The Times are Changing…
Can a newspaper company adapt to a world without paper? Can the New York Times last in a time of digital revolution?
The Challenge facing The New York Times
Perhaps no industry has been more radically shaken by digital transformation than the newspaper business and no company has felt the pressure of change more than the “paper of record” since 1851, The New York Times. For generations newspapers were the primary source of news. The consumption of news and the value proposition offered by a newspaper was quite simple: Consumers had an extremely limited ability to connect with people across the world and to understand all the possible events that were taking place. Newspapers solved this problem by sending the best journalists around the world to gather news, combining all the world’s stories into one easily digestible paper that landed on the doorsteps of readers every morning. This operation required sophisticated distribution networks, large coordinated newsrooms and the best journalists in the country. These large costs were offset by reader subscriptions and advertisements placed throughout the paper. But, the advent of the internet radically shocked the way people consume information.
Today consumers can access information and news in real time from countless sources. Who needs a reporter to tell you about a protest when you can simply live stream the events on youtube? We now live in a world of 24 hour tv news coverage, facebook newsfeeds from friends, snapchats of buzzer-beaters and tweets from presidents. And with this shift in consumer behavior, print news media has seen revenue and profits spiral downwards as advertisers rethink the best ways to influence and connect with consumers. (1) Print advertising revenues fell from nearly $50B in 2005 to only $19B by 2012. In 7 years, roughly 60% of the industries core revenue disappeared. And though digital advertising grew from $2.6B to $3.3B, total advertising spending still fell by over 50%. (2) So with Advertising revenue seemingly evaporating, how can The Grey Lady of the past stay relevant in this vibrant digital future?
U.S. News Media Statistics
The Response
The New York Times fully believes that its future viability as a business depends on its digital strategy.(3) Since 1996 the New York Times has had a presence on the web and since 2011 the Times has utilized a pay wall. By 2015 over a million consumers subscribed to the New York Times online, but the Times new that more needed to be done to save their business.(4) On October of 2015 the Times unveiled a plan to double its $400 million in digital revenue to $800 million by 2020. This plan outlines many initiatives that are needed for success, but focuses mainly on three key objectives: obsessive focus on the user experience, a continued commitment to best in class journalism and innovative digital advertising partnerships. Unlike other new outlets that focused on attracting as many unique users as possible with hopes of increasing ad revenue, the Times views its future as resting on the backs of highly loyal and engaged subscribers. As CEO Mark Thompson noted:
“Our unique business model depends on a deep relationship with our most engaged readers. Twelve percent of our digital readers deliver 90 percent of our total digital revenue. To double our digital revenue, we need to more than double the number of these most loyal readers….. Many of our competitors focus primarily on attracting as many uniques as they can with a view to building an advertising-only business. We see our business as a subscription service first, which requires us to offer journalism and products worth paying for. Our focus on quality and a deep engagement with readers is also a competitive advantage in advertising, which at its best is driven by unique consumer insight and superior creative work.” (4)
But how successful has this plan actually been? The Times has been hemorrhaging revenue and profit for nearly a decade and its overall revenue is still heavily dependent on print… a business that is rapidly dying.
Source: 2014 New York Times “Innovation Report” (5)
Future Growth – Readers are an untapped asset
The industry head winds are incredibly daunting for the New York Times. The Times strategy of providing best in class journalism and continuing to enhance the user experience by adapting content for mobile and tablet use are good ideas, but I fear it is not enough. Digital subscriptions simply can’t grow fast enough to make up for the dramatic loss of print advertising revenue. The largest untapped asset the Times has is its massive community of readers. The Times needs to think creatively about potential ways to increase interaction between community members and ways to make the consumption of news a less passive activity. New York Times readers are smart and opinionated. An opportunity exists to activate this community as a social network enhancing the user experience and increasing user engagement, which will attract advertising revenue.
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Sources:
- “Innovation”, March 2014. The New York Times. http://www.niemanlab.org/2014/05/the-leaked-new-york-times-innovation-report-is-one-of-the-key-documents-of-this-media-age/ Accessed Nov. 2018.
- “The Pew Research Center’s Project for Excellence in Journalism: The State of the News Media 2013 An Annual Report on American Journalism” May 2013. http://www.stateofthemedia.org/2013/newspapers-stabilizing-but-still-threatened/newspapers-by-the-numbers/ Accessed Nov. 2018.
- Thompson, Mark and Baquet, Dean. “Note from Mark and Dean”. October 2015, http://www.nytco.com/note-from-mark-and-dean/ Accessed Nov. 2018
- Lichterman, Joseph. “4 takeaways from the New York Times’ new digital strategy memo” Oct. 2015. http://www.niemanlab.org/2015/10/4-takeaways-from-the-new-york-times-new-digital-strategy-memo/ Accessed Nov. 2018.
