You can feel the walls closing in at the new, light-filled Times building off Times Square.
---America's (the world's?) largest newsroom is getting a major haircut. Of the current 1300 jobs, 100 will be gone soon, victim of the increasingly familiar buyout/layoff grind. That's 7.5% in one clean sweep.
---The Firebrand Partners/Harbinger Capital Partners' charge isn't going away. After voicing its concerns about the direction of the Times Company, it has upped its share in the Times first from about 5% to just short of 10% now to about 15.6%, as it runs its slate of four directors for the upcoming board election on April 22. Its goal it says is for the company to aim for 50% of its revenues to be digital in five years. Sure, the Sulzberger family has legal control, but such pressure is still real and felt. When Morgan Stanley pushed, the family pushed back. Now with Firebrand/Harbinger upping the pressure, its slate may get a more favorable hearing from investors who previously sat out votes.
---There's an increasing divide in performance between the Times flagship products -- the print Times and the NYTimes.com -- and its regional products, the Boston Globe and the New York Times Regional News Group, comprising 15 markets. We don't yet know how the Firebrand/Harbinger people (who are also pushing on Media General) want to get to that 50% digital revenue level, which would be a leap from today's total of about 12-13% of total Times revenue, according to my calculations. But I have little doubt, they'll be saying: Focus on the Times, not on those other papers.
While it pains me to suggest it, I think they may be right. It's time for the Times to look at selling off its regional properties and concentrating its future on what will make most sense for the Republic and for the potential prosperity of the Times brand.
Why, and why now?
Well, the Times ownership and management can sniff at other people's ideas on how to run a newspaper company. The Times did that last year, staring down Morgan Stanley, and Executive Editor Bill Keller did it when he derided the Washington Post Co.'s reliance on education company Kaplan to provide it growth and revenue, calling it "an education company that happens to own a newspaper.
The Times, on the other hand, having sold its broadcast group last year (not a bad idea, given the relatively maturing fortunes of that business as well) is almost wholly dependent on newspapers. About.com and a few other web ventures are good, but they contribute only 3% of the company's overall revenues.
If the Sulzbergers have the resources to provide resources the market is no longer providing and want to use those resources to do it, that would be one thing. News of the massive newsroom reduction, though, says they don't, on one score or another. With newspaper fortunes looking like they will only further decline -- those who see plateau on the horizon may be about to fall awkwardly off a cliff -- we've got to ask the question of how and where the family will draw the line in terms of NYT newsroom funding, which today runs about $200 million a year.
It's not quite Sophie's Choice we're talking about here, but, it's a business decision with consequences for the country. The Times, even with its occasional stumbles (well-illustrated last week when it mis-edited sexual innuendo into a decent McCain ethics story) is a national asset. We can't see it further diminished, especially in a year in which the only other serious US national paper has been bought up by Rupert Murdoch.
While we can all criticize the Times almost daily, we're increasingly reliant on the Times for much original reporting across the country and around the globe. That reliance is only growing as major metro papers that used to provide (and staff for) substantial national/international reporting recede into the sand-trap of "local-local." That list is long: L.A. Times, Miami Herald, Dallas Morning News, Chicago Tribune, Baltimore Sun, Newsday, Atlanta Journal Constitution, the San Jose Mercury News, and, yes, the Boston Globe.
So the prize of the New York Times is too valuable to suffer a series of cuts that may be without end.
The pain in bringing up the sales proposition is easy to describe: the Times runs above-average regional properties, from Boston to Sarasota to Santa Rosa. Most observers will tell you that it seems to devote more resources to those newsrooms than the average newspaper, and the communities served are better for it. The companies largely do good journalism, and they've made a lot of the right moves online, as good management overall and in the digital business pushes forward.
But the trend lines are the trend lines. One thing we see clearly in those trends are the revenue declines. Those lines reaffirm that while the company's in the newspaper business (online and off), it is really increasingly in two different businesses.
The Times is national and global. In print, and especially online, that portends a big future in online readership and online ad dollars. It is the largest newspaper site, pulling in 20 million unique visitors a month and registering an above-average more than 30 minutes per month duration. With only 1.2 of the world's 6 billion people online, and English becoming a universal business language, the Times can be in great shape....someday. But no one knows when that day is coming, and in the interim, it looks like it needs cash.
The Times' other holdings -- which constitute about a third of the company -- are increasingly operating in a different universe: local. Local is what's left when national sites -- whether the Times or Yahoo or Google -- both deliver the political/business/sports/entertainment/health+ news we all want and of course increasingly targeted (including geo-targeted) advertising. Local is a bizarre place these days. Yes, local news publishers are greatly ramping up online-only sales, trying to get to merchants previously ignored and tapping new revenue streams. They'll find some success, but are in for a long and less certain slog.
Meanwhile, the newsroom reduction tells the more important immediate story.
So the Times is forced to confront its business as it exists today. Here's a picture of the relative performance of the company's three main parts -- The New York Times, the New England Group, anchored by the Globe, and the Regional Group, each with associated online revenue.
You can see the disparity. The Times is barely keeping its head above water. The other two groups are flagging. Inevitably their poor performance weighs on what the Times itself can do and how big a news operation it can support.
No, it's not an ideal time to sell newspapers, as recent sales would tell us, with the Times maybe able to fetch 8-10 times EBITDA. But the value of newspaper assets is probably higher today than it is going to be a year or two from now. There are operators out there who think they can make it work better, though the real-life trials of Dean Singleton, Chris Harte and Brian Tierney all point to how hard that proposition is.
Maybe, in our ideal world, the Times -- if it isn't forced to take a fire-sale approach to a sale -- could look for buyers who value the newspapers as community institutions and have the deep pockets to fund them as traditional revenue falls. I don't know if Jack Welch is still interested in the Globe, or at what price, or most importantly to the Commonwealth, what he would do with the paper? Are there community buyers in Gainesville or Gadsden?
Sure, things could turn. Having papers concentrated in Florida and California doesn't help, but the deeper downturn there is one thing and the devastations brought by the reader and ad revolutions are another.
Further testimony to how poor the prospects of publishing look arrived last week, in a parallel industry -- trade magazine publishing. There, Reed Elsevier surprised many by putting its whole Reed Business Information business up for sale. That group includes Variety. New Scientist, Publishers Weekly, Broadcasting & Cable and Multichannel News, among others. Reed CEO Sir Crispin Davis CEO said the sale was due the company's belief that "its advertising revenue model and the inherent cyclicality fit less well however with the subscription-based information and workflow solutions focus of Reed Elsevier's strategy." In other words, the business is tanking, and time to get out.
It's a tough lesson for many of us to fully absorb, but in the Times' case, it needs to come to grips with it sooner than later.More Content Bridges coverage of the New York Times, here.