The NYT has been hit by the digital disruption of the industry. In tandem with new technology and the rise of mobile, today’s audiences have drastically changed how they consume content. They’re abandoning so-called legacy news media for digital and mobile.
This change has had a major impact on NYT in Q2 2016, where NYT reported a net loss. Total revenue fell 3% as NYT continued to struggle with declining advertising revenue, which fell about 12%. 
Industry disruption has posed multiple challenges to NYT
A. Challenges to business model
Declining revenues of original business models:
- Print circulation is stagnating driven by a decline in demand for printed newspapers. However, print advertising still accounts for ~70% of NYT’s advertising revenue 
- Print advertising is in decline, mainly due to decrease in print circulation. In Q2 2016, print advertising revenue slid 14% compared to Q2 2015. 
NYT reacted to these disruptions by developing a digital distribution strategy, and a new business model based on:
- In Q1 2016, NYT had ~ 1.4 million digital-only subscriptions for its news products. NYT generates about 60 mn unique visitors (U.S.) a month, of which only ~1mn pay 
- However, subscription revenue is sensitive to discretionary spending available to subscribers as well as economic conditions 
- There is no assurance that NYT will be able to maintain and increase its digital audience without reducing pricing or incurring subscription acquisition costs that would affect margins or profitability 
b. Digital advertising:
- Digital advertising revenue now accounts for more than a third of the company’s total ad revenue 
- Native advertising is a model, where NYT publishes ads in the newspaper looking like editorial content. However, this model may cause irreparable damage as it risks the loss of readers’ trust 
- Rates and margins for digital & mobile advertising are generally lower than for traditional print advertising, hence, digital ad revenue may not replace in full print advertising revenue lost 
- Technologies have been developed that enable consumers to circumvent digital ads leading to lost revenues from advertisers 
- Competition from digital media and services, many of which charge lower rates affect NYT’s ability to attract and retain advertisers and rates 
Overall, NYT has succeeded in doubling its digital‐only revenues to roughly $400 million last year. The company also aims to double its total digital revenue to $800 million by 2020. 
What additional steps NYT should consider? 
- Leverage assets to generate more revenue. For example, resurfacing archival content (currently there are ~14.7mn articles in the archives)
- Engage audience via creative content presentation to expand customer base. For example, a former Nieman Lab staffer developed a Flipboard magazine of the Times’ best obits from 2013, which became the best-read collection ever on Flipboard.
- Develop a more customized experience to differentiate offering, attract, and retain subscribers. For example, a “follow” button that would allow readers to follow topics/columnists and receive alerts
- Consider expanding further into live events. There is an enormous opportunity for both revenue and engagement e.g., events similar to TED talks
B. Challenges to operating model
- The organizational structure of the current news room was not developed to handle the disruption in the industry, and it is challenging to understand how to incorporate digital capabilities (e.g., separate department vs in-departments integration)
- Inflexible editing and web publishing systems often make it difficult to share and interactively present the stories that digital tools help tell
- NYT is facing pressure to reduce costs in response to decline in revenues. Failing to do so would impact operations, quality of products, future revenues, and ability to attract and retain top talent.
How did the NYT react to the industry disruption?
- Development of digital first teams. For example, NYT built a “digital rewrite team”, a new newsroom unit to tackle the stories that are going viral on the web 
- Reshaping the news room for the digital age via cost optimization: Recently, NYT announced a sweeping strategy review, identifying areas for cost-cutting e.g., closing its Paris-based editing and production offices 
What additional steps NYT should consider? 
- Produce unique digital features/tools that can drive significant traffic with deeper engagement and longer shelf-lives rather than focusing on reproducing traditional news stories
- Transform the culture to genuinely adopt digital (currently “Many top editors and producers think of digital tools as extras – ‘bells and whistles’ that augment traditional story forms”)
- Revamp the traditional editorial systems which targeted perfect editorials, and develop a lean editing strategy for digital stories/updates
Some critics claim that it is one of the largest failures that we haven’t been able to figure out a value recovery mechanism equal to the value that journalism provides to society. Many leading media companies have not been able to find a stable and sustainable business model after more than a decade of declining revenues.
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