The Moose is Back at the New York Times

Publisher Sulzberger looks for a lift in the numbers.

Executive Editor Keller looks for more readers just like him.

Readers in short supply.

Red ink not.

"You may say to yourself, 'Where does that highway lead to?' "

Stock in the tank. Revenue down, down, down. Circulation gains "infinitesimal." Costs of growth skyrocketing. Ad pages declining. Core market deserting the product. Spending to increase. Sound like a healthy business to you? Business Week agrees.

The current cover story of Business Week concerns a struggling business and the people that run it. Chock full of information hard to find in one place "The Future Of The New York Times" sets out the decline in the Gray Lady's fortunes in some detail.

While the article is exhaustive, the single thing that doesn't really come up in the piece, or in the sidebar where "The Times Top Scribes Speak," is a discussion of why the New York Times might be having these problems. Yes, there are a lot of explanations given concerning tough markets and tough times. There is a nod to the costs of becoming a national newspaper. All this and more, but you will search in vain for any self-searching on the part of the Times concerning the real problem, the "Moose in the Room."

The "Moose Meme" first came to light during the slow defenestration of Howell Raines from top editorial slot at the times. "The Moose" was, and I suppose is, an actual stuffed plushy moose owned and operated by Times publisher and overlord Arthur Sulzberger. He reportedly trots it out at meetings whenever he senses that the obvious problem is not being acknowledged as a problem. For whatever reason, the Moose was not around when BW did the story. [ For more about "The Moose" see our story from July, 2003,: Raines may be gone, but ... the Moose remains: Praise the New York Times but Pass the Ammunition.]

The Moose is, of course, the cold fact that, in ever increasing numbers, people do not trust and do not like the editorial tone and slant that the New York Times is peddling. If this has not penetrated the Publishers office or the newsroom, it has certainly not

been lost on the advertising or circulation departments. Neither has it been lost on the business side of the New York Times Company. Here's a brief sketch of what's going wrong at the Times. A drift that Arthur Sulzberger seems either disinterested in or powerless to correct.

The stock has been underperforming for some time:

"NYT Co.'s stock is trading at about 40, down 25% from its high of 53.80 in mid-2002 and has trailed the shares of many other newspaper companies for a good year and a half. "Their numbers in this recovery are bordering on the abysmal," says Douglas Arthur, Morgan Stanley's ( MWD ) senior publishing analyst. "

Which is not good news for stockholders at large and for the family interests that actually control the "public " company:

"Like other Old Media families, the Sulzbergers have been able to maintain unquestioned control of their company by creating a new class of voting stock and reserving most of it for themselves. Among them, the various branches of the Sulzberger family control 91% of the Class B voting shares.... The Wall Street consensus is that the company will report net income of $290 million for 2004, down 4% from the preceding year and a good 35% below the $445 million it netted in the media industry boom year of 2001. Revenues have plateaued at $3 billion, give or take a few hundred million, for five years running. "

The reason given for this sorry state of affairs is, of course, circulation:

"In 2004, the paper posted an infinitesimal 0.2% increase in the circulation of both the daily edition, which now stands at about 1.1 million, and the Sunday paper, which is just under 1.7 million. Since the national expansion began in 1998, the Times has added 150,000 daily subscribers outside New York but is thought to have lost about 96,000 subscribers in its home market. The net increase of 54,000 represents a 5.1% uptick, which compares with the 3.5% decline in U.S. daily newspaper circulation over this period. What's more, the Times posted its gains despite boosting the price of a subscription by more than 25% on average. "

On the surface that might look vaguely encouraging, but the real problem lies in the costs of acquiring those subscribers. And if the general drift in the population at large is to dislike and distrust what you are selling, finding more subscribers becomes increasingly difficult.

With low or declining circulation at a publication (Something which I have seen happen. ), advertising revenues very easily enter a decline that is hard to reverse. This is especially true at the New York Times:

"The most pressing business problem the new CEO faces is a paucity of advertising. Through November, the Times 's ad revenues were just 2.3% ahead of the previous year -- a surprisingly weak performance, considering that the newspaper industry as a whole reported a 9.7% gain in national advertising revenues during the first nine months, according to TNS Media Intelligence/CMR. Expenditures on local newspaper advertising in the industry rose 6.6%."

This shortfall is even more alarming if you focus on the phrase "ad revenues." The Times charges a premium for its advertising by proposing. "We feel that premium quality equals premium price," CEO Robinson. Translation: "We're better and our readers are a better class of people, so you have to pay more to reach them." What 2.3% growth in revenue means then is that the sales of ads in terms of volume actually fell but were masked by higher rates. Next year, Robinson notes, rates will be higher still. So while it might look okay to say that "revenue" grew, what you are also disclosing is that ad lineage, volume, fell. And probably not for the first year. It also discloses that you are way off the pace of your industry and the stock market will continue to make you pay for that as well.

Stock, revenue, circulation, advertising -- all consistently down. This is not a good hole to be in. But fear not, the Times is determined to keep digging. More money is going to be poured into the Times game plan in the hopes that it will get in all back when things 'rebound.' Whether they will is left entirely without discussion.

The one bright spot at the operation seems to be.... wait for it.... on the Web:

"ONLINE, THE TIMES ALREADY is making serious money. New York Times Digital (which includes Boston.com as well as NYTimes.com) netted an enviable $17.3 million on revenues of $53.1 million during the first half of 2004, the last period for which its financials have been disclosed. All indications are that the digital unit is continuing to grow at 30% to 40% a year, making it NYT Co.'s fastest-revving growth engine. "

How seriously the core executives in the Sulzberger karass will take this is unknown. AS claims to be 'platform agnostic' and has shown the willingness to plunge into TV production and cable. Still, it remains to be seen if the Sulzberger touch can bring malaise to online as it has to so many other divisions.

Finally, to come back to where we began, is there any reason to think that the primary reason the Times is failing (People don't like its editorial attitude or its approach to reporting.) is going to change? It is the single thing that would alter the business fortunes of the Times, and it could probably be done slowly and carefully. As you have probably guessed, the answer to that is No, No, No, and No.

The solution to readers deserting or declining to start with the New York Times is not to broaden their appeal, but to hunt with greater intensity for more "people like us."

In a revealing moment, the Executive Editor of the Times, Bill Keller, explains the core thinking at the top of the Times:

When I first became an editor here in 1995, somebody upstairs on the business side explained to me the basic business philosophy of the Times .... What most papers do when they want to extend their reach is they go out and interview all the people who don't subscribe and say, "What would you like?" and then they try to dumb down or spice up their paper to pander to that audience. That's what produced the kind of McNuggetization of a lot of local and regional papers in America. The Times ' approach was exactly backward. What they did is focus on the most loyal subscribers and identify their characteristics. And then they went out and tried to find more people who are like those people.

With all the money and effort that has gone into finding more 'people like us' coming up increasingly short, it just may be that, at long last, the New York Times has found all the people like them that there are.

Posted by Vanderleun at January 8, 2005 8:57 AM