Dear Janet Robinson, New York Times CEO,
Today I was pointed to one of your articles on NYT and wanted to comment. But that was not possible, readers apparently can't comment. I liked what I read and so I wanted to at least tweet about it. I learned that I have to be registered to be 'allowed' to tweet the content. As you can imagine, I was quite surprised. There are businesses to pay people to tweet about them and here is a company struggling for growth and making it so hard to interact with. I wanted to connect with you to share my thoughts but couldn't find you anywhere in the social web.
Please understand – this is not a rant about New York Times, or you, or the print media industry. This is about helping your industry to not only survive but grow. I trust your 2011 Annual Report could read quite differently (see below).
Why helping the news industry is important?
The news industry brought two major advantages to our society:
1) Well researched news on time.
2) Independent information.
The Internet would have been a blessing to the news and media industry, as it provided a way to distribute news even faster and reduced cost of production and distribution by an order of magnitude. The big problem however was that the news industry decided to build their business on advertising and no longer on news. The shift in business model killed many and crumbled the rest.
However we – the society – still need well researched and professionally written news – actually we are more information hungry than ever before.
Advertising dependency is killing the media industry in many ways.
5 Years of continuously declining revenues (Source: NYT 2010 Annual Report)
2010 2009 2008 2007 2006
Revenues $2,393,463 $2,440,439 $2,939,764 $3,184,757 $3,274,387
Operating costs 2,136,927 2,307,800 2,783,076 2,919,031 2,986,853
The decline in revenue will most likely rather accelerate that stagnate
Of course you compensate the decrease in revenue with ongoing cost cutting measures, so you stay profitable, but for how long can you do that? More importantly: do you see any chance to turn the ship around?
2010 revenue of $2.4 Billion continues to be dominated by advertising revenue. In other words NYT is largely an advertising distribution company, providing advertising throughout its media platforms, in print and electronically. News and other content is now a byproduct to the advertising business.
With 41% of the revenue coming from circulation, there is a light at the end of the tunnel. That revenue seems to be directly related to people interested in your content rather than people advertising on your real estate. However that revenue also comes with the highest cost: Print – and as we all know it is important to make the advertiser happy.
As a strategist I'm a bit puzzled with the variety of "strategies". I see the various strategies in part even being counter productive to your efforts of staying a top news provider.
* Expanding your reach is a rather dangerous undertaking as it would get you only deeper into the problem rather getting out of it.
* Strengthening your digital presence is certainly a very strategic goal – but increasing the dependency from advertising rather counter productive
* Diversifying revenue streams may be a great idea in general but all you are doing is diversifying the ad revenue stream that makes you further depending on the "drug" that you should get away from.
Dysfunctional Business Model
To sum it up: the advertising business model makes the news industry dysfunctional. More so it dilutes one of the two core principles: Independence.
Is There A Solution?
Obviously not a easy one – but I guess there are three key factors that will ensure a successful solution creation process
The Market Needs
1) Professional news compilation in the overwhelming avalanche of user generated content is a rapidly growing need
2) Independent information research is expensive but equally needed in an information dependent society
3) Fast and reliable news distribution remains to be a top need and interest in our world
All together there are distinct values that an information society is willing to pay for. And getting independent and advertising free information would even increase that value significantly.
On the other side of the equation is cost
Journalists are expensive, travel and other news aggregation expenditures are growing, and online news distribution technology cost continues to grow as well – even so it is nothing compared to print media.
Thinking out of the box
Toady, everything that could help the media industry, is seen as competition. Internet is competition, free information is competition, user generated content is competition. As long as the media industry is not leaving their ancient business model, that industry will further decline and make way to new models of news management. So why not saving what's left and radically transforming the business before it is completely lost?
1) Make Internet / online to the no.1 advantage for rapid – non stop news aggregation and distribution (Yes aggregation too).
2) Make user generated content a valuable and strategic content contribution mechanism which is even free
3) Focus on non stop content management curating, reviewing, adjusting content from all kinds of sources, developing a ranking and rating mechanism that not only is influenced by the publisher but also by the public.
Monetization & Profitability
Monetize the business by charging a monthly fee for independent, on-time and high quality content. I'd love to become (again) a reader of such a publication. Remove all advertising, advertising dependency, cost of advertising sales, and any other advertising related cost and dependencies. With a highly engaged estimated online readership of 20 Million paying, let's say $60/year your circulation revenue would be $1.2 Billion. The raw material; cost is zero, depreciation from printing equipment would be zero, cost of sales which is currently an estimated 3/4 of a Billion in your organization would collapse to a fraction of that.
Growth and Expansion
With the new model you are not only finally independent of advertising but your management resources can focus on growth, reader engagement, contributor engagement, news quality improvement, expanding geographic reach as well as content diversification, and many other aspects of what now is again your very core business: News aggregation and distribution. And you will be exclusively measured by the quality of your own service.
Your 2011 Annual Report
Maybe in 2011 you have only one strategy:
Make New York Times being acknowledged as the fastest high quality news provider in the world with the highest level of profitability by the end of 2014.
I'd love to see your 2012 outlook read more like:
New York Times is reinventing the news industry and with it our own business model. For the first time in six years we are expecting growth in readership, market acceptance and profitability. Our new business model is entirely focused on being the world leading independent news publisher with rapid declining dependency on advertising. With an estimated 500,000 independent news contributor and the new "non stop news" service we are considered the fastest news provider in the world. Readership is expected to grow by an estimated 7 % in the coming year, witch provides an estimated growth of 5% in revenue and 7% in profitability. Depreciation is cut from $120 Million to $20 Million. The sale of the printing division brought an non core business related revenue of $250 Million.
Ready To Tack?
Business transformation is like tacking on a large sailing vessel in rough weather. All hands on deck, knowing it will shake everything on and below deck but also a necessity to get to the desired destination. As my favorite saying goes: You cannot direct the wind – but you can adjust your sail. Ready to tack?
(any way you like to reach me)