Assignment: Digitization Challenge
The New York Times in the digitalization era
By Bernardita
Modified Nov 17, 2016
Combining Agriculture and Technology
Digitalization have change how we interact with the world. These have put a lot of pressure in the news and media industry, whose product offer was totally misaligned with what people was asking for.
Digitalization have change how we interact with the world. Our habits have changed; we don't longer like to receive information as we did 10 or 15 years ago:
We don't like unilateral information. Gone are the days of old newspaper with whom nobody could interact. Today, people want to share their opinions, be involved in a multilateral conversation.
Wewant to know the last events exactly when they happened. If there was a huge political scandal, if some company found the cure for a horrible disease… we want to know, and we want to know it now. That means that we don't longer want to wait for the printed newspaper to arrive tomorrow morning.
We want to get informed only in the topics that we like. Today, everything happens fast. We don't have enough time to do the things that we like, or to spend time with the people we care about. We don't want to lose our time in things that don't add us value. The 100-pages newspaper with a Sport, National, International, and Culture section, does not capture the interest of the person who only wants to know about the economic situation of the country.
These trends have put a lot of pressure in the news and media industry, whose product offer was totally misaligned with what people was asking for. Not only the printed newspaper didn't allow people to have the last customized information, but also the digital offering was not closing any gap. It was just a simple copy of its printed version.
These changes also generated a reduction on the entry barriers in the industry. Previously, a company needed to invest millions of dollars to participate in the business (from the purchase of printers to the payment of publishing and advertising teams). Nowadays anyone with $10 can have a successful blog.
Large news and media companies face fierce competition in the digital media. New players are engaging the public with a completely new approach. Google offer immediate customized content, Facebook and Twitter offer the possibility to participate in massive trending discussions, and Blogs allows readers to be part of a community.
One company that suffered the impact of digitization was the New York Times. The company had its valuation peak in 2002, and maintained it until 2004. However, between 2004 and 2009, the company's stock suffered a steep decline, going from a valuation of $39 to $3.9. [1]
Figure 1: NYT Adjusted Stock Price from 1990 to 2016 (Close price adjusted for dividends and splits)
To deal with these new reality, NYT defined a series of initiatives that affected its business and its operating model.
NYT shift its content distribution through printed media towards the use of three platforms: print, web and mobile. Even when the company launched NYTimes.com in 1996, they only started charging customers for the content provided on the website and the mobile app in 2011. [2]
The second change was related to revenues sources. NYT distribute its incomes between circulation and advertising. A decade ago, advertising was their primary source of revenues, nevertheless, since 2012 circulation have accounted for more than 50% of the same. [3] The reasons behind this are:
Circulation revenues are increasing because of the growth in digital subscription and the price increase in printed copies (imposed to counteract the decline in printed copies sold)
Advertising revenues are decreasing even when digital advertising revenues are increasing. This is because the cost of digital advertisement is significantly lower than the one of printed advertisement.
Figure 2: NYT Revenues Distribution
Operating Model
The first goal of the company was to increase their target audience using a new discovery approach (don't have a copy of the printed version online, but something that customers can relate to), promotion (leverage social media to engage readers) and engagement with the customers (generate a two-way relationship).
The second was to increase the collaboration between the newsroom and the business units focusing on the reader experience. That allowed to increase the creativity and insights of the newsroom team. [4]
At the end of 2015 NYT announced a new digital strategy memo, based on simplifying subscriptions to reach younger population, improve the quality of advertisements, optimize channels (print, web and mobile), and reach new international audiences to increase paying subscriber base. [5]
One additional action that NYT should do is to simplify its structure. They are now in an industry with narrow margins, where assuring low costs is critical. Also, because the reading of printed newspaper is heavily decreasing, I would recommend to decrease resources allocation in that segment to focus in digital platforms.
Even though all of NYT's efforts have had a positive impact, in my opinion, the company will never reach its 2002 levels. Digitization changed the dynamic in which news and media competes, increasing the number and variety of competitors, and pushing down revenue.
[1] NYT Historical Prices | New York Times Company (The) Co Stock – Yahoo Finance. 2016. NYT Historical Prices | New York Times Company (The) Co Stock – Yahoo Finance. [ONLINE] Available at: https://finance.yahoo.com/quote/NYT/history?period1=1447650000&period2=1479272400&interval=1wk&filter=history&frequency=1wk. [Accessed 17 November 2016].
[2] The New York Times Company – Investors – Financials – 2015 Annual Report & Form 10-K . 2016. The New York Times Company – Investors – Financials – Annual Reports . [ONLINE] Available at: http://s1.q4cdn.com/156149269/files/doc_financials/annual/2015/Bookmarked-2015-Annual-Report.pdf [Accessed 17 November 2016].
[3] The New York Times Company – Investors – Financials – 2012 Annual Report & Form 10-K . 2016. The New York Times Company – Investors – Financials – Annual Reports . [ONLINE] Available at: http://s1.q4cdn.com/156149269/files/doc_financils/annual/2012NYTannual.pdf [Accessed 17 November 2016].
