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Bloomberg Businessweek’s editor believes print remains the ultimate “distraction-free news product”
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Feb. 22, 2019, 1:33 p.m.

Newsonomics: Can The New York Times avoid a Trump Slump and sign up 10 million paying subscribers?

And what lessons can the rest of the industry draw from the Times’ outsized success?

Editor’s note: Be sure to read the Mark Thompson Q&A that accompanies this story.

Mark Thompson’s nautical and military metaphors have generated some ribbing from others at The New York Times. He once said, early on in his now-six-year tenure as CEO, that the print paper was like the Titanic — “the movie,” he laughs, “which ran another two hours after the ship was hit.” His point — that print still had a lot of useful life left in it, despite the hit it’s taken — didn’t quite get through.

He’s a bit more circumspect now, but he still likes to talk about the Times as a “navy that can fight on many fronts” and characterizes his multiple strategic positions as places “where we can stand and fight.” In the age of Brexit, the evocation of British sea power is almost endearing.

But make no mistake: The Times’ fight — characterized more by movement than by standing still — has now delivered it to a position in global journalism unimaginable almost a decade ago, when it first started talking about a “paywall” to hoots of derision. It stands today as queen of the turbulent newspaper seas, head of a distressed fleet it can barely recognize looking back in its wake.

Two weeks ago, the Times released up its full-year 2018 financial report and its numbers shocked any “newspaper” industry watchers accustomed, for the past decade, to seeing only negative numbers. It again reported a year-over-year increase in revenue, up 6.2 percent. Its digital ad business grew 11.3 percent; print ads dropped, but only by 5.3 percent, about a third of the decline suffered by the rest of the industry. The Times can now count 3.4 million paying digital subscribers and 4.3 million overall. Thompson says that of those 900,000 “print” subscribers, 85 percent of them also use digital devices to some extent.

Symbolically, it makes sense that The New York Times Co. was the first publicly traded newspaper company to issue its annual report. As the rest of them surface over the next several weeks, they’ll present a marked contrast to the Times’. In fact, it’s this set of awful reports that is complicating the frenzied M&A strategizing — what I’ve called the 2019 Consolidation Games — among the rest of the industry’s biggest survivors.

Take Wednesday’s numbers from Gannett, which is currently struggling to fend off the rapacious Alden Global Capital. Gannett reported its overall 2018 revenues were down 6.1 percent and its fourth-quarter publishing revenues down 8.5 percent. So the Times, in being up 6.2 percent for the year and in being up 10.4 percent for the fourth quarter, has in effect created a 12-to-19 percentage-point gap between it and America’s largest newspaper chain. That number marks the end of one era and the dawn of another as well as any.1

Three numbers now stand out to me most prominently in thinking about the Times in 2019:

  • It now employs 1,550 journalists. That’s 1,450 in the newsroom and about 100 in the Opinion department. The Times’ news force in total — still twice the size of the rival Washington Post, which has increased its own staff at roughly the same rate as the Times in recent years — will grow even more this year, Thompson says.
  • The Times’ share price burst through the $30 barrier earlier this month, a height not seen since May 2005. It’s up nearly 50 percent just since January 1. Investors believe this new digital business is sustainable and even a good investment. They value the company today at $5.38 billion; towards the end of 2016, that number was less than $2 billion.

Long-ago Times competitor Gordon Crovitz, former publisher of The Wall Street Journal, thinks that investors still undervalue what the Times has become. “Do equity analysts fully appreciate the greater value of high-margin, recurring digital subscriber revenues versus the historic print advertising revenues? Shouldn’t the NYT be trading at revenue and EBIDTA multiples more like an information-services business than like a structurally challenged, still advertising-reliant newspaper business?”

Crovitz brings some experience on that question. “In the early 2000s, I made this pitch to the equity analysts who followed Dow Jones when it was an independent company, and incremental earnings from high-margin digital subscriptions to the WSJ accounted for all the brand’s profits.” His question is a good one and gets to the core of both the sustainability and valuation of majority subscriber businesses.

  • “10 million subscribers,” a Times aspirational mantra I first wrote about two years ago, has now has been given a deadline by Thompson: 2025. Now that the Times is more than 80 percent of the way to its previous big goal — $800 million in digital revenue by 2020 — it was time to install a new goalpost. You might be surprised by how the Times plans to get to that new goal.

In a wide-ranging one-hour interview last week, I talked with the Times CEO as much about the future as about the recent past. (You can, and should, read a lot about that in the Q&A with Thompson that accompanies this article.)

The Times’ success is a welcome tonic to anyone consumed with worry about the fate of the press into the 2020s, a fear neatly summarized recently by the former Guardian editor Alan Rusbridger: “We are, for the first time in modern history, facing the prospect of how modern societies would exist without reliable news.”

The Times’ success doesn’t turn around the miserable woes of the local and regional press in North America and western Europe. But it does offer lots of intelligence about the path forward.

The Times, of course, enjoys an enviable market position to reach what the internet rewards most, scale. But in its beliefs in increasing its volume of high-quality content, in hiring the best journalists, in creating superior mobile products, and in providing a technological foundation to support that business, it can teach lots of lessons to any news operator — no matter the size. Let’s look at a few of them.

The 10 million — and anticipating The Trump Slump

Of those 10 million eventual digital subscriptions, how many does he think will be to the main news product? How much of the Times’ future growth will depend on diversifying both its content and its products? Thompson is quite clear: The core of the Times is trustworthy news and analysis, and that ship’s flag flies highest and first.

