcasts but also managed to capture a younger demographic, with 75% of listeners under 40 years old. This demographic is highly coveted by advertisers, contributing to the podcasting business’s $36 million revenue in advertising, up $7 million from the previous year. Despite its high margins, The Daily does incur substantial production costs, given its team of over 20 people and the extensive reporting involved. This demonstrates The Times’s commitment to investing in quality content as part of their digital transformation strategy.

Digital Shift Proves Successful

Hits 2 Million Subscribers Pre-Election, grow digital subscribers 47% in 2016

By 2016, The New York Times (NYT) had seen a shift in revenue, with subscription earnings surpassing advertising. This change reflected the industry-wide transition from ad-reliant to subscriber-based models. The NYT’s subscriber base grew steadily after their paywall was introduced in 2011, hitting 400,000 subscribers in the first year. Following the tightening of the paywall in 2012, growth continued, although it took until 2016 for the NYT to reach one million digital subscribers. The pace of subscriber acquisition then accelerated, taking just one and a half years to achieve the second million, coinciding with increasing public interest in news before the 2016 U.S. presidential election. This demonstrated the NYT’s successful adaptation to digital media trends and the value of its journalism to readers.

Thrives Amid ‘Failing’ Accusation, Hits 5 Million Digital Subscribers

The “failing New York Times” narrative, used prominently by President Trump, ironically coincided with a major upturn in the newspaper’s success, marked by rapid growth in digital subscriptions and financial stability. The Times experienced a surge in digital subscriptions during this period, with growth rates comparable to those of tech companies. The constant cycle of news and controversy during the Trump administration fueled public interest and engagement, resulting in the Times adding 300,000 subscribers in the first quarter of 2017 alone. By the end of 2017, digital subscribers had reached 2.2 million, and by 2019, 3.4 million, excluding subscribers to their crossword and cooking apps.

In 2019, completely debt-free

Digital revenue surpasses print revenue for the first time ever

By 2020, the growth was even more substantial, with a 48% increase in digital news subscribers, surpassing 5 million, plus an additional 1.6 million for standalone products like the cooking and crossword apps. This growth resulted in digital revenue exceeding print revenue for the first time in the Times’ history.

7.5 Million Subscribers and Zero Debt, Outpacing Competitors

The New York Times has achieved a significant milestone by not only reaching a subscriber base of 7.5 million, outpacing competitors like The Washington Post and The LA Times, but also by operating completely debt-free with a highly profitable digital subscription model. This success is attributed to their strategic shift to digital platforms, including popular apps for cooking and crosswords, and a substantial digital news presence. The company has capitalized on the increased demand for quality journalism during the Trump presidency, which provided an unexpected boost in subscribers and revenue. Moreover, The Times has invested in journalistic talent, offering salaries well above the industry average, thanks to its robust financial standing, akin to a Netflix-like business model in the news industry.

Subscription Surge

2.3 Million Digital Sign-Ups in 2020, Outpacing Ads

Amidst a historic year for journalism, The New York Times seized a record growth in digital subscriptions, adding 2.3 million in 2020 alone, far surpassing its early years’ figures and eclipsing its first million-subscriber milestone, which took 4½ years to achieve. Despite a 26% decline in ad revenue due to the pandemic, the company’s subscription revenue now triples its advertising income, marking a dramatic shift from the traditional reliance on advertising that characterized the industry for decades. With a target to reach 10 million subscribers by 2025, The Times is not only on track but also likely to exceed this goal, all while transforming its business model to one that is increasingly reliant on direct reader revenue.

Vacuuming up the best journalism talent

The nature of the Internet economy, winner-take-all businesses.

The company currently employs 4,300 people, of which 1,700 are journalists. This journalist contingent makes up approximately 5% of all professionally employed journalists in the United States, indicating that the company is a significant employer of journalistic talent and is able to attract and remunerate top journalists. Financially, the company has maintained a steady top-line revenue of $1.8 billion over recent years, with an operating profit of $250 million, numbers that have remained stable despite changes in the industry, possibly due to the impact of the pandemic.

While the overall revenue has stayed consistent, the sources of this revenue have shifted significantly, suggesting a transformation in the company’s business model. This is evident when considering the scale of the company’s digital subscription base, which outnumbers the combined digital subscribers of major competitors like the Wall Street Journal, The Washington Post, and the 250 Gannett local newspapers.

