Newsonomics: A Q & A With NYT's Mark Thompson 2020, A Half Billion In Digital Revenue And Thinning Competition
Five years is a long time, especially in the media business.
It was five years ago this week that Mark Thompson took on the top job at The New York Times Company. It was an enterprise still wobbling from the effects of the Great Recession, its new paywall only a year old. The Huffington Post was trumpeting that it had surpassed the Times in digital traffic — a recognition of Google’s market power and of Facebook’s emergence.
The Times was a shrinking enterprise. It had shed revenues, profits, staff, and share price. It had also shed its previous CEO, Janet Robinson. Publisher Arthur Sulzberger’s pick of Thompson to replace her surprised many; despite having led the BBC’s ongoing transition to the increasingly digital world, Thompson had no publishing management experience. And he was a Brit, plucked out of London to head America’s flagship newspaper company.
Half a decade later, the Times is on surer footing, thanks in large part to its execution of Thompson’s mantra: subscriber-first. Most newspaper companies have now embraced revenue from readers (rather than advertisers) as a priority, but the Times is the global leader in that quest, with more than 2 million digital news subscribers. Still, the finish line for that transition is still some distance away.
Heading into 2018, Thompson can at least take a deep breath or two. After years of turning the Times’ business on its advertising/circulation head, he can now point to two words that have eluded its industry for a decade: revenue growth.
First published Nov. 15, 2017 at Harvard’s Nieman Journalism Lab
Follow Newsonomics on Twitter @kdoctor
Year-to-date through September, the Times has managed to grow revenues 6.8 percent. Each of its three quarters has seen growth, at 5.1 percent, 9.2 percent and 6.1 percent. Repeating that feat in the fourth quarter may be more problematic, the company says, but even so, the Times will look back on 2017 as a turning point. It may not have built out a new business model for the 21st-century press, but it, along with the Financial Times, has served as the leading engineers. Consider these data points:
- Print advertising — which used to make up 75 to 80 percent of all Times revenue — now accounts for only 17 percent of its total. Within the next year or two, he told me, it will likely be the Times’ fourth-largest revenue contributor, behind print subscription, digital subscription, and digital advertising.
- The Times counts 2.1 million digital-only news subscribers, still growing post-Trump-bump at about 100,000 a quarter. Compare that to the Times’ still-strong (though declining at about 3 percent a year) Sunday print sales of 1.1 million, and we see a curious ratio. Digital payers now outnumber print payers about 2 to 1.
- Reader revenue — both print and digital — now makes up 62 percent of all Times revenue, as compared to about 44 percent when Thompson took the job in 2012. That crossover number serves as its most important one. As print advertising continues its epochal decline — even the Times was down 20 percent in print ad revenue in the third quarter, in the general neighborhood of many other newspaper chains — nearly everyone in the news publishing business is turning back to readers as their likeliest source of future funding. But the Times (along with other advanced nationals like the FT, The Wall Street Journal, and probably the privately held Washington Post) is among the few publishers who now see more revenue from readers than advertisers. Meanwhile, much of the daily press can’t imagine achieving overall revenue growth, because its reliance on print advertising counterbalances whatever success it may have in the digital transition.
Thompson and other Times executives don’t want to disclose much about their own future modeling. But one thing we know: The company can envision a future without print.
As Thompson told me last week, the Times “may well be facing a future where you should set printed revenue at zero, because it will not be a profitable exercise to make it.”
In five years, Thompson has reshaped the Times’ executive leadership. In early 2017, he elevated Meredith Levien to COO, with both revenue and product responsibilities now centralized. Early next year, Thompson will replace the Times’ retiring longtime CFO, Jim Follo. That will offer Thompson another opportunity to reshape a top job, perhaps looking for both dealmaking and digital business skills.
Of course, all that the Times has accomplished financially owes enormously to its newsroom. That journalistic bedrock — its value unexpectedly enhanced in this weirdest of modern American times — has served as the foundation for all the digital smarts of marketing, messaging, presentation, and distribution that now build upon it.