I asked him which metrics matter most in that path to 10 million. He said he’s focused on the number and nature of those engaged but not subscribed. (“I look at the health of that group,” he told me.) So, while retaining those 3.4 million digital subscribers is Job 1, farming the next group of likelies is the next one. A key question the Times is asking: What kinds of experiences make them want to go deeper?

Despite all the targeting and propensity modeling the Times has done — it counts about 300 in its Marketing, Product & Design and Data Insights groups — Thompson acknowledges that the Times still needs more “rigor” in understanding all the complexity in the path from Times discovery to Times sampling to Times readership to Times subscribing.

He talks about the multiple levers the Times pulls. There are the newsletters, the homepage presentations, the podcasts, the introductory offers, and more — all of them efforts to turn partially engaged audiences into subscribers.

There’s one more lever the Times may soon pull harder: registration. Registration, as all subscriber-seeking publishers know, is a great onramp to eventual payment; “subscribing” to free newsletters has been a great tactic. The Times may try requiring all those who download its free app to register — something it doesn’t currently require. The Times knows what other top publishers know: App users consumer magnitudes more content than browser users. Maybe such registration could lead the Times to higher (and faster) conversion of the partially engaged.

At the same time, the Times’ resources allow it to test new products. That’s in part about understanding the whole Times reader; it’s also in part about believing that there may well be a Trump Slump at some point — an era in which Times readers no longer feel the need to compulsively check their iPhones in trepidation of what just happened.

Next up is a new effort to get to younger families. The Times will soon deliver Parenting, a product which has had a long gestation and will be nurtured slowly. The Times would like to be able to add it to its paid-niche-product complement — led by Crosswords and Cooking, which together account for 35 percent of new digital subscriptions, albeit at far lower price points than news subs. Parenting, though, will be free at launch, led by newsletter seeding and lots of engagement watching. At some point, the Times will look to charge for it.

Down the road, that leads to bundling possibilities, Thompson says. News + Crossword. Or News + Cooking + Parenting. Or combinations still to be created and tested.

It’s a big world after all

It’s even easier than normal for Americans to forget these days, but the United States is only home to five percent of the globe’s populace. Lots of publishers have eyed the potential markets outside their own borders, and all of them are closer to the beginning of reaching it than the middle.

The Times’ outside-the-U.S. sales, though, are beginning to boom. Even as the intense political news cycles drive domestic subscription totals up, the Times’ international growth rate exceeds its U.S. one. In all, 16 percent of Times digital-only news subscribers are international. International readers make up 26 percent of its total digital audience.

I’ve tracked that percentage of international subscribers for at least three years, and it’s usually come in at 12 or 13 percent. Sixteen percent is noteworthy.

So how many of those would-be 10 million subscribers in 2025 will live outside the United States? More than two million of them, Thompson believes. That’s an astounding number — and it’s based on extrapolation through data. Another area of growth is in female readership, which now makes up a majority of Times users, after decades of a male-dominant readership. The Times says (without providing specific data) that over the past two years, “our readers and subscribers have become generally more female, compared to before 2016 election.” That could be an indication that the Times’ efforts to broaden its content mix — as best showcased in its burgeoning Smarter Living story count — is working. (It could also mean women concerned about the direction of American politics make up a larger share of that Trump Bump.)

Finally, the Times says it is moving beyond its areas of greatest subscriber concentration in the Northeast, mid-Atlantic, and West Coast. Which states showed the highest year-over-year growth in subscribers? Florida, Arizona, Georgia, and Connecticut.

The Times’ human voice

The Times brand has long stood, domestically and globally, for authority. But its voice has long been above the fray, often aloof. You may trust the Times, but you didn’t feel a lot of affinity for it.

That’s started to change. It’s The Daily, the Times’ breakout podcast, that best symbolizes the loosening of its tie and dropping of its shoulders. Launched two years ago and hosted by unlikely Times personality Michael Barbaro, The Daily was Apple’s most downloaded podcast in 2018 with 8 million monthly listeners. The best thing about that audience: Nearly 75 percent of it is 40 and under, the Times says.

On the platforms

The Times has been the most public about its testing of Subscribe with Google, and Thompson doesn’t want to go into detail about similar relationships with Facebook or Apple. Why partner? It’s data, mostly: “Machine learning. They know a lot about their audiences and we want to know more.”

Those were the days

Thompson notes how the Times, which once enjoying a unique recruitment business, has lost almost all of it in print. “We had $130 million in help wanted in 2005. Last year, that was $6 million or $7 million.”

The collapse of classifieds — recruitment, real estate, and cars — marked the first major downshift for the newspaper industry. The Times, almost uniquely among the “papers” that once counted on classifieds for outsized profits, has found a way past that major disruption.

The world outside newspapering

You might think that Thompson has been focused mainly on the impacts of the Trump Bump and avoiding that potential Trump Slump. However, he can readily tick through a list of other overarching phenomena that are not only changing our world, but necessarily force those who run news businesses to think through their impacts. In eight words, he reminds us how those who intend to operate news businesses successfully well into the 2020s must take a wider focus in their vision: “Globalism, automation, the decline of the West, and human migration.”

  1. Editor’s note: This paragraph originally misreported Gannett’s numbers, confusing its fourth-quarter and full-year results. They’ve been corrected. []
POSTED     Feb. 22, 2019, 1:33 p.m.
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