Optimism (bull case)

NYT believes that up to 100 million English-speaking individuals are willing to pay for news

The bullish perspective is supported by the company’s growing subscriber base, which includes not only traditional print subscribers but also a substantial number of digital and non-news subscribers, totaling 7.5 million. Meredith Kopit Levien, the CEO, has regularly indicated on earnings calls that this growth suggests a very large potential market (Total Addressable Market — TAM) for their offerings. The NYT believes that up to 100 million English-speaking individuals are willing to pay for news, which is many times greater than their current subscriber base, implying a significant room for growth. The rationale is that the current rapid growth rate of new subscribers is indicative of a large TAM; otherwise, the rate of new customer acquisition would not be sustainable if the market were smaller or saturated.

Caution (bear case)

Can The New York Times (NYT) be considered a tech company?

The implications of such a classification on its business model. The NYT appears to be adopting tech company strategies, with 150 of its staff participating in a tech-focused growth series, indicating a shift towards a tech-centric mindset. This shift is also reflected in their cost structure, as highlighted by Mine Safety Disclosures. While traditionally the costs for a newspaper are variable and scale with the number of physical copies produced, the digital model changes this dynamic.

In the digital subscription model, most of NYT’s costs are fixed and do not increase with the addition of subscribers, similar to the way Netflix operates. This transition from variable costs (like delivery trucks and printing) to fixed costs (like content acquisition) implies that as the subscriber base grows, the marginal cost of adding subscribers decreases, potentially leading to higher profit margins.

The current excitement stems from the potential for the NYT to reach a point where their audience is so large that their revenue growth outpaces cost growth, resulting in significantly higher margins. Essentially, they could leverage their fixed costs across an expanding subscriber base without incurring proportional increases in expenses, enhancing profitability.

NYT’s Subscriber Scale Enables High Journalist Salaries

Mirroring Netflix’s Content Economy, and It’s Better

The New York Times can offer high starting salaries to journalists due to its large subscriber base, which allows it to distribute fixed content creation costs across millions of subscribers, mirroring Netflix’s strategy of amortizing expensive content over a wide audience. Unlike other platforms that need to negotiate content rights, the NYT produces its content in-house, which means they avoid variable costs scaling with the audience size. This structure keeps their cost increases manageable even as their subscriber numbers rise, facilitating a potentially high-margin business model as they grow.

This economic advantage is significant as it transforms the NYT’s cost structure from one that was historically variable (tied to the number of physical newspapers produced) to one that is increasingly fixed, benefiting from economies of scale in the digital space. Salaries for journalists at the NYT, while substantial, do not escalate with the increasing subscriber base, unlike content acquisition costs that can inflate with audience size on platforms that do not own their content, thereby maintaining cost stability and profit margins.

NYT Balances Tech Growth with Journalistic Integrity

Immutable mission of the trust and the company — to continue to serve as an independent newspaper, entirely fearless, free of ulterior influence, and unselfishly devoted to public welfare.

The New York Times (NYT) has been reshaping its business to appear more like a tech company in terms of growth and digital transformation. However, at its core, the NYT is fundamentally a journalistic entity where the newsroom holds significant power. While they’ve incorporated tech elements and embraced digital opportunities, their expansion into new digital arenas, such as podcasts or games, is measured and slow. This deliberate pace is a conscious choice to preserve their brand integrity and the trust they have built with their audience.

The NYT’s cautious approach to expansion can be both a strength and a limitation. Their journalistic integrity and commitment to objectivity are part of their mission and crucial to their brand value. Yet, this same commitment may restrain them from aggressively pursuing new ventures in the way a typical tech startup might. Despite their successful adaptation to the digital era, the NYT’s primary allegiance is to their role as an independent news organization, which guides their business strategy and could be considered a “bear case” for their identification as a tech company.

Faces Revenue Uncertainty Despite Subscriber Growth

The Effectiveness of Discount Digital Subscription Strategies Remains Unclear

The bear case for The New York Times focuses on their stagnating subscriber revenue despite growing subscription numbers. While the company asserts that promotional discounts for new subscribers will lead to higher revenue as they renew, this is still unproven. There is skepticism about whether traditional tactics of increasing subscription prices over time will be effective in the digital age, given the lack of a geographic monopoly and the availability of alternative news sources online. Revenue growth has not matched the pace of subscriber additions, leaving uncertainty about the long-term sustainability of their current business model.

Market Scale Limited Compared to Netflix’s Reach

The bear case against The New York Times suggests that despite its tech company-like cost structure, it doesn’t compare with the scale of larger tech giants like Netflix. While The Times has a significant subscriber base of 7.5 million and an average revenue per user comparable to Netflix’s, its total addressable market is estimated to be just half of Netflix’s current subscriber count of 200 million. This suggests that The Times, despite its successes, is unlikely to achieve the colossal scale associated with FAANG companies due to the limitations of its potential market reach.