[4] New York Times, New York Times, 2014. Report. The New York Times Innovation Report, [Online]. 1, 3-96. Available at: http://www.presscouncil.org.au/uploads/52321/ufiles/The_New_York_Times_Innovation_Report_-_March_2014.pdf [Accessed 16 November 2016].
[5] Nieman Lab. 2016. 4 takeaways from The New York Times' new digital strategy memo » Nieman Journalism Lab. [ONLINE] Available at: http://www.niemanlab.org/2015/10/4-takeaways-from-the-new-york-times-new-digital-strategy-memo/. [Accessed 17 November 2016].
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7 thoughts on "The New York Times in the digitalization era"
November 17, 2016	 JS says:
Nice post about the issues facing the printed media industry today as digital media takes hold.
While I agree that NYT faces headwinds regarding digitalization, they also have major opportunities in regards to how they capture new marketshare, given their innovations in the space. NYT has been at the forefront in the industry of creating interactive news, especially during the election. The quality of how they present information is unmatched and the ease in which they can produce it is fairly remarkable.
I wonder if they could partly transform their business, as competitors have done, in better integrating native ads into their website and increasing the value of the ads they serve. Using their expertise in digital content creation, they could help brands make interactive, relevant and useful ads on their website, which they could charge a significant premium for over traditional online marketing. They could use this revenue to offset free users of the website and hopefully make ads better so that users would be more willing to delist the site from adblockers.
Only time will tell, but NYT does have a few significant competitive advantages which I feel could carry them forward into the future.
November 17, 2016	 Joanna Cornell says:
Interesting post! In college, I used to spread the NYTimes out and read it over breakfast, but my college eventually stopped buying paper copies and switched to online access for students. A few thoughts:
1.) One of the NYT's key strengths is the quality of its reporting and the fact that they have foreign correspondents who are on the ground reporting on events and their stories are fact checked. I know you mention blogs and online companies that have a presence in the news space, but do you think the industry will fundamentally change? Who will become the major players? Will it become harder to discern who the reputable news sources are?
2.) You recommend decreasing resources allocated to printed newspapers to shift more to digital platforms. How would this look? I would think that there are a lot of synergies in terms of article sourcing, so would this just cutting down on the printing staff? Do you think the NYTimes should go completely digital?
3.) Should the NYTimes start pricing its digital ads comparably to what it charges for print ads?
November 20, 2016	 DRajan says:
Great post Jesu! As a Journalism and Mass Media undergrad, the transformation process of NYT is something that I have been very invested in, and have followed closely. I look forward to seeing how they bridge two main gaps: optimising returns from different mediums and platforms and how they will convert the 40% of their audience which consists of younger readers into actual subscribers.
November 20, 2016	 Zach says:
Cool post! I just want to draw your attention to an article about The Washington Post, one of the NYTimes' greatest competitors:
http://digiday.com/publishers/washington-post-grew-digital-subscriptions-145-percent/
The article explains how the Washington Post has surpassed the NYTimes in online readership in part because it has more effectively embraced a digital content strategy. By introducing A/B testing, leveraging video, and embracing social media, the Post is understanding the way people consume content online and they are serving that customer. If the NYTimes is going to continue to be relevant, they will need to double-down on the work they've already done and think bigger about what it means to be a news organization in the 21st century.
November 20, 2016	 Will L says:
This was great, thanks! Is there any thinking on why non-video online ads are still so undervalued relative to print ads? It feels like there's no real reason other than just pure scarcity (space online is unlimited) but if readership is constant and share of page is similar I don't get why the ads would be so much less effective. And if they aren't, are they fundamentally mispriced? Also, would be curious to see how their publication strategy is changing. Is long-form going out of vogue for their readers like it is elsewhere? Does that mean depth suffers?
November 20, 2016	 Marcelo says:
Great post, Bernardita. As I understand that the trends you mentioned are similar across the industry, they certainly affect certain players more than others. The NYT is still a reference in terms of news reporting, content creation and opinion-making and the challenge is how to monetize this asset in the digital world. Newspapers all over the world that did not have the same content creation capabilities and were simply replicators of content will have substantially more difficulties in this digital age.
There is also the fact that the relevance of US news is very high worldwide, which might help monetize the content. For international newspapers, the strength of the local market will play an important role in surviving the digital age.
November 20, 2016	 T.O.M. says:
Interest post Bernardita, the shift to digital/online consumption of news is definitely one of the most visible and severe negative effects of digitalization. However, whilst paper readership is declining it's very difficult to cut costs in this area as there is a large amount of fixed costs involved in paper newspaper production (machinery, staff, distribution network etc). In addition the overall revenue generated by NYT is decreasing (despite rising subscriptions) which decreases the resources available to generate compelling stories. Are there more innovative ways NYT can increase advertising revenues, particularly as they expand internationally and increase their viewership?