The New York Times – A Casualty of the Digital Revolution?

New York Times – A Casualty of the Digital Revolution?

 

Introduction

The New York Times (NYT) is arguably the best known daily newspaper in the United States. The organization has been operating since 1851 and has won more Pulitzer Prizes than any other news source.[1] However, with the rise of the digital age, some say the sun has set on the NYT. Their readership, like many newspapers, has steadily and alarmingly declined since the early 2000’s, with the drop accelerating in 2007 and beyond.[2] Readers gained greater access to the internet, started to rethink the “newspaper form factor” (e.g. the desire for a tactile, hard print experience waned), and a variety of online options (blogs, e-zines, podcasts, etc.) proliferated. The New York times has had to weather a tough transition from print to digital, and I’d label them a “loser en route to victory” as they strive to find their footing in a rapidly changing environment.

I will explain NYT 1.0’s business model (value creation and capture) and operating model and will do the same for NYT 2.0 explaining the key challenges NYT faced / continues to face during the transition.

 

NYT 1.0 – Old School Journalism

Value Creation

NYT created value for readers and for the world by producing and curating high-quality, relevant, and trust-worthy news. The NYT, along with the press more broadly, acted as a critical enabler of U.S. democracy by holding politicians and business leaders accountable and ensuring an educated populace.

Value Capture

NYT traditionally made money via a two-fold revenue model: 1) Print sales and subscriptions; and 2) Print advertisement revenue. In its “heyday” traditional print advertising was quite lucrative. In 2006 total print advertising revenue industry-wide was just over $49B. But by 2012, it was just 45% of that.[3]

Operating Model

  • Tech: capital intensive printing equipment and related maintenance
  • Marketing and sales: Tried and true newspaper advertising sales model
  • Service Delivery: High delivery costs (shipping, truck fleets, etc.)
  • Staffing: Staffing requirements focused around writing and editorial staff
  • Culture & Values: Old-school approach to journalism; NYT prided itself on thorough and well-researched work

 

NYT 2.0 – Going Digital

Value Creation

It took time for NYT to realize that the type value that its customers are demanding is shifting in the digital age. Readers want news fast, they want it in different formats, they want it to be interactive, they want it to be personalized, and they want their news to have an opinion. While reliability is still important, NYT digital must shift to consider its changing customer value proposition.

Value Capture

Value capture is the area in which NYT has struggled most during the transition to digital. I believe there are three key drivers to the value capture challenge: 1) the barriers to entry have eroded (expensive printing equipment is no longer required and anyone can create a website!) encouraging the entrance of a vast array of alternative news sources that the NYT must now compete with for eyeballs; 2) technology hacks (incognito window anyone?) have allowed readers to circumvent subscription firewalls; and 3) in an age in which people have quick and free access to mines of information, many argue that high quality news should be available to all free of charge. This mindset shift has allowed many to justify their use of the aforementioned hacks.

In the face of these barriers, NYT’s value capture model has remained fairly consistent: they make money from subscriptions and digital revenue. They’ve had to shift internal capabilities (discussed further below) to accommodate a digital advertising model (which looks different from print advertising). However, with declining readership (for reasons discussed above) and continuously declining print advertising, digital advertising has failed to bridge the gap.  Few would argue this is a trying time for the NYT and other traditional newspapers.[4] NYT is starting to consider and must continue to explore alternative revenue streams moving forward (ex: added fees for new services such as VR formatted news).

NYT must get creative quickly!!! or their inability to capture the value they create will jeopardize the quality of their news.

Operating Model

  • Tech: customer researchers to understand shifting consumer preferences, software engineers, user experience designers
  • Marketing and sales: digital advertising expertise (digital advertising differs from traditional advertising in its ability to target audiences, its cost structure, and the available media formats)
  • Staffing: The locus point of the newsroom has shifted from writing and editorial team members to blog writers, designers, multimedia experts, and engineers
  • Culture & Values: NYT must shed its nostalgia for the past and embrace a cadre of young new talent looking to modernize the NYT user experience; the organization must find the delicate balance between speed/sexy format of news and maintaining their high journalistic standards. (We must not ignore this latter tension – a high-quality press corps is criticalin the context of a Trump administration.)

 

[1] https://en.wikipedia.org/wiki/The_New_York_Times

[2] http://www.nytimes.com/2008/10/28/business/media/28circ.html

[3] http://www.stateofthemedia.org/2013/newspapers-stabilizing-but-still-threatened/newspapers-by-the-numbers/

[4] https://www.nytimes.com/2016/11/03/business/media/new-york-times-co-reports-an-advertising-drop-though-digital-results-grew.html

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Student comments on The New York Times – A Casualty of the Digital Revolution?

  1. Even when we’ve all heard about the struggles of traditional newspapers in the digital age, it’s hard to image an institution like the NYT ever going away. The heat is definitely on them to figure out the right business models, but it seems they have some core assets that should always provide a base for the future. Primarily I’m thinking of the reputation and ability to produce “high-quality, relevant, and trust-worthy news,” as you say. There will always be demand for that in some form, even if it isn’t a traditional buy or subscribe model. I’d argue the jury is still out on whether they’ve lost the war or just a brutal battle. If they can let go of past expectations and think creatively about monetization, they may find their content is still very valuable.

    1. @DK-22 and @James S

      Thanks for reading! Definitely agree that the verdict is still out (hence the “Loser en route to victory” thesis) but I also don’t think that despite valuable assets, value capture is as forthcoming as some may posit. First of all, the idea that a national story isn’t news until NYT features it, in my opinion, doesn’t reflect reality and is perhaps just a function of living in a tight knit echo chamber; and 2) NYT has a lot of smart people attempting to monetize and has yet to find real, viable revenue streams. I really hope, like you guys suggest, that they’ll get creative and will overcome this very serious hiccup, but I certainly don’t think we can call them a winner quite yet.
      Thank you again for thoughts. Really appreciate the perspective.

  2. I’m with DK_22. NYT’s problems appear temporary to me. The last few decades have been difficult, yes, but NYT’s challenges have been all form and no function. What is really critical to NYT’s ability to create value hasn’t been the format, whether paper or print, interactive or static, but its credibility. It took decades to build the NYTs reputation, and despite President Trump’s claims, that reputation does not appear to have waned much. The bottom line is that for millions of readers, a national story isn’t news until the NYT features it. When you have power like that, there are many ways to monetize. The real trick is monetizing without damaging your credibility. While this has been a challenge, so long as their core asset–credibility–remains intact, the NYT will have plenty of time to play with revenue models. I, for one, would like to see a little more price discrimination. There ought to be a way to charge wealthier folks higher rates. Love your blog!

    1. @DK-22 and @James S

      Thanks for reading! Definitely agree that the verdict is still out (hence the “Loser en route to victory” thesis) but I also don’t think that despite valuable assets, value capture is as forthcoming as some may posit. First of all, the idea that a national story isn’t news until NYT features it, in my opinion, doesn’t reflect reality and is perhaps just a function of living in a tight knit echo chamber; and 2) NYT has a lot of smart people attempting to monetize and has yet to find real, viable revenue streams. I really hope, like you guys suggest, that they’ll get creative and will overcome this very serious hiccup, but I certainly don’t think we can call them a winner quite yet.
      Thank you again for thoughts. Really appreciate the perspective.

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