Not Your Grandma’s Newspaper – Restructuring the Journalism Value Chain to Digitally Engage Consumers
As the consumption of media continues to shift away from print, The New York Times is implementing a successful digital transformation. But challenges remain in optimizing the digital supply chain to generate and deliver authentic content to the consumer.
In its August 2017 quarterly earnings report, The New York Times (NYT) Company reported a 6.1% revenue growth in the third quarter despite continuous decline in print subscriptions and advertising [1]. The path to digitalization has threatened the NYT’s readership and relevance, but management is harnessing this megatrend to its benefit. The new strategy is leading to shifting roles for the major players in the NYT supply chain, including the newsroom, the business/marketing unit, print and digital advertisers, and consumers who provide feedback and engage in co-creation of content.
Background: A Commitment to the Truth
Founded in 1851, the NYT has long been a preeminent daily news source providing high-quality reporting through a subscription-based model. However, the ways people consume news have changed drastically, and the NYT’s revenue growth is now primarily attributable to digital subscriptions rather than print advertising [2]. 2.2 million of its 3 million subscribers are paying digital subscribers, while print advertising, once the NYT’s core revenue stream, has declined 16% year-over-year [3]. The shift to digital presents the opportunity to save on printing and distribution costs, as well as to understand the consumer better through data collection. Yet, digitalization also poses challenges to preserving the authenticity of the media production chain and the credibility of the final product.
Figure 1: Trends in sources of revenue at The New York Times, 2000-2015. [4]
Challenges and Concerns:
In an organization that traditionally emphasized separation of news reporting from its business operations, digitalization has encouraged the interconnectedness of these two functions [5]. Indeed, consumer feedback in most industries is critical to customizing products to meet demand and thus minimizing costs and inventory [6]. Likewise, in journalism, producing content that is determined popular by behavioral data can generate more views and contribute to a leaner reporting staff. But data-driven content optimization can lead to a “feedback loop” in which judgments of preferred content are based on consumer reactions to all previous assumptions and biases in the algorithms. This loop can derail validity of the data and undermine the newspaper’s control over its content [7].
Going Digital:
The NYT has responded to the digital consumption of media by downsizing its reporting and editorial staff while growing its marketing and business strategy units. This shift in labor allocation reflects the expectation that increasingly more value will be generated from understanding and tailoring to the consumer. A plan was announced to redesign the NYT headquarters building and consolidate operations onto fewer floors [8]. An in-house data analytics software is being used in the newsroom to show reporters how readers are engaging with their content in real time. To preserve authenticity, marketing and business unit employees were banned from becoming journalists in the newsroom to maintain a “wall” between the two functions [9].
The NYT’s long-term plan includes several changes to the production process. They plan to designate select stories as primarily “visual” and assign the content creation to graphic or film experts [10]. While the NYT historically engaged with brands through print advertising, the new digital platform is beginning to re-engage these advertisers through ad-driven content such as sponsored video collaborations. It also plans to continue reaching consumers through innovative multimedia platforms including podcasts and interactive journalism [11].
Opportunities and Recommendations:
Looking to the future, digital growth will continue to be a driver of revenue for the NYT. The NYT Company should hire executives with expertise in digital strategy who will emphasize responsibly growing the NYT’s digital presence and use of data. Digital transformation also presents the opportunity to expand internationally with little additional overhead. There should be ongoing investigation of the platforms people want to engage with beyond the existing podcasts and mobile application. I encourage using consumer data to drive the way content is presented rather than informing the content itself. I would also caution against over-integration of ad-driven content with un-paid content which can challenge validity.
Perhaps most essentially, the shift to digital allows for co-creation of content with readers, an aspect of the internet supply chain that has significant value-adding potential [12]. The NYT, until this year, individually moderated 12,000 comments per day, and the articles with allowed commentary were limited by moderating labor capacity. However, the NYT recently implemented Moderator, a system that uses machine learning technology to sort comments for moderation or automatically approve them [13]. I would recommend taking this a step further and using Moderator to experiment with varying degrees of leniency in moderation to encourage livelier yet respectful debate thus driving traffic to the page.
As the NYT continues its digital transformation, a few important questions arise: Does high-quality reporting have to precede marketing in the value chain, or is it acceptable for marketing data to drive news content? Should content co-creation by readers continue to be moderated or become open forum? Can machine learning be leveraged in other stages of the digital news supply chain?
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References:
- The New York Times Company Reports: 2017 Third-Quarter Results (New York: The New York Times Company, 2017).
- Ibid.
- The New York Times, 2016 Annual Report (New York: The New York Times Company, 2017), p. 28-29.
- Gabriel Snyder. “The New York Times Claws its Way Into the Future.” Wired. https://www.wired.com/2017/02/new-york-times-digital-journalism/ (Accessed Nov 2017).
