Open Letter to New York Times


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?

Advertising Dependency

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.

Circulation Revenue

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.

NYT Strategy

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?

 

Axel
http://xeesm.com/AxelS

(any way you like to reach me)


  1. Walter AdamsonWalter Adamson04-13-2011

     
    I think that there is another side of the whole industry which needs to be rebuilt. While it is nice to say that there is a place for quality journalism, as opposed to the rabble of the blogsphere, in reality "quality journalism" has become a myth. 
     
    The newspaper industry and its journalists are not producing independent well-researched news. The final nail in the coffin was clearly the Gulf War and then Iraq and Afghanistan. Amazingly, journalists even appeared proud of their "embedding" – the adrenalin went to their heads! Even the BBC failed to do independent research, it just pumped out the propaganda.
     
    It's not just these wars where 99% of journalists are seen to be empty channels, but throughout the whole political system of "connections" and "access". Sadly, in the wars, the very very few independent journalists had (have) a very much higher death rate, so we have little chance to hear their stories. Thankfully the internet does provide a medium for those that survive.
     
    If the NYT really wants to re-invent itself, it needs to clean out the vassals that purport to be journalists at the top middle and bottom of the organization and start again. Then it could really make a mark on the future of newspapers and be something well worth paying to read.
     
    Walter @adamson
    http://xeesm.com/walter

  2. Trent SherrellTrent Sherrell04-13-2011

    Axel and Walter,
    I believe you both speak a lot of truth in your critique of the news media business. As a fairly new UXArchitect at a major media organization (company name will remain silent to protect the not-so-innocent… me!) I know the advertising "drug", content aggregation, and user generated content, to name only a few issues, are very real hurdles faced by the business.
    Personally, I am a full proponent for your call to action. It is going to have to happen. Problem is, in the short term, it may seem more like a 180 degree turn than tacking to the direction of the wind. Examples abound which harken to the road ahead. To your point Walter, look no further than the current Libyan uprising and the use of Kickstarter to leverage the power of social media and the crowd to fund small, independent reporters. [See http://tsherrell.us/fFaS8L for Mashable's reporting on the story.]
    I am looking forward to reading how (and if) Ms. Robinson responds – both from someone in the media business as well as an alumni of the Social Media Academy.
    Great letter Axel. Great comment Walter.
    Kindest regards,
    Trent Sherrell

  3. Axel SchultzeAxel Schultze04-13-2011

    @Walter – agree to a certain extend. Advertising dependence is the single biggest drug the news industry needs to get away from. I guess war stories are very different. There are forces that journalist need to comply with in the interest of the respective nations.

    @Per (thanks for your feedback in the Social Media Academy group on Facebook Here is my comment: The money will come from content consumers. I know it's all free – but it really isn't. Think "experience" not content. Fashion is just a bunch of sewed together fabric – yet it's the experience to ware a Gucci piece. :) So the reinvention of editorial systems is the actual million-dollar question that needs to be answered.
     

  4. adminadmin04-13-2011

    Bob Thompson commented on this at Social Business one, and I thought I share Axel’s answer here too:
    Thanks for the comment Bob. I should have been more specific on the advertising part. I'm not seeing the dependency as an integrity issue – but as a business model issue.

    Please take a moment and read the NYT Annual Report 2010. All the core thinking, the strategy, the outlook centers around advertising. Now if you look deeper into their sales organization you will see the same thing: It's all about advertising. If you talk to "old school journalists" they tell you the same thing: "it's all about advertising now". In today's world a publisher thinks, advertising and revenue stream from advertising from early in the morning til late at night. Now – obviously there is a lot of thinking about content and readership too – but even here it is in the light of getting more advertising in order to sustain the publication.

    If you would take the same amount of executive thinking and energy and put it all around one thought:

    "What value can I create for my reader that is big enough to offset the cost to create that value"

    I'm absolutely certain that a business model will evolve that creates a value balance between the value provided and the value paid for. If not – there is something wrong with the business model, at least in my opinion.

    Let's assume advertising is rapidly moving elsewhere and there is no significant advertising revenue available to publishers any more. That publisher is dying because the business value they originally provided is not offset by the revenue they generate. That means their business model or their business value is just not there. And that is exactly why publishers die. By the way – for the same reason software vendors die if all they do is bet on advertising revenue stream. That is why blogger couldn't sustain their blogs because the hoped to get revenue from advertising didn't come in. That is why events die because they can't get enough advertising sponsors, why video channels die…

    And we are beginning to see search engines die because also they are entirely dependent on advertising revenue.

    Dependency on advertising revenue is as old as advertising itself. And so is the death those advertising dependent organizations are dieing from.

    I totally agree with you about lack of innovation. Right now all the innovation circles around their core business model, which is advertising. And here we have the problem again.

    I'm not at all against advertising. We are starting to offer advertising any soon in our own business – but I *never, ever*, want it become our main source of profitability.

  5. Walter AdamsonWalter Adamson04-14-2011

    @axel, "embedding" is just the visible inescapable revelation of the journalistic malaise – it happens everywhere else as well but since the adrenalin doesn't rush to their heads in these other fields they don't gush it out. Embedding came naturally because of they saw nothing unusual in the practice of being PR agents for their sources. The proof of this assertion is the outcry which occurs when one of "their own" breaks ranks. It's that obvious.
    Walter

  6. Laureen EarnestLaureen Earnest04-15-2011

    Axel, I appreciate your wake up call to an industry sorely in need of regeneration.  The internet  has changed how we find, access, and create information and publishers have to figure out how to get in front of their subscribers in new ways and provide various methods for doing so.  
    With more information than we can possibly consume readily available it is now the job of the consumer themselves to "filter" what is it they want to consume.   Back in the day it was the TV / Industrial complex that interrupted our lives with what they felt we should hear.   And yes lately it seems news has to have some sort of spin to it — (not just the facts ma'am)  — but a bunch of talking heads talking over each other adding little value to a conversation.  Is it any wonder we as consumers tune out?      
    Quality is and will remain "the" differentiator of information …. as the authentic will naturally stand above the spin.    With a large reputation for quality it only seems natural they can step up to this task, but must uphold themselves above the norm to pave this new path.  
    Second, why not go wide by providing the consumer many different "on-ramps" to a paid subscription?   For instance if I want to only read the section on the Arts or the section on Sports on a daily basis — that is what I subscribe to.   Perhaps on another day I'd want to read the entire paper and on that day "buy access" to it.    On another day I'm doing research and need to access archives on a given subject — that too would have it's own price.    And let's not forget the ability to have an "in-context" payment experience … a micro payment 2-click process embedded in the online paper that for a few cents allows you to read the entire article and pay as you go.   
    Now .. lets not forget the "hard-copy" printed on the press version  … for on Saturday mornings it is the ritual in our household to enjoy the morning at the breakfast table with their spouse having coffee and sharing the paper.   The only hard copy they subscribe to in a given week is Saturday … but none the less, consumers still want this option too.   Yes it may cost more than online … but who wants to give up their rituals.    Besides there will be plenty of fans needing to buy hardcopy to frame up for their den when the headline reads  "Steelers in 7th Heaven!" … having just achieved their 7th Super Bowl title … or others who would enjoy simply burning this hardcopy headline succumbing to defeat.      
    It seems crazy to me that in the "information age" those with the most history of providing "information" have waited this long to think outside the box and adjust their business models accordingly.    If I was to recommend how they should proceed it would only include significant council sessions with the forward thinking entrepreneurs available at Sobizco  — for they will present not only how to make "shift happen", but the incremental steps to get to a fresh perspective and implement changes the 21st century consumer will embrace.           
     
     
     

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