The Times’ Subscription Model vs. Mission Conflict

The Times is limiting its reach

The argument against The New York Times’ subscription-based model is that it contradicts their mission to be the paper of record, aiming to deliver authoritative news to everyone. The bear case suggests that by adopting a subscription model, which is typically suited for niche markets, The Times is inherently limiting its reach. This model could inadvertently incentivize the publication to cater to specific audiences, such as liberal subscribers or critics of certain political figures, rather than maintaining pure journalistic neutrality. The discussion also touches on The Times’ historical strategy to become an authoritative source by indexing topics for librarians and researchers, which contrasts with the current business strategy that may lead to targeting a more selective readership.

How to Balance Neutrality with a Subscriber-Based Model

The challenge The New York Times may face in balancing the drive for a subscriber-based revenue model with the aim of maintaining neutral, high-quality journalism. There’s a question of whether a media outlet can generate strong subscriber affinity — and thus willingness to pay — by offering unbiased content as opposed to content that caters to specific biases. While niche outlets like Fox News have successfully built a lucrative business by appealing to a particular demographic, it remains uncertain if a similar level of success can be achieved by an outlet aiming to be a “subscription for everyone,” prioritizing neutrality over bias. This raises the debate over whether the incentive to remain neutral is as financially compelling as the incentive to cater to specific viewpoints, especially when the business model relies on subscriptions.

Subscription Growth Sparks Debate on Neutrality in Journalism

Reconciling the goal of being a universally trusted news source with the realities of a subscription-based business model. The Times aims to maintain high-quality, neutral journalism that appeals broadly and justifies its subscription cost. However, the significant increase in subscribers since the election of Donald Trump suggests that many may be subscribing for content that aligns with specific viewpoints rather than for neutral reporting. This raises questions about the viability of a business model that relies on subscriptions while also aspiring to serve as an unbiased information source. Subscribers may conflate trustworthiness with alignment to their preexisting beliefs, underscoring the challenge of maintaining true neutrality in journalism, especially when the selection of news to report is inherently subjective. This discussion is reflective of a broader debate about how subscription models influence media incentives and the potential conflict with journalistic missions.

Faces Stagnant Revenues Amid Business Restructuring

A discrepancy between the rapid growth in digital subscriptions, which is reminiscent of a thriving late-stage startup, and the more modest increase in revenue, which lags significantly behind subscriber growth at just 10% year over year. Further, the overall revenue has remained flat in recent years and has even decreased by more than 50% from its peak in the early 2000s.

This contrast presents a complex picture: on one hand, there’s commendable growth in the digital subscriber base; on the other, there’s an underwhelming performance in total revenue, suggesting that the company’s best days of profitability might be in the past. However, there’s a belief in a transformative narrative where The Times is undergoing a fundamental restructuring of its cost framework with the potential to substantially boost profitability in the future. This perspective requires a longer-term view to appreciate the potential for a significant financial turnaround despite current appearances.

Hamilton Helmer’s “7 Powers”

outlines strategies companies can use to maintain superior long-term profits compared to their competitors

The seven strategies identified are counter-positioning, scale economies, switching costs, network economies, process power, branding, and cornered resources.

Brand Power

The significant brand power of The New York Times, which is built upon years of trust and consistent delivery on its promises, a stark contrast to most tech companies discussed on the show. The strength of The Times’s brand is such that it adds credibility to information that might be doubted if it appeared on a lesser-known blog or source. The ‘canonical test’ for brand power is mentioned: if the same content were offered under a different name, it would be perceived differently. In the case of The Times, the brand is so strong that it influences the willingness of individuals to pay for the content, underscoring the fact that The Times has one of the most potent examples of brand power discussed on the show, to the extent that the brand itself motivates subscription and trust.

Scale Economies

How The New York Times benefits from scale economies in both its historical print newspaper business and its current digital model. Historically, the necessity of a printing press and distribution network meant that only those with significant scale could sustain a newspaper. In the modern digital era, The Times’s large subscriber base allows it to distribute the fixed costs of high journalist salaries and the employment of numerous reporters across more subscribers, giving it a competitive advantage over smaller organizations. The larger the subscriber base, the more the costs are spread out, enhancing the publication’s ability to invest in quality journalism and outpace competitors.

Process Power

The New York Times’ longstanding tradition and expertise in high-quality journalism, suggesting that it is deeply ingrained within the organization’s culture, maintained through continuous stewardship by a family with a consistent value set. This institutional knowledge is viewed as non-transferrable, meaning that even if key individuals were to leave and start their own ventures, the unique qualities that define The Times would not follow them.

Compares The New York Times’ strategy to that of Disney

highlighting the need for a clear strategic position in the digital age

The Times has seemingly chosen to become the “big guy,” focusing on high-quality, original content, international expansion, and a digital-first approach.