- Jeff Gerth. “In the digital age, The New York Times treads an increasingly slippery path between news and advertising.” Columbia Journalism Review. June 2017. https://www.cjr.org/special_report/digital-age-the-new-york-times-slippery-path-news-advertising.php. Accessed November 2017.
- Alicke et al. “Supply Chain 4.0 in consumer goods.” McKinsey & Company. April 2017.
- Greg Satell. “Tronc’s Data Delusion.” Harvard Business Review. (Harvard Business School Publishing Corporation, June 2016).
- The New York Times, 2016 Annual Report.
- Jeff Gerth, Columbia Journalism Review, 2017.
- “Journalism that Stands Apart: The Report of the 2020 Group”. The New York Times. January 2017. https://www.nytimes.com/2017/01/17/business/new-york-times-newsroom-report-2020.html. Accessed November 2017.
- The New York Times, 2016 Annual Report.
- Gary Graham, Alison Smart. “The regional-newspaper industry supply chain and the internet.” Supply Chain Management: An International Journal, Vol 15, Issue 3, pp. 196-206. (2010).
- Bassey Etim. “The Times Sharply Increases Articles Open for Comments, Using Google’s Technology.” The New York Times, June 2017. https://www.nytimes.com/2017/06/13/insider/have-a-comment-leave-a-comment.html. Accessed November 2017.
A very interesting view of a different supply chain in a rapidly changing industry. I was particularly intrigued by the concept of leveraging digitization and machine learning to open up the co-creation aspect of the digital supply chain further. While I think an open discourse is essential to the evolution of the internet I look at other internet supply chains and find myself nervous about the ability to have these conversations productively and without influencing the validity of the parent platform (thinking of Twitter and YouTube as two examples). Does the new machine learning approach the NYT is investigating have the ability to fundamentally change the monitoring aspect of a conversation? To your question of the balance between reporting and marketing in the digital supply chain, I think these two forces will always have to exist as competing interests. You need the journalism driven content to manage your credibility (and I think for a productive society) but you also have to balance with some marketing-driven content because the best journalism in the world won’t survive if it no one is reading it.
Very interesting! I personally thought newspaper companies will lose their role as most of news become available online for free. Although thinking in retrospect, they did not have a choice to stay with the paper subscription model, the decision must have been very challenging, because the digital model eliminates the whole supply chain they build in the past. It is a LEAD case.
I am also curious to see what NYT will do to the questions you raised at the end. If NYT continues to create its content with the feedback loop, what is the role of NYT in the future? How would NYT continue to add value in the new supply chain of media?
Interesting take on the challenges faced by print media with digitization. I particularly appreciate your emphasis on the division between editorial and revenue generating functions, such as advertising. To maintain credibility as a premier source of content, the Times certainly needs to be cautious of the blurred lines between sponsored / co-created content and purely editorial reporting. I believe these are not mutually exclusive; for instance, most co-created content does contain heavy disclaimers alerting the reader of such collaboration. Marketing, on behalf of the New York Times, can still play a role in providing data-driven focal points for reporting without necessarily compromising editorial independence.
Great article MJ! Digital disruption is a challenge that all traditional media companies are facing right now. On the supply chain structure, I think the changes that NYT needs to make are even more drastic than adding a few more people to the business/marketing team and bringing those functions closer to the creative side. Instead, I would take a page out of Bloomberg’s Media group that underwent a complete org overhaul in August to best service its clients in this new digital age [1]. NYT, however, as you mentioned probably can’t take it as far as Bloomberg in shifting to a complete focus on client demands and customer interests because of its customer promise of remaining an objective content creator/news source. I agree this will be a very difficult tightrope to walk for NYT. As its competitors are creating custom content for its sponsors or stories geared directly towards readers’ interests, how can NYT keep up? Unless it changes its customer promise, I don’t think it can.
[1] http://www.adweek.com/digital/bloomberg-is-tapping-its-deep-resources-to-provide-consulting-services-for-businesses/#/
Interesting bit! You raise an important question about targetted content and its pitfalls. I definitely think that in today’s world where information is abundant, there is a merit in showing news articles according to person’s interests and past behavior. But, internet companies should give greater control to end-users on the way they want content to be delivered to them. Users should be able to switch between receiving content based on their consumption history or based on what editors think is most important. But, internet inherently exposes content providers with a much higher level of scrutiny given the ease of sharing and commenting. NYT’s investments in comment moderation is definitely a step in the right direction. But NYT should do much more than that to take full control. Few media companies have started monitoring the “internet chatter” to predict how receptive or hateful people are towards their content. An interesting example of how this was implemented recently can be found in this article: http://www.sciencemag.org/news/2012/06/forget-movie-critics-mindless-internet-chatter-predicts-blockbusters-and-bombs