Category Archives: New York Times

Hello?

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Mr. Watson, come here… I need you…

Sometimes when new technologies come along, they overturn the world of conventional thinking – particularly when it comes to valuation.

Take a look at the telephone.

Before Alexander Graham Bell invented the telephone, value was directly married to rarity.  The more rare an object, the more it was worth.  Gold had great value because there was not a lot of it. Make gold as common as lead, and its value would plummet.  So people horded gold and nations went to war over gold. Only kings and very rich people had gold. That was how they liked it.  Open the treasury in the middle of the night and luxuriate in your wealth.

Comes the telephone.

What is the value of a telephone if only one person has it?

Nothing.

Who are you going to call?

If only a few kings and a few rich people have phones, the value increases, but only marginally. Now you can call a few friends,but that’s about it.

However, if everyone has a phone, right down to the local plumber, suddenly a phone is so valuable that you can not afford not to have one.

Now that’s value, but an inverse value from that which had been true through almost all of human experience. It is no longer rarity that gives value, but rather commonality.

What does this have to do with the current crisis in newspapers?

A lot, I think.

Because the crisis we are facing in newspapers and journalism in general is also a moment in which conventional thinking about valuation is being turned on its head, although we are slow to see that , as usual.

Up until now, we have thought that the primary asset of a paper or a TV station was, in fact, the station or the newspaper itself.  It was The New York Times that had the value, or CBS News. The rest, the people who worked there, were in a sense fungible.

In other words, the institution lived on and on, and readers or viewers were attracted to the institution, while the people who created the content for the institution were fundamentally replaceable or interchangeable.

This we sometimes referred to as ‘branding’.

This remained true so long as the technology of the day meant that there were a limited number of pipelines or platforms for delivery of information or content (and the advertising that went along with them).  In the words of AJ Liebling “freedom of the press is limited to those who own one”.

Because it was ridiculously expensive to even entertain the idea of having your own press.  The very cost of a press and the attendant mechanisms of distribution were a barrier to entry for competitors.  Thus, the perceived value of an institution like The New York Times was vested in that barrier to entry.  The reporters might go from paper to paper, from The Times to The Herald to The Daily News, but the paper, the institution would survive.

The reporters were marginal.

The same was true for television.

When it surfaced in the 1950s, the signal was pushed through the air.  There was limited space on the electromagnetic spectrum, so the FCC licensed the limited space to three networks, ABC, NBC and CBS and they held a virtual monopoly over access to people’s homes.

Shows might come and go, but the platform, the pipeline was in the frequency (and in all the expensive investment in infrastructure to push pictures and sound into the air).  The value was in the network, not in the content, per se.  The content was simply the filler, which was changeable depending upon taste.

When cable arrived, it as the same model, simply fractionalized over more players.

The web, however, like the invention of the telephone, changed everything.

At first, newspapers and later television stations saw the web as yet another platform for distribution – a kind of super cable, that would carry The New York Times or CBS shows into everyone’s home.

But that was not the case.

What the web did was to rewrite the fundamentals of valuation.

And like medieval kings, it was and is hard for those who once had the most precious things in the world to grasp that the very definition of value has now changed forever.

What the web did was to take away the barriers to entry. To make the ‘gold’  of the NY Times or NBC’s FCC license as common as lead.

Now, anyone, any time, and for no cost, could get into 2 billion homes. For free.

So where does value suddenly reside?

In the content.

People online are seeking content.

Quality content.

And they do not care where it resides.

iTunes is a classic indicator of what is coming.

In webworld, music is often a harbinger of where the future lies.

When I go to iTunes to download a song, I don’t care if the recording artist is signed with Arista or RCA or Decca or whomever. It does not matter a bit to me.  It is the music I am after.  The ‘studio’ goes away. It is the content that is king.

Each day I go to NYTimes.com to read the paper, but in truth, if Frank Rich, Maureen Dowd, Tom Friedman and a handfull of others were to suddenly break away from the paper and set up their own website (and like Drudge, they might aggregate headlines), I would go there instead.

Now, the NY Times might be in financial trouble, and perhaps their website does not generate enough revenue to support their building, the presses, their trucks, their vast management and HR teams and so on. But my guess is that online revenues from The New New York Times  (aka Rich, Dowd, Friedman and Co.) would more than satisfy the writers.

That’s all that counts.

The content.

So it strikes me as more than a bit odd that when budget cuts come, which is inevitable, the first places to be cut are those who actually create the content.

It does not make sense.

It is like eating the seed corn.

Sell the building.

Fire the management.

Close down HR.

Do anything, but save and nurture the talent.

Or maybe the talent will simply leave and set up their own online ‘paper’. I mean, why do they really need management anyway?

