Yesterday’s solid financial results by the New York Times Company made one thing crystal clear:
All this hand-wringing about the “death of journalism” and the need for “newspaper bailouts” is just a crock of self-serving b.s.
The NYT’s “news media” division, which excludes About.com, generated an impressive $50 million of online revenue in Q2, the bulk of which (we assume) came from the New York Times.
On an annualized basis, that means the NYT’s digital news operations are a $200 million a year business, with the NYT itself probably clocking in at about $150 million. And a $200 million a year business is a large, growing, and perfectly viable business. So the New York Times–and journalism–will be fine even if the the NYT’s print business goes to zero (which it almost certainly will).
But what’s that you say? You say the NYT’s current newsroom, which feeds both the online business and the print business, currently costs $200 million a year? You say the NYT won’t be able to support a $200 million newsroom on online revenue of $200 million a year (or, rather, on the $150 million a year that the NYT alone probably makes–the rest coming from the Boston Globe, et al)?
Well, you’re right about that.
The NYT digital business can probably sustainably spend about one-third of its revenue on its newsroom. So if and when the NYT digital business hits $200 million of annual revenue, the NYT will then be able to spend about $75 million on its newsroom.
Which is decidedly less than the $200 million it currently spends.
Which means that, if if the print business eventually goes to zero, there are more big painful newsroom cost cuts coming.
But that’s not what’s really important here.
What’s important here is that the New York Times has a big, excellent, growing, and perfectly viable online business. It has an amazing web site, one that produces revenue of about $150 million a year. In a few years, given current trends, that web site should produce revenue of at least a quarter-billion dollars a year.
And with that much revenue, you can have one hell of a newsgathering operation.
So stop wringing your hands about the future of journalism. If you think society can’t possibly survive without the New York Times, you can rest assured that society will still have the services of the New York Times–even when the print business goes to zero.
Yes, the NYT’s future digital newsroom might be significantly smaller than the one it has now. But this newsroom will also likely be much fitter and trimmer and more disciplined than the one it has now, with vastly improved productivity. So, we suspect, the digital NYT will be able to bring you almost all, if not all, of the great journalism it brings you now.
And what will happen to New York Times shareholders in the meantime? Will they, too, cash in on this digital future?
“Cash in?” Probably not. They might salvage something. But the NYT still has $700 million of debt and additional massive pension liabilities it has to pay off before shareholders see a cent. And all those liabilities may add up to more than the value of the digital business.
But the fate of the New York Times’ shareholders is irrelevant to the concern about the future of journalism. If the NYT’s shareholders lose their shirts, the debtholders will just take over the company. And those debtholders, post-restructuring (and, probably, the closure of the print business), will own an amazing digital asset generating $250+ million of revenue a year and producing some of the best journalism in the world. And that asset will be worth at least $1 billion and probably more.
So rest your worried little heads. The New York Times will always be with us. Even if the print paper and the stock price go to zero.
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