The New York Times: Loser (sadly)

 

 

As of February 2017, the NYT stock price is down ~ 80% from its high 15 years ago. This decline is in spite of the fact that NYT continues to create massive value for its three million paid print and digital subscribers.

 

The macro-level convergence of digital, social media, and mobile technology trends have all contributed to the bleak future of the news organization.

 

CREATING VALUE

 

For decades, the NYT brand has represented world-class quality reporting, opinion, and investigative journalism. This brand has continued to attract the best journalism talent from around the globe, giving it strategic operational access to some of the most important tips, interviews and minds in the industry. However, their value creation has come under attack from many angles.

 

One challenge has been the multi-faceted Trump effect. The President’s intense and erratic use of Twitter to communicate directly to citizens, his active discrediting of news organizations (by accusing them of “fake news” and bias), along with his proliferation of objectively false news (or “alternative facts”) on social media platforms has transformed public opinion of media (and the NYT). In many ways, the NYT and media have been both relegated in influence and disintermediated thanks to social media.

 

A second challenge is the high pace of content creation and consumption in the digital age. Social media has democratised content creation, and has shortened news cycle, leaving less time for investigative journalism, and even less time for short-attention-span readers to research issues deeply before forming their own opinions.

 

A third challenge is the rise of global inequality and the resulting political polarization, which has been mirrored (to varying degrees) in the polarization of reporting. The time spent on social media and its echo chamber phenomenon has exacerbated this bias, as we’ve seen by the NYT (and other media outlets’) completely wrong election result forecasts. Readers distrust media’s bias and have seen a multi-decade decline in accuracy.

 

Combined, thanks to the rapid change of reader’s internet- mobile- and social media-enabled context, this has put the NYT in an unprecedented existential value-creation crisis. With so much discrediting of facts, and growth in speed-related inaccuracies, and whom should readers believe? Where does(n’t) the NYT fit in readers’ lives as compared to 15 years ago?

 

CAPTURING VALUE

 

More problems plague the NYT on the monetization front.

 

Their main FY2016 revenue sources include:

Circulation $880M (+3.4% YoY)

Advertising $581M (- 9.1%)

 

Their main 2016 costs include:

Production $628M (+1.7% )

SG&A $721M (+1.0%)

 

As reader attention has shifted to digital and mobile, the decline in print advertising revenue and the inadequate offset of digital advertising revenue or digital cost savings.

 

One main cause of this is social media becoming a primary channel through which readers discover NYT (and other media) content. As a result, advertiser dollars increasingly go to the platform (e.g. Facebook) rather than the NYT.

 

There’s much more to discuss around NYT’s strategies to better monetize, including the 10 free articles per month pay-wall, their arrangements with Facebook and Twitter, and their forays into video, VR, and big data, however these investments have clearly not started delivering significant value returns.