- Benton, Joshua. “The leaked New York Times innovation report is one of the key documents of this media age” May 2014. http://www.niemanlab.org/2014/05/the-leaked-new-york-times-innovation-report-is-one-of-the-key-documents-of-this-media-age/ Accessed Nov. 2018.
- Ember, Sydney. “The New York Times Co. Reports Loss as Digital Subscriptions Grow” May 3, 2016. http://www.nytimes.com/2016/05/04/business/media/new-york-times-co-q1-earnings.html?_r=0 Accessed Nov. 2018
Thanks for sharing Exxon. It really is a interesting dilemma newspaper/media companies face. On one hand, every person with a smartphone and internet access is now a “reporter” which as you pointed out, diminishes the necessity of news outlets to provide breaking news coverage. On the other, I feel that we as a society need responsible, insightful analysis and coverage more than ever. Unfortunately, given the way online content is distributed today (typically through subscription model), I feel that reputable media outlets are reaching less people than ever. In order to expand my revenue base I would be looking into a freemium style model that allows anyone to read a select number of articles each day. Consumers would then have the option to pay a fee to subscribe additional content. Given this would likely increase the consumer base, I would expect it may all news companies to charge a higher premium for advertisements.
I think a big reason why the NYTimes is struggling is because their social media strategy is terrible. Their articles are always so poorly packaged for Facebook: the photo almost always a stock image, the headline is generally too long and confusing, and the Facebook copy is never eye-catching or controversial. They do social all wrong. If they really want to capitalize on the digital trend, they need to invest heavily in training their marketing team on how to package their stories for social. You can’t simply take a newspaper headline and expect it to work on Facebook. It’s an entirely different playing field. From my experience, people typically only read the first 3 words of a headline on Facebook. That means you need to put the most important words up front. A recent NYTimes headline on Facebook read, “High in Tower, Trump Reads, Tweets and Plans”. “Trump”, the most important and “click-baity” word in the headline, is hidden in the middle. If they want to maintain readership, they need to figure this out.
Your article was very interesting to me Exxon, since what you highlighted is very different from what is happening in the Middle East. I worked on a consulting project with a printing & publishing house in Saudi; although you would think that circulation and revenues are going down, in reality, an increase in population coupled with an almost stagnating readership per capita are driving revenues up. This might be due to a sub-par internet penetration in the region – what you highlighted in your article might be what is lying ahead of us in the next decade. We will make sure to use the lessons learned from the Western world by then!
Great analysis! One question I have is: can the newspaper industry adapt not only to the new forms of digital data consumption (computer, mobile, etc.), but also to the new standards of data consumption? By that I mean that the attention span of a reader online is much shorter than one of a reader offline (that has a physical copy of the newspaper). Hence, you can see more and more digital news providers write shorter articles, in bullet point formats and using clickbait titles (see my Digg.com post for a good example of a clickbait title ;)).
Agree that newspapers are facing a great problem with digitalization, and changes are needed fast if they want to stay alive. This makes me think of a newspaper in Chile that has a similar audience to the NYT, and as so the percentage of the population that read it was very small. However they were fast to launch a website that not only has news but also allows readers to post and comment, and it’s now the most visited website in the country!
The Chilean newspaper gets revenue 100% from advertisements. I like your proposal to find other sources of income to have some diversification, but do you see having paid subscribers something that will last in the long term if there are other websites that will give the same news for free? I think it’s an interesting challenge to find something other than news that is “proprietary” to the NYT to give paid subscribers something than noone else does and make payment sustainable in the long term.
Very interesting article! I found your analysis of the NY Time dilemma very intriguing and your recommendation interesting. There were three questions I had. First with many other social network sites for people to share opinions, what advantage does the NY Times have to have these readers now use their interface to share opinions and create this network? I question if this is part of their core business competency now and if not, can they build it fast enough and good enough to compete and effectively build the network to achieve the desired result. Secondly, you outlined a great problem facing the print media giants. As consumers change how we access and consume news, what part do companies like CNN and FOX play in this dynamic. Where a reader can go to any of these sites and read the news they want for free. This seems to be a new source of competition to the news print business that I do not think just increasing readership will fix. Third, did you find any information about how the company has changed its internal operations model to streamline efficiency, reduce the number of reporters, or how they actually receive news to print that would shed light on how they have remained profitable with this significant lose in revenue? Is there any future benefits that could be gained by reduction of operational costs, and is there still a need to send reporters to other parts of the world when their internal/external news is so accessible directly?
Dear Exxon,
Thanks for your interesting blog post.
You have touched on a very important topic on how the the digital revolution has severely dented the revenue streams of print media industry. Its evident that either one can ride the rising tide or risk drowning. Its interesting to see how NYTimes lays more emphasis on subscription revenues as compared to ad revenues. I believe that increasing the user base is definitely very important — as ad revenues are a byproduct of an increased or more engaged user base. If you can build the latter, the former will eventually turn up on your doorsteps.
Thanks.
Regards,
EK.