As Thompson told me last week in an interview in his Times office, he believes that overall press economics may soon grow even more unkind. “I think over the next five years it’s possible the competitive landscape will actually get in some ways more attractive for The New York Times, because I’m afraid I see a lot of casualties over the next few years because of the economics of the industry,” he says. “And, actually, I think for a period we could enjoy — well, we won’t be alone in this — but the survivors could enjoy a kind of last-men-and-women-standing sort of benefit for a bit.”
Thompson and I covered a wide range of topics in our conversation. Is 10 million subscribers a real goal? What about the Times’ global expansion? In a time of legacy bundles, skinny bundles, and no bundles at all, what’s he thinking about how the Times might rebundle itself for fun and profit?
Our conversation is condensed and lightly edited for clarity.
The 2020 plan
THOMPSON: You know the famous ancient British folk story about King Cnut going down to the ocean and setting his throne up on the beach as the tides coming in? So that his courtiers can see the limits of kingly power? He can’t stop the tide coming in.The fundamental consumption habits are changing, and you can certainly worry a lot about the slope and what you can do to ameliorate the decline rate. Most of that stuff is never coming back and some of what you’ve got now you probably won’t have in a year’s time.
THOMPSON: That’s right. We’re also recognized to be more than a boutique venue, but a place where companies can be very, very comfortable about the brand association with us. I think we’re going to feel like a much safer brand to be associated with than some of the big Silicon Valley companies. They’ve got advantages of scale we can only dream about, so the digital advertising road is a hard one in many ways. But we’ve shown an ability to adapt and seize that in recent years, and I hope we can carry on doing that.And the last piece, I think, is that the 70 percent number depends on whether people are satisfied, long-range.
THOMPSON: If you get churn [the rate of subscribers who cancel their subscriptions] down to a low number, then it’s kind of an annuity. And obviously, the idea you could have a rock-solid annuity paying for high-quality journalism in perpetuity is very attractive thing.I think back here on planet Earth, the process of change in behavior is not going to stop. In the long term, the competition is likely to remain very intense.
I think over the next five years, it’s possible the competitive landscape will actually get in some ways more attractive for The New York Times, because I’m afraid I see a lot of casualties over the next few years because of the economics of the industry.
And, actually, I think for a period we could enjoy — well, we won’t be alone in this — but the survivors could enjoy a kind of last-men-and-women-standing sort of benefit for a bit.
From our point of view, that could be a period where competition becomes less.
THOMPSON: My story of becoming a journalist — I was born in 1957, so at the age of 14 or 15, I was completely engrossed by American politics and Watergate. In England, by the way, where I couldn’t see any American newspapers. But hearing at one or two removes about the work being done by The New York Times and The Washington Post in uncovering Pentagon Papers, Watergate, and so forth.It’s a matter of honest astonishment that 45 years, 46 years later, it’s the same brands. That was not what was meant to happen. What was meant to happen was a replacement by thrusting new digital brands — like, The Huffington Post was going to become The New York Times in the digital age, BuzzFeed was going to be an entertainment conglomerate.
What’s fascinating is, because of the growth of the audiences and the present news environment, we’ve got 35 million U.S. millennial uniques in our audience. So, the basic concept that classic brands like the Times are for older folks — actually, young people are very savvy about media brands, and classic news brands work perfectly well.
But the idea that you need a new generation of media for younger generations of consumers, I’m not even sure that’s true. And what’s intriguing is we literally — I’m pointing at a place that’s literally about 50 feet away, The Daily [the podcast which draws a strong audience of millennials] is a room two doors down. It’s kind of a dungeon.That was the room for a period where the Snowden laptop was. That’s sacred ground.
The Sunday paper and the future of print
DOCTOR: Let me ask you a question about a current dilemma that my wife and I had. This is a question on behalf of a lot of Times readers. So, we recently canceled Sunday print. We were on Sunday print and digital. Because we didn’t read much of the print paper, we were reading everything on a smartphone. My wife said, “We usually recycle the Times without reading much of it.” What does that do to the economics of the Times?I ran the numbers from your last report and extrapolated. It looks to me, even with all the digital circulation gains, that about 65 percent of the circulation revenue is coming from print.
