What Are They Thinking? Mark Thompson and The Year 2020 Challenge
Does Mark Thompson have 20/20 vision, or, perhaps better asked, does Mark Thompson have a vision of 2020?
As the New York Times shared very publically its $800 million digital revenue goal for 2020, the Times CEO put down one big marker. It’s a hugely important one, yet by itself doesn’t answer the question of how big, or healthy the Times news enterprise might be – even if it achieves that number.
In an interview last week with Thompson, I focused on that question and the wider implications, and challenges of digital revenue growth.
In our conversation, Thompson, who now approaches his fourth year in the job, told me that if the $800 million target is hit, he expects that the Times would also achieve an elusive target: overall revenue growth, year over year.
First published at Politico Media
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“I would say in the way we understand our business, mid-case track of the business, delivering $800 million additional revenue per year by 2020 would represent overall revenue growth for the company. It would be the company growing as a whole,” he said, “Just because of the way of the gearing of the two businesses, digital and print, is changing, this doubling would be enough to deliver revenue growth for the company as a whole.”
Gearing is word we hear Brits use more than Americans, and it describes well the almost-Chaplineque (Modern Times) notion of the interconnected pulleys and gears that operationally determine the fortunes of a newspaper company at still-midstream transition.
“Growth” looms as the major question of transition today.
U.S. newspaper industry as a whole hasn’t seen revenue growth year over year since 2005, a drought that has left the newsroom landscape parched, with more and more journalists falling through the cracks each year. (Within two years, U.S. newsrooms will house about half the number of journalists they did at their height in 1990.)
The New York Times hasn’t shown growth either, but it is pushing its nose closer to the line than its newspaper peers. While many of those peers consistently show one to two handfuls of down digits each year in revenue, the Times, more or less consistently, has come in at zero each of the last several years (“The Newsonomics of Zero“). (Significantly, the now-global Guardian, which has emerged as one of the Times newer competitors, struggles with similar issues and has inaugurated its own “ Project 2021”.)
Why is the Times closer to achieving revenue growth than it peers?
It is the digital subscription growth that has made the difference. As digital ad growth has picked up steam, together the two digital sources now amount to a little more than a $400 million annual run rate. That growth tells us a lot about the likelihood of the Times’ ability to make its $800 million goal.
One million digital-only subscribers have brought the Times to the zero line – but not over it.
The Times’ new $800 million goal of doubling digital revenue, then, seeks to not only put a big number on the board, but to resume normal business operations: growing revenue dependably year-over-year, with at least small profits to match.
Today, the Times says digital business drives 32% of its overall revenue, among the highest in the daily industry. That leaves 68% dependent on dead trees, a pulp business in spiraling decline. One number to watch in the Times’ – and the industry’s – 2016-2020 transition is the point of crossover.
Does Thompson expect that if the $800 million number is met, the company will see more than 50% of its income derived from digital then?
“Clearly, digital would be far closer to print revenue then, if not equal to or slightly ahead of it….The answer is we don’t know that. I think it’s not obvious that that will happen. It could be that print is still ahead, if we execute well on print. Print could still just be ahead in 2020. The point I want to make is I want print to stay as big as it can, for as long as it can.”
Crossover is a big point. Why? Consider Thompson’s notion of gearing. If a business’ line of growth provides more than half its revenue, it’s easier to see a growing future. If a business’ line of decline – print, quite strong and universally – contributes more than half its income, the transition is tougher. Publishers continue to grease those print gears and pulleys, even as the machine – that once-wonderful profit-pumping machine of daily print – just inevitably gives out.
In this crossover scenario, we see both the power of compounding, as digital revenue grows, and of course, reverse compounding, as the impact of the print decline hurts less.
Still, as much as crossover matters, its timing remains critical. It is these years of the next half-decade in which crossover happens – smoothly or painfully.
Thompson provides his perspective on this next period: “I’m not looking forward to digital crossing over because of print decline. I’m looking forward to a day in which digital revenue overtakes print because digital is growing so strongly. If you told me maybe print is still delivering more than $800 million by 2020, you won’t be at the crossover, I’d be happy about that. I’m not yearning for the crossover.”
Of course, he’s right, and I hear a similar line of thinking from top newspaper company CEOs. They want to maximize and optimize the print operations as long as they can.
As to the $800 million goal, Thompson provides some context on how the Times got to the number.
His team did the kind of modeling we’d expect.
”What we did is to do a number of things at the same time, to look at the current track of digital businesses, the subscription and advertising business above all. We look at the audience potential that we believe is out there in the United States and around the world based on actual data, actual trends in the audience, but also as it was original research and thinking about both sets of audience.”
Then, there’s the isolation of growth opportunity.
“All of this stuff is ongoing, but we looked at what we believe is our further head room to do the things I’ve said to optimize the design of portfolio and our free pay boundaries and approach to registration and indeed broadly our marketing strategy, direct marketing strategy and tactics. To look at the potential, we see in other business, I would point to potential we still believe is there in video. I would point to our very successful and very rapidly growing T-Brand content business.”
And, then, the problem areas.
“[We looked at] at other areas where we can see maturity in the desktop/laptop platform and so on. Not all of the trends in customer behavior and in particular digital advertising are positive ones. We’re trying to look at all of those things.”
In tracing the path to the 800 million number, Thompson noted that “five years ago, we were at about $200 million. Gives a little bit of a hint, if you draw a straight line.” That’s the steady – on paper — 12.5% CAGR I noted in my first report on the Times’ new plan.
As to the steadiness of the years ahead, he notes, “This is not, it’s only going to be a straight line.” In fact, that’s probably the easiest forecast to make.
As to predictability, Thompson understandably places a little more of it on the reader revenue side of the business.
“Right now, subscription feels bit more predictable than digital advertising. What I would say is we’ve got a track record over the last 18 months of a lot of innovation on the digital advertising side, and if digital advertising ended up out performing subscription over the next 5 year, I wouldn’t say our strategy’s failed.
“Digital advertising is a great revenue stream, and I rely on having both. Overall, I think of the $800 million as an aggressive target, but it’s an achievable one. I don’t disagree with your headline view of that. I think it’s aggressive but achievable.”
There are the dollar and cents of the new digital goal and as importantly – maybe more important – the motivational value of rebuilding confidence in the future of country’s largest general news enterprise.
“What I do say to everyone in the building is at $800 million digital revenue business, although from 2020 onwards, there would be more do, more growth to find and all the rest of that,” says Thompson. “I think that’s a formidable proof of concept for a digital New York Times company. I do think that.”
While the Times’ new goal got big press, less well-publicized have been the round-the-building staff sessions, larger and smaller, with the company’s new leadership, including Thompson, Chief Revenue Officer Meredith Levien, Executive Editor Dean Baquet and EVP Digital Products Kinsey Wilson. In more than a dozen meetings, staffers have heard the vision laid out and asked questions.
“I’ll go on talking until everyone else gets sick of listening,” laughs Thompson.
Implicit in the year 2020 revenue growth outlook: The Times would be a healthy company, no longer needing to aggressively trim expenses, including buyouts and/or layoffs, to keep itself going.
The elusive promise: a new stability, after what would have been a decade (2010-2019) of unending turmoil, transition and transformation.