Accuracy in Media

ny times buildingWith the shocking announcement this week that The Washington Post was being sold to Amazon founder Jeff Bezos for $250 million, ending the Graham family’s 80-year ownership of the newspaper, all eyes have turned towards The New York Times, which like the Post is family owned.

Times publisher Arthur Sulzberger Jr. moved quickly to dispel the rumors that the family would follow the Graham’s lead and sell the Gray Lady:

Colleagues –

We were all taken by surprise on Monday afternoon with the announcement of the Graham family’s decision to sell The Washington Post. Surprise probably doesn’t cover it; we were stunned.

We have spoken to Don Graham and he reiterated to us his desire to put The Washington Post into the hands of someone who he and his family believe is best positioned to help it grow and thrive and compete in the global and digital marketplace. It’s sad to see a great American newspaper family like the Grahams depart from The Post, a publication for which we at The Times have much affection and common ground. While The Times will continue to compete with them for the big story, we hope for the sake of quality journalism and an informed citizenry that Jeff Bezos will continue the tradition of excellence that the Grahams achieved in their eight decades of stewardship.

This leads us to the Ochs-Sulzberger family and this great institution, The New York Times. There has been much speculation and understandable concern about what this could mean for us. Will our family seek to sell The Times? The answer to that is no. The Times is not for sale, and the Trustees of the Ochs-Sulzberger Trust and the rest of the family are united in our commitment to work together with the Company’s Board, senior management and employees to lead The New York Times forward into our global and digital future.

All of us at The Times are aware of the great strides we have made. Our digital subscription model set the standard for the industry and put us on the path forward. The Company is profitable and generates very strong cash flow, which we believe makes us perfectly able to fund our future growth. The Times has both the ideas and the money to pursue innovation.

Mark Thompson has articulated our strategic plan to enable that growth, and we are implementing it beginning with a focus on The New York Times brand, increased investment internationally, in video, in paid products and in brand extensions. Jill Abramson is presiding over a newsroom that is raising the bar with its innovation in storytelling capabilities while maintaining the highest standard of excellence in its journalism. The same can clearly be said for Andy Rosenthal’s leadership in Opinion.

We’re incredibly proud of our association with this great institution and, on behalf of the Trustees and the other members of our family, we plan for that association to continue for many years to come.

Arthur and Michael
On behalf of the Ochs-Sulzberger Trustees and family

But just because Sulzberger says the family isn’t interested in selling doesn’t mean that he shouldn’t.

The Times, like other major city daily newspapers, has been suffering for years after the recession. That, combined with increased Internet usage, has forever altered the business model of newspapers across the country.

Like other newspapers the Times has been hit hard by the decline in advertising, as large advertisers have either cut back or in many cases disappeared as consolidation took hold. Think department stores, which have seen numerous mergers and bankruptcies in the last decade, along with the auto industry, which required jettisoned brands and dealers, and a government bailout to survive. Both  sectors were once major advertisers and provided plenty of profits to the Times and their ilk, but no more.

Even harder hit has been the classified ad section, which has shrunk to almost nothing as sites such as Craigslist, EBay, LinkedIn etc…, have proven to be a far more efficient method to sell merchandise or look for a house or apartment.

The Times is a prime example of how much the business model has changed and why they should consider selling.

For the 11th quarter in a row, advertising revenue dropped—this time by 6.8% compared to a year ago. In addition, digital advertising, which was supposed to help make up for the loss of print ads, declined by 2.7%. And for the first time in its history, circulation revenues surpassed advertising revenues, thanks to the initial success of their paywall, which now has 699,000 subscribers.

As advertisers and their money either move to other platforms or disappear altogether, the pressure will grow on the Times to replace that revenue. They are trying by building up their paywall, but at some point that growth will likely stall, putting downward pressure on profits.

While the Times eked out a profit of $20 million in the last quarter, that doesn’t do anything to enrich the Sulzberger family, which used to receive about $25 million in dividends annually  from the company. Sellling would allow the family to monetize an asset that is producing no income and is facing some stiff headwinds now that they are purely a newspaper company.

With a market value of nearly $1.8 billion, the Times wouldn’t come as cheaply as the Post, but a deep pocketed investor could still offer an attractive price—it seems like billionaires have nothing better to do with their money lately—and give Sulzberger a chance to cash out at what is likely to be the company’s peak.

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