What would you say to Times readers who like what the Times does and want to support it: Should they keep Sunday print or should they just go to digital if that’s their usage?
THOMPSON: I’m seven-day print, although I have to say I think I’m in a household where I’m essentially on my smartphone, like you guys. I have an American wife who has grown up with the physical New York Times. She uses digital devices very adeptly, she’s reading on a smartphone when we were just away on brief holiday. But she actually likes the pleasure of having a physical newspaper to read in the morning. A cup of tea, a physical New York Times.It’s almost like the crossover point is when the last member of the household decides that they no longer want the print product.
The print product is a mature platform. It is, as you say, an economically important platform to us. It’s possible that platform will plateau. I think it’s more likely that the platform will eventually go away. It’ll go away because the economics will no longer make sense to us or our customers.
I think in most scenarios, it’s likely that that platform will be more resilient on its circulation side.
THOMPSON: I don’t know. In strict economic terms, I think of us running this platform for the long-range free cashflow we drive out of it as a platform. And to optimize for that all the way to the moment when you switch off the last press.It’s obviously possible to imagine a Sunday-only Times. In a thought experiment where you imagined print advertising being very, very strong, given the very high proportion of advertising associated with the Sunday paper and the higher circulation, you’d have said, “That might make sense.”
If you imagine a scenario where there’s little or no print advertising, that then becomes an argument about the editorial product. Obviously, there’s a geographical dimension as well that the margin associated with the physical paper.
That 10 million subscriber ambition
THOMPSON: Well, I have an American wife. I’m pretty invested in America. What I was going to say — somebody told me that in American publishing, magazine publishing, newspaper publishing, it’s a million. There’s some sort of boundary at a million.I want to say: Look at Netflix. You know, Netflix has obviously got a TV-based, global, entertainment proposition. With new subs, we’re not going to get to 110 million global subscribers [as Netflix does]. I get that. But when you think about the scale of people around the world who’ve got college degrees, who’ve got confident English, that’s a number in the hundreds of millions.
Creating new bundles of joy
The promise of Wirecutter
THOMPSON: I think the affiliate-fees revenue stream out of Wirecutter is, potentially, highly extensible. I don’t think you’re going to see buy buttons littering, flashing all over the place. But is it extensible? Definitely. Is it possible there are resources or tools or archival content which could ultimately be behind a paywall either as a standalone or in a Times model? Yeah. Potentially yes.We think Wirecutter has got immense potential in terms of building on different categories as a standalone. We’ve demonstrated, I think, very well that Wirecutter can be used for content which fits very nicely on the Times. The basis of that acquisition is that Wirecutter is worth more to us than it would be worth to someone else, because we could do more with it.
THOMPSON: Yeah. It’s complicated. It’s not obvious what the value of archival is. In some ways, I think one of the very, very clever things about Wirecutter is if all you want is to know what you should buy now, that’s the first sentence you read. “Most people should buy X” — there’s a buy button. You’re done. So, if you want a five-second interaction with Wirecutter, to mutual advantage, that’s fine. If you want to see the workings. They got the workings. To me, that’s something, again, that’s something for us to explore and learn but we’re very, very pleased with the company.There’s a couple of very interesting things about the company. First is the newsroom. They’re passionately enthusiastic about our buying the company. So, not just, you know, acquiescing: “Oh, if you must.” They were very, very excited about it. We’ve licensed Wirecutter content in the past. There was real admiration inside the Times newsroom for the journalistic standards of Wirecutter and the authenticity. It’s been a marriage made in heaven. It’s been good.
Thompson vs. Thomson
THOMPSON: I don’t see that happening. They have lots of good journalists. Some of them they’ve been kind enough to train and develop for us and we’re thankful.But no, I want to say more broadly, The Wall Street Journal looks like less of a direct competitor than Rupert Murdoch seemed to think they were going to be a few years ago. The Washington Post is revived and is more of a competitor. You know, we want competition. No harm in that. But it’s our relationship with the digital platforms — when we think about the critical relationships, it’s going to be how all of us deal with them.