I had a chance to see “Page One” this weekend, the documentary on the troubles facing the New York Times. Many have opined on the issues facing the New York Times, notably Henry Blodget here at Business Insider, but this documentary illustrated for me how well and truly screwed NYT may be.
A turnaround situation requires, more than anything else, honesty about the nature of the problem and at least a sense of what success looks like. With revenues down over 24 per cent from FY 2008 – LTM, the situation at NYT is clearly a turnaround situation. And yet, over the course of a very well executed if muddled documentary, I was left with the strong impression that too few of NYT’s own people have a sense of how this ends, other than hoping that each round of layoffs will be the last, or patting themselves on the back for the admittedly impressive breadth and depth of their news coverage.
Death is Not the End
It was interesting in watching “Page One” to hear the vitriolic comments of NYT employees regarding a January 2009 Atlantic article written by Michael Hirschorn. In the article, Hirschorn outlines the serious financial troubles facing NYT and suggests that the world might soon find the company consigned to the dustbin of history. Hirschorn’s boldest prediction, that NYT could fail in 2009, has clearly been proven false, but on rereading the piece I am struck by just how much of his analysis remains relevant.
Hirschorn makes a number of fantastic points, notably:
“journalistic outlets will discover that the Web allows (OK, forces) them to concentrate on developing expertise in a narrower set of issues and interests, while helping journalists from other places and publications find new audiences.”
“over the long run, a world in which journalism is no longer weighed down by the need to fold an omnibus news product into a larger lifestyle-tastic package might turn out to be one in which actual reportage could make the case for why it matters, and why it might even be worth paying for. The best journalists will survive, and eventually thrive.”
Facing Up to the Challenge
As a public company valued at not quite 5.4x LTM EBITDA, the markets are telling NYT that something needs to change. A quick look at the numbers suggests that the low-hanging fruit has already been consumed (see exhibits on key financial ratios, there is just not much left there) and it is time for serious discussion of the types of unpalatable options that make executives nauseous but have a tendency to save struggling companies.
- Say Goodbye to the Past: Man, the 70s were great for the major papers. NYT had the Pentagon Papers, Washington Post had Watergate, and journalism was on the march. A lot has changed and it is time to get over it.
- You Are Not a Public Trust; You are a Corporate Governance Basket Case: I am not a shareholder in NYT, but to hear Bill Keller, the Executive Editor at the time of Page One’s filming, explain that all options had been considered; including running the company as a nonprofit, made my blood run cold. This is a publicly traded company, and regardless of the dual-class structure every investor who is not a Sulzberger has a reasonable expectation that management is focusing on turning this ship around, not turning it into a megalithic non-profit dedicated to the idea of its own greatness.
- Adopt a Bold Strategy and Hunker Down: This is not a call to buy something. Rather, divest everything that is non-core, put together a clear-eyed view of where this company will be in five years, and then execute. The people at NYT are an erudite lot: think Fabian strategy, think the Siege of Constantinople in 626, think Stamford Bridge.
Revolution is Not a Tea Party, and Neither is Business
Sam Zell got kicked around briefly in “Page One,” and I think somewhat unfairly, when a clip was shown of him at a meeting with Tribune employees exhorting them to change the company. Yes, Tribune became a fabulous mess, but Zell was right: in the end a company must be able to afford its cost structure, or else reduce it. This basic law of business does not include a special dispensation for newspapers with foreign offices and numerous Pulitzer Prize winners.
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