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A House of Cards

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The answer, my friend, is blowing in the wind…

Drudgereport.com, one of the top websites in the country is an aggregator of other people’s work.

My friend Jeff Jarvis calls on websites to be ‘curators’.

All of this is great…. but…

But at the end of the day, someone has to make the original content and be paid for it.

Until now, that someone has been newspapers.

But I think we are looking at the end of newspapers, and that is a sobering moment for all of is.

Again, I am going to pimp for Jay Yarrow’s outstanding analysis in the BER, which is, I learn to my amazement, the Business and Economic Reporting program for NYU! So congrats Jay Rosen for doing such an incredible job over there.

The entire newspaper business, now no longer a surprise to anyone, is on life support.

Henry Blodget at Silicon Alley Insider recently did an analysis of The New York Times and found that the company has a negative net worth!

They have $46 million in cash and are owed $366 million from advertisers, giving them $412 million. They owe $398 million in short-term debt, which comes due May 2009, in addition to a projected $470 million in operational costs like salaries and newsprint, giving them a total of $865 million in near-term obligations — $453 more than they have.

This is not a problem they are going to fix by mortgaging their new building.

And this collapse is not limited to The NY Times.  The bankruptcy of the entire Tribune group, which include The LA Times, The Baltimore Sun, the Chicago Tribune is almost incomprehensible, yet true.

The newspaper business is not what it was.  It is a mess.

The Washington Post is actually supported by that company’s educational division (including the Stanley Kaplan SAT review course).  The company’s annual report last year stated that the company took in $2.93 billion in revenue (of a total 4.18 billion) from the educational branch. The paper delivered only $889 million. The paper’s revenue declined 7% while the educational division grew 13%.  Without the educational division, I think it is fair to say that the paper would be in the same straits as The NY Times is now.

So the conventional newspaper business model is in deep deep trouble. And if the papers go belly up, who is going to provide the content for Mr. Drudge and countless others to curate?

That’s a good question.

Is news of any value?

I think so.

But perhaps not on paper and ink.

Michael Bloomberg made a fortune with news, but by not putting it on paper and ink. He could have. But he opted instead to lease dedicated terminals that delivered the same information that a paper (or a website!!) might have.  Bloomberg understood the value of the news information and a way to package it very very profitably.

In yesterday’s blog, Paul commented:

Business models are thin on the ground. Sure, loads of newpapers are crossing to the internet – it’s a cheap transition to make – but how many are making money from it? Name them.

Well, here’s one.  The Wall Street Journal. Since taking over the paper, Rupert Murdoch has started charging for the online service, and now you have to pay $104 a year for the full online service.  In the past year, Murdoch has earned $100 million in online ad revenue and another $100 million in subscription fees.  That’s almost as much as The New York Times is going to get for mortgaging its building.

Women and Children First

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And we had 70% market share….

The Day of Reckoning has arrived.

Or at least it has started.

Sam Zell’s Tribune Company goes Chapter 11.

The New York Times is so close to the edge that it has to mortgage its new headquarters to raise $225 million to meet a debt note that comes due May 2009.

NBC announces yet another round of cuts, and we are still at the beginning.

Change… vast and rapid change, is coming to the media business.  Now its a matter of survival, and only those willing to make the most radical changes in cost of operation are going to survive.

And this is not limited to the newspaper business, although they are first in line because the web carried text before it carried video. About 10 years before. So what television operations are seeing happen to newspapers today is going to happen to them tomorrow.

The ability of the web to carry text for free to 2+ billion homes around the world changed the fundamentals of the newspaper business.  It no longer made any sense to gather news, print it on paper and sell it on the street corner.  As much as 85% of the costs associated with publishing a newspaper are bound up in the cost of the physical production of the paper – the presses, the ink, the trucks to move the product around and put it in your hands.

The web offered an alternative – not a parallel distribution method, but an alternative. One or the other.

And, at the same time as the web offered that alternative, it also began to eat newspaper’s advertising dollars.

In the past decade or so, newspapers globally have been in decline. This isn’t a result of the recession. This was happening in the boom decade.

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Newspaper’s revenues have been eroding over time, ironically, as younger readers migrate to the web (or indeed simply started there and never left).

Newspapers have two options now: follow the model of the Christian Science Monitor and pull the plug on print entirely, or go out of business.

In a wonderful piece by Jay Yarrow, Donald Graham, Publisher of the Washington Post said, “The business model that used to work at newspapers does not work any more.”

Television news is not far behind. Not by a long shot. Just ask the people who work at NBC.  And the local stations are going to follow suit.

That does not mean that news is not a viable business. But, as Donald Graham says, it is not viable the way it has been done until now.