They have been investing in original journalism and expanding their international presence, including reporting in both English and Chinese, suggesting a long-term vision for capturing the global market beyond English-speaking readers. The comparison to Disney lies in the commitment to expensive, high-quality production — for The Times, this translates to in-depth journalism with compelling digital presentations.

Additionally, The Times is recognized for filling the gap in local reporting across the United States, emphasizing its on-ground presence in key cities like San Francisco and Seattle, particularly in the technology sector. This local reporting strategy, coupled with their international reach, represents a significant pivot from the pre-internet era, enabling The Times to maintain its relevance and authority in a media landscape increasingly dominated by digital content distribution.

The entrepreneurial spirit underlying The New York Times’ history

Comparing pivotal moments of the newspaper’s evolution to startup challenges

It highlights how critical decisions, particularly by Adolph Ochs, were akin to a startup’s ingenuity when resources were scarce. The New York Times, despite being a long-standing institution, began similarly to many successful startups, facing existential threats and innovating to survive.

The conservative approach of The Times under family leadership as an advantage. While in the 2010–2014 era, other media companies chased the trends set by BuzzFeed and similar platforms, The Times focused on the quality of its journalism. This conservative strategy is credited with allowing The Times to preserve its core values and emerge from the digital transition successfully, outlasting other media ventures that deviated from such principles. It draws an analogy with government’s intention to change slowly, ensuring stability and endurance, suggesting that The Times’ adherence to its foundational values has been a key to its longevity and current standing in the media landscape.

Thrives with Digital Diversification and Strategic Acquisitions

The New York Times’ strategic diversification into non-news digital revenue streams, particularly through its digital products like cooking and crossword apps, which saw a 60% growth in subscribers. A significant highlight is the acquisition of Wirecutter, a product review site, for $30 million. This investment has paid off handsomely for The Times, as Wirecutter generates about $50 million a year in high-margin affiliate revenue. The Times successfully rebranded and expanded Wirecutter’s scope, potentially moving towards a digital subscription model.

Moreover, the enduring value of The Times’ print business. Despite a 5% annual decline, a substantial number of subscribers are willing to pay a high price for the print edition, with the average annual subscription being around $700. The Times has capitalized on this loyalty, maintaining steady revenue from print subscriptions by increasing prices for the dwindling, yet dedicated customer base while concurrently focusing on growing digital revenues.

This is a wise move by The Times, allowing them to maximize earnings from the print segment as they transition more heavily into digital and diversified revenue streams.

The transformative power of the internet in creating global markets

The idea that pre-internet, markets were geographically limited, whereas now anyone in the world can access products or services online. They also consider the mindset of younger generations, like Gen Z, who may take this global accessibility for granted. Moreover, they reminisce about the 1990s as a lucrative era where both traditional and internet businesses thrived, leading to an understanding of the high stock valuations during that time.

Value Capture Versus Value Creation

Value Capture Versus Value Creation: In 2014, The New York Times was seen as struggling to monetize its value creation effectively. They were producing high-quality journalism but were unable to capture the financial rewards adequately, as other companies like Facebook and BuzzFeed were benefiting from their content. Fast forward to the present, The Times has improved its situation. It’s not perfect, but there’s a foundation that suggests potential future profitability.

Value Created For the World Versus Value Destruction

The New York Times, unlike some large companies, is perceived to have created an enormous amount of value for society throughout its 170 years without a commensurate amount of value destruction. It has been integral to the development and functioning of society. The company’s journalistic efforts, underscored by winning 130 Pulitzer prizes and critical reporting like the Pentagon Papers, have had a significant and influential role in shaping societal discourse and holding power to account, sometimes at great personal risk to its journalists.

The future prospects

A+ Scenario: The Times could reach a point where it doesn’t need to significantly increase its workforce because the fixed costs to produce content are tapering. They could have a system in place that efficiently acquires new subscribers even without the urgency driven by events like the Trump presidency or the COVID-19 pandemic. Also, achieving an A+ would entail the Times making strides in additional revenue streams and not missing out on the video content boom, as well as increasing the average revenue per user (ARPU) for subscribers, especially as introductory offers expire.

B Scenario: The Times continues to acquire subscribers at a steady, if unspectacular, rate without the need for substantial additional investment in fixed costs.

C Scenario: The Times maintains its current trajectory without significant improvement in monetizing various revenue opportunities, including video and other media ventures that have been lackluster so far.

F Scenario: A potential failure could arise from a hyperpartisan environment where centrality becomes untenable, leading to a loss of credibility or relevance. Alternatively, a failure to adapt and protect against being undermined by content aggregators and social networks could also be detrimental, though this is seen as less likely given recent learnings and adjustments by the industry.