The New York Times Company | Acquired | Ben Gilbert & David Rosenthal

🔑 Key Takeaways

1. Despite facing difficulties due to the rise of digital media, The New York Times has emerged as a strong force in the journalism industry with a high number of digital subscribers and new editorial talent. The company's success can provide valuable insights for businesses looking to adapt to changing market conditions.
2. The New-York Daily Times was established in 1851 by George Jones and Henry Jarvis Raymond, who prioritized journalism and conservatism over sensationalism, thanks to advancements in production technology, lower printing costs, rising literacy levels, and increasing population.
3. The newspaper's success during the Civil War reflects its focus on business and politics, and the challenges journalists face to report news free from political and social interference.
4. The amazing American story of The New York Times, from its rescue by Adolph Ochs to its pioneering of the dual-class structure, provides valuable lessons for tech CEOs today.
5. Adolph Ochs' determination, unbiased reporting, and entrepreneurial hustle turned failing newspapers into profitable businesses, and his focus made him one of the greatest newspapermen in history.
6. Effective planning, ethical reporting, and perseverance can turn a struggling business into a success story.
7. Sometimes taking a risk and making a bold move can lead to greater success. Don't be afraid to challenge the norm and think outside the box to achieve your goals.
8. Adolph Ochs' business strategy of producing more business content for the growing middle class paid off by turning the newspaper into a dual revenue stream model, ensuring profits from subscriptions and advertising and unleashing a real estate obsession that lasts till today.
9. Despite Adolph Ochs' vision of a family legacy with The New York Times, his sexist decision-making and contentious succession decisions have resulted in unresolved animosity and family squabbles that threaten the foundation of the newspaper empire.
10. The Sulzberger family established a trust to maintain ownership and editorial integrity of The New York Times, but their reluctance to be known as a Jewish newspaper prevented them from reporting on the Holocaust, highlighting the importance of speaking out against injustice.
11. The New York Times recognized its shortcomings in reporting on the Holocaust and its discrimination against minority groups. Today, the newspaper strives to interpret the news and its significance, setting itself apart from other news sources.
12. The New York Times prioritized objectivity by investing in copy editing and distancing the newsroom from the publisher. They went public in 1969 and sold their Broadcast Media Group in 2007 for acquisitions. They negotiated for their content archives.
13. The New York Times missed the chance to be the frontrunner in charging for online content, but their decision helped build their audience. Meanwhile, Rupert Murdoch identified and seized an opportunity in the growing cable news market, resulting in the successful launch of Fox News.
14. Companies in the media industry should diversify and recognize emerging market segments to capitalize on growth opportunities. Failure to do so can result in missed opportunities and poor capital allocation decisions.
15. The New York Times suffered financial setbacks due to questionable decisions, a disconnect between journalism and business, and a shift in the industry. They were ultimately bailed out with a high-interest debt deal.
16. Implementing a metered paywall proved to be a successful solution amidst financial struggles, resulting in a significant increase in digital subscribers. Furthermore, selling assets strategically can generate substantial returns in the long term.
17. The traditional approach to journalism must be revamped to prioritize distribution and embrace technology, marketing, and growth leaders, while still upholding the values of integrity and great journalism.
18. The New York Times' digital success is due to constant innovation, with high-margin apps and podcasts like The Daily and their cooking app, which has led to an increase in their digital subscriber base surpassing print revenue for the first time in 2020. Their flagship podcast The Daily, attracts younger demographic and advertisers while also allowing them to retire all their debt and buy back their headquarters.
19. The Times' focus on growing their digital subscription base has proven successful, with plans to reach 10 million subscribers by 2025. However, they also faced a significant drop in ad revenue during the pandemic.
20. The New York Times has shifted to a subscription-based model while remaining a leader in internet advertising, leading to rapid growth in their subscriber base. This allows them to pay high salaries and acquire content with scale economies similar to Netflix.
21. The New York Times is a successful digital player in the news industry but is held back by maintaining trust and journalistic integrity. Despite a smaller subscriber base than Netflix, revenue per subscriber growth is not as significant.
22. While the New York Times' subscription-based model may limit their audience and conflict with their mission to be the paper of record for everyone, figuring out how to successfully run an advertising-based publication is essential for reaching a larger audience and staying true to their journalistic neutrality.
23. Subscriber growth doesn't necessarily mean increased revenue, analyzing a company's cost structure and profitability is crucial. The New York Times' exceptional brand, scale economies, and process power contribute to their long-term profitability.
24. In order to succeed in the highly competitive media industry, businesses must produce high quality, original content and diversify their revenue streams to avoid the lost middle. The New York Times' approach of focusing on quality journalism and expanding into non-news digital revenue has proven successful.
25. Embracing the internet's global reach, the NY Times acquired Wirecutter for $50 million in affiliate revenue and aims for it to be the new Consumer Reports while shifting towards digital subscriptions. Capchase helps fast-growing SaaS companies finance growth without debt or dilution.
26. The New York Times must focus on reducing fixed costs, acquiring more subscribers, and increasing Average Revenue per User (ARPU) through experimentation and iteration to remain a pillar of a functioning society and transform into a tech company.
27. Maintaining a centrist position in a polarized environment is challenging, but The New York Times strives for it while being undervalued compared to similar businesses like Netflix. The contradictory legacy of philanthropist John D. Rockefeller raises questions about the morality of ruthless business practices.
28. Iteratively's product takes software testing seriously to improve the quality of analytics, making it a must-have for data teams and analysts. Subscribe to Acquired to join a community of top executives, VCs, and co-founders for investment insights and career-building opportunities.

📝 Podcast Summary

The New York Times – From Struggle to Monopoly

The New York Times, founded over 170 years ago, has seen dramatic falls and rises in the last 20 years due to the advent of the internet and social media. The traditional journalism industry took a hit and The New York Times even sold their office building in the late 2000s to free up cash while they rented it back from the buyer. However, today they've been accused of being a monopoly in the journalism industry with more digital subscribers than ever before and employing former editors-in-chief of BuzzFeed, Recode, and Vox as columnists. The company has more recurring revenue and is looking for new stewards. Tiny's unique strategy is to go after businesses with high-quality recurring revenue that are looking for liquidity or for someone to sell to.

The Growth and Establishment of The New-York Daily Times

The demand for news in the US grew tremendously from 200 newspapers in 1800 to 3000 in 1860, thanks to the advancements in production technology, lower printing costs, rising literacy levels and increasing population. The New-York Daily Times was established in September 1851 by George Jones and Henry Jarvis Raymond, who raised $100,000 from various family connections, including members of the Morgan family. While Jones was the business guy, Raymond was the real force behind the newspaper, who had previously co-founded the Republican party and played a pivotal role in pushing Lincoln into the presidency while publishing the Times and serving as a congressman. Raymond valued journalism and didn't want The Times to be sensational, writing in its first edition about conservatism and radical reform.