The New York Times and its big 'zero'

The New York Times has closed out another year, and like the two years before it, one number stands out: Zero.

That's zero, as in it's just not growing much.

Times CEO Mark Thompson, a British import by way of the BBC, plummily announced the Times annual earnings, and he pointed to a meager 0.7% increase in sales. That followed 0.5% in 2013 and 1% the year before that.

Under that tepid "zero" performance swirl menacing waves. The Times has had to mightily swim against the currents of change just to stay even. At this point, no matter how hard it paddles, it doesn't get too far.

It's trying.

In 2014, it bought out or laid off a 100 people in its vaunted newsroom, just to make sure it could continue to eke out a small profit. Yes, the Times, with all the tumult of digital disruption, is still profitable, but not by a lot. Last year, it made $91.9 million.

The Times also launched its first-of-its-kind paid smartphone products like NYT Now and dove headfirst into the controversial arena of native advertising.

Its game is a game of crossover: Moving from a world that is still print-centric to one that will be mainly digital within the next several years.

While digital disruption has afflicted newspapers for more than a decade, it's the next five years that will spell crossover success or failure.

One example of its push to make it: T Brand Studio. That is the Times' fast-growing native advertising unit, now serving the needs of 50 big brands like Cole Haan, Goldman Sachs and Shell. In a nutshell, the Times, like Time Inc., Buzzfeed and Hearst, now uses its storytelling chops of behalf of advertisers, who want their stories told in ways that match the richness of the new digital medium.

For all its challenges, the Times' numbers -- adding up to that zero -- are better than a lot of papers, and it can be credited to one big gamble: its paywall.

Laughed at when it introduced its paywall in 2011, the New York Times proved that readers in the digital age would indeed pay for high-quality news. Its paywall helps produce what is now the majority of its revenue. 52% comes from readers, now strongly driven by the paywall. Certainly, more readers are swapping print subscriptions for digital ones and paying less for them, but even the digital buyers pay at least $180 a year.

There's a lot of math, guesswork and prayers in the monetary transition, as readers swap dollars for quarters, but so far the Times has been able to keep gaining reader (or circulation) revenue for at least three years.

The Times, then, is far along on this reader revenue crossover: It believes it will top one million digital-only subscribers this year; that compares to 640,000 print customers.

In advertising, though, its road ahead looms longer. Only 30.5% of its ad revenue is digital, and it has to earn every penny against brutal competition, including that of ad tech giants, Google and Facebook. At the same time, the bottom is fast dropping out of print advertising, down another 9% in the fourth quarter.

With one strong leg, and one wobblier one, the Times would love to have a third one, to offer some stability. Times readers find themselves increasingly confronted with pitches for posters and doodads offered by the New York Times Store, and a growing number of Times-sponsored conferences and events seek to add new "sponsorship" revenue. That third stream is growing, but oh-so-slowly, adding but $2.5 million to the mix last year.

As a media analyst, I am often asked, "Will the Times make it?" It's a curious question, at first blush. The Times remains the biggest, most important newspaper institution in the world's wealthiest country. Yet, its decade of tribulations has kept that question current, and involved larger-than-life characters.

There's Mexican telecom billionaire Carolos Slim. He now owns 16.8% of the Times, given his shrewd, bottom-of-The Great Recession investment in the company.

There's the persistent apparition of Michael Bloomberg, now returned to the helm of his eponymous business news company. His liberal-leaning instincts match those of the Times, and every once in a while, journalists dig up the story of him becoming a White Knight Times buyer, using his billions to "save the Times" and stand up to it long-time arch-enemy, Wall Street Journal owner Rupert Murdoch.

The Bloomberg billions offer a contrast to the Sulzberger family that still draws a dividend of about $3 million out of the enterprise each year to keep family members happy.

The Sulzbergers, through a two-class share system, are the last of a lot. They control a big important, family-dominated newspaper company, surviving while the Grahams (Washington Post), Chandlers (L.A. Times), Bancrofts (the Journal), Knights and Ridders (Knight-Ridder) and Binghams (Louisville Courier-Journal) have all sold their legacies.

The Times' family ownership, though, hangs together, and looks like it may have weathered the worst of the digital storm. Though it still walks that tightrope from print to digital, it's invested its next generation in care of the business.

Three 30-something Sulzberger cousins each took on new business management responsibility at the paper last year. No surprise, each drives a differing part of the digital strategy. Sam Dolnick focuses on the newsroom's mobile strategy. David Perpich heads new product development. A.G. Sulzberger III, the publisher's son, became senior editor for strategy in the newsroom, after authoring the leaked "Innovation Report" last spring that helped set the stage for the firing of editor Jill Abramson.

For now, though, it's the older generation -- chairman and publisher Arthur Ochs Sulzberger, Jr. and his cousin Michael Golden -- working with Thompson, who lead the crossover, testing each step forward with the knowledge of how precarious their journey remains.


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