The answer, I think, is a radical cost cutting on the production side, commensurate with the radical cuts in revenue and income that the web has wrought.  Fortunately, technology is on the cost-cutting side.

Small cameras and laptops in the hands of well trained journalists can create a treasure trove of digital content on a daily basis from all over the world.  The technology already exists.

Not to put too fine a point on it, but for $25 million, one-tenth of the money the Times has raised by mortgaging its building to one time service the interest on their debt… for one tenth of that, NBC News could field 250 digital journalists around the world, at $100,000 each.  Those reporters, all carrying digital cameras and laptops could file daily enough material to feed all NBC operations, all web news, as well as a great deal of NYtimes.com.

The asset to protect here is the content – the journalism.  Not the building.

The place to feed here is the web.

Media companies have an opportunity, and a rapidly closing window, to re-invent themselves as digital content creators, or they can close the doors and turn out the lights.

The potential is there.

It’s in the newsroom.

Put it to work.

Leverage (not to use too dirty a word) off the only asset you have. Your journalism.

In a world of global free internet access, newspaper’s and television station’s only real asset goes home every night.

If they don’t come back, you have nothing.

If you equip and train them for the new digital world, you have everything.


Bittman-Doe & Dough

This weekend, having just flown in from London, we got on a Jet Blue flight to Burlington, Vermont, where we spent the weekend at the Mark Bittman / Kelly Doe wedding.

Bittman is an old friend of ours, long-time food critic for The New York Times, and author of that big yellow cookbook, How To Cook Everything that you and everyone else has in their kitchen.  He has also written many other cookbooks and of course, his columns in The Times. I was following his step-by-step recipes long before I ever met him.

His new wife, Kelly Doe is a graphic designer and art director at The NY Times, and has already had a considerable impact on Bittman’s own design and art. A long-time afficianado of horizontally striped t-shirts, he was nattily attired in grey Prada suit.  Things are looking good.

Bittman is of interest to us not because of his lovely lakeside Vermont wedding (mazel tov), but because of the predominant position his video takes on The New York Times website.

Bittman’s columns are a natural for video – it’s informative and it’s how-to, and it’s extremely popular.

It’s also one of those situations where the video is more powerful than the text – owing to the very visual nature of food and cooking and purchasing, the ability to go on location, and of course, Bittman’s own engaging style and personality.

As paper’s move to the web and as the web embraces video, it is only natural that newspapers are going to embrace video if they are going to survive.  Of course, the cost-point for production has to be commensurate with the cost point for producing text, or none of this transition will work.

In this case, it all works extremely well.

It Hits The Fan

The New York Times today reported that their second-quarter profits fell 82 per cent to $21m, or 15 cents per share, compared with the same period a year ago.

82 percent.

The paper also suffered a 16.4% decline in ad revenues for just one month.

It’s pretty astonishing.

The paper responded by raising the price of the paper from $1.25 to $1.50.

Probably will not help.

And of course, the Times is not alone.  Gannett reported a 36% decline for the same period.

The only bright spot for The Times was About.com, which they own.  Ad revenues up 15.8%.

What we are looking at is the first wave of the impact of the web.

There is more to come.

The web carried text before it carried video. By about a decade. And when sites like Craigslist appeared, they eviscerated what had been a mainstay of newspaper income since newspapers started – classifieds.

Now newspapers have two choices: they can reinvent themselves or they can go out of business. Reinvention looks a lot better.  Because the function that newspapers do – going out into the community, gathering stories and publishing them, is a worthwhile function.  The problem with newspapers is the paper part. Fully 85% of the cost of a newspaper is the physicality of the paper: the ink, the paper, the presses, the trucks to deliver them.  The web does all this for free. So papers are running to the web.

And as the web goes to video, that is where papers want to be if they’re going to be competitive.

Which puts them in head to head competition with another group that is already doing video news from the community.

Same stories.

Same town.

Same advertisers.

There is only room here for one of these two competitors to survive.

Which one will it be?

My guess: the one that is fastest, leanest, covers the most stories (as this is the web, there is no ‘show’ any more, no half hour newshole. The news hole is a black hole. It never ends.

Where will the viewers (and advertisers) go?

To the one that offers the most interesting and compelling stuff.

Which will it be?

We’ll see……

How will they do it? How will they ‘feed the beast’ and its limitless appetite?

On this I have a pretty good answer.

Flash! Bananas Grow in Central Park!

When I was a student at Williams College, about a million years ago, my Econ 101 professor, Randy Bartlett told us that the basics of economics could be understood by two axioms:

1. There is not such thing as a free lunch

2. You can’t grow bananas in Central Park

Now, it seems, the first axiom has gone out the window.

The web delivers stuff for free all day, every day. You are, after all, reading this for free. But this is only the tip of an iceberg that seems destined to sink a lot of the ‘basics’ of economics, and turn a lot of businesses on their heads, or out the door.

The New York Times is running a piece this morning on Craig Newmark, the founder of Craig’s List. In case you have been living on the moon for the past decade (and maybe he is even there by now), Craig’s List is an online classified website that offers people the opportunity to sell, buy, hire, rent or just about anything else. And it is free.

And because it is free, and easy to use, and global and online, it has undercut the classifieds business out from under newspapers. And classifieds used to be the backbone of newspaper incomes. If you are old enough, you will remember those pages and pages of half-inch listings selling cars and houses and help wanted, you will also notice that they are for the most part missing from the daily paper, or greatly scaled down.

At the same time as the Times is running a profile of their competitor, blog.pmarca.com, the blog site for Netscape founder Marc Andreessen is running a piece entitled “Inaugurating The Times Deathwatch”. How timely. Andreessen quotes the following fairly shocking statistic from Media Daily News:

Separately, the [New York Times] reported that December ad revenue dropped 25.2%. Excluding an additional week in December 2006, ad revenue declined 12% for the month.

…[W]eakness across several national [advertising] categories including health care, books, technology products and transportation hampered results in the month. Classified ads, the traditional lifeblood of newspapers, saw steep declines in help-wanted, real estate and automotive sales. [Craig, you bad bad boy…]

“To date in January, the percentage decline in advertising revenue is trending similar to that of December…” said Janet Robinson, chief executive of New York Times…

Shocking, no?

The New York Times, so I understand, looses 200 subscribers a day.

So perhaps the price we are going to pay for a free Internet is the loss of newspapers.

In the future, how are we going to pay for the journalists who make the content that actually sells the papers?

And, what the web does to Newspapers today, it is going to do to Television journalists tomorrow, (or perhaps this afternoon).

The good news is that the demand and appetite for news, particularly for local news, seems strong. The local advertisers are there. But the model has to change to meet and match the metrics that the web offers. And the first metric of web-based distribution is that it costs nothing to put news or information or classifieds (as Craig Newmark so well proves) into hundreds of millions of homes 24 hours a day for free. And there is on one who would say that Craigslist has no value. Who here would turn down a 10% equity stake in Craigslist? 1%?

But it is a new model.
And newspapers (and local TV stations) would do well to move as fast as they can to embrace it.

This is no time for halfway or half hearted measures.

As I look out my kitchen window this morning, I almost expect to see bananas growing in Central Park.

Not yet… but I keep looking, and perhaps with global warming, this too will come to pass.

Dalton Sports Radio

Don’t touch that dial…..dial? What’s a dial?

When I was a kid, I used to lay in bed at night, in the dark, and listen to WOR radio, 720 AM.

Every night, at 10pm, Jean Shepherd ran a show.

It was a talk show, but not like the kind of talk show you think about now. Not ‘Tyra!”

It was a show where he just talked into the microphone. He told stories. And boy, could that guy tell stories. He had an unlimited supply. His stories were all about growing up in Indiana during the Depression. They were about his family, his friends, his life. He wrote a book called “In God We Trust, All Others Pay Cash”.

And one of his stories went on to become a made for TV movie. Is became pretty popular. It was the story where Ralphie goes to Santa and asks for a BB gun for Christmas and almost shoots his eye out, the family looses the Turkey and has Christmas dinner at a Chinese restaurant. You know the one. It airs every year.

It was an OK story, but not one of Shepherd’s best. Curiously, it survives.

In those days, listening in the dark, radio was magical.

The photo above is my nephew Brett. He’s a sophomore at Dalton, a private school in NY, but he’s on the baseball team. He’s also got his own online radio show: Dalton Sportstalk.

OK. He’s not Jean Shepherd, but then again, he’s 16. And sports, (not the Depression years), is his passion. But the amazing thing here is how at his age, he can get access not just to the media to create his own content, but also a global audience – for free. The barriers to access are not just coming down, they have been completely obliterated.

Now, anyone is free to take a crack at radio, or video, or filmmaking (or blogging for that matter) – all at no cost. Yesterday, the NY Times announced that for the first time in their history they are going to lay off 100 journalists ( or offer them early buy-outs). The Times is from an era when access to an audience was both difficult to achieve and expensive to carry out. That no longer is the case.

What is the new architecture of media in the 21st Century?

You can find it in NY, but probably not at the NY Times’ expensive and massive new building on 8th Avenue. I think its a bit further up….. maybe on a bench on a ballfield in Central Park?