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The End Game for the New York TimesGone as a Stand-Alone Newspaper by 2015
April 5th, 2012Eric Jackson
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The New York Times: About to Stare Into the Abyss
• The New York Times is the most recognizable newspaper in the world
• Yet it’s been ravaged in the last 5 years by an evaporation of advertising revenue
• Cost reductions have hit a plateau recently
• Ad revenues appear set to continue declining without help from paywalls or other digital efforts
• With current trends, it appears the NYT will be unable to continue as a stand‐alone business by 2015
• The rest of the newspaper industry should face a similar crisis even sooner
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Circulation Price Increases Can’t Compensate for Ad Losses - #s in Millions
NYT Media Group Revenues Disappeared in the Financial Crisis and Aren’t Coming Back
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2003 2004 2005 2006 2007 2008 2009 2010 2011
NYTMG Ad Revs NYTMG Circ Revs
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Numbers Reported In Millions
NYT Group Costs Have Gone Down But Have Also Recently Flat‐Lined
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2003 2004 2005 2006 2007 2008 2009 2010 2011
SG&A Wages Raw Materials
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Headcount Flat Since Financial Crisis Abated
How Low Can You Go?
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2003 2004 2005 2006 2007 2008 2009 2010 2011
NYT Full‐Time Employees
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2012 On Track To Be the First of Many Years to Come of Losses from Operations
The Historical Trends are Clear – And Seemingly Irreversible
‐$600
‐$400
‐$200
$0
$200
$400
$600
2003 2004 2005 2006 2007 2008 2009 2010 2011
NYT Operating Profit (MM) NYT Cash Flow from Operations (MM)
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Staring Down the Barrel of a Gun:
• Cash at the end of 2011 was $280 million, down from $400 million at the end of 2010
• Cash from operations likely to be negative in 2012 if historical trends hold
• Even though nearly half the headcount has been cut since 2003, cuts since 2008 have leveled off
• NYT owes $283 million in contractual obligations this year, including almost half of that in pensions and benefits
• NYT owes $405 million in contractual obligations in 2013 – 2014 and another $879 million in 2005 ‐ 2016
• Pension and benefits costs are rising 2.7% a year in the coming years
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What Can Be Done?
• Merge
• Sell
• Restructure through bankruptcy
• Refinance
• Sell non‐core assets and smaller papers
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Other Issues:
• iPad proliferation suggests that Ad revenue could decline faster than the 2009 – 2011 trend
• Circulation might start to trend down in the coming years instead of modest increases, as price increases can’t compensate for cancelled subscriptions
• The Paywall vs. non‐Paywall debate seems to miss the larger point: this ad‐revenue supported business model will no longer be viable after 2015
• Why would Carlos Slim or other financiers want to refinance based on this business model?
• 2014 appears to be the key year for the Times management and board to decide how they can exist after 2015
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Conclusions:
• Newspapers supported by classifieds and ads will likely cease to exist after 2015
• The only viable news business models moving forward appear to be: – (1) Financial data subscription (e.g., Bloomberg/ThomsonReuters), – (2) Cable subscription (e.g., Comcast, Disney, CBS), – (3) Costs for digital news getting spread across page views of larger Internet company (e.g., Yahoo!) or – (4) Copycat blogging supported by banner ads (e.g., Huffington Post)
• Only other possible model is support by a benefactor (e.g., Apple or the Steve Jobs Foundation)
• If the New York Times can’t make it alone, why would any other smaller newspaper?
• Investigative reporting will become even more invisible than it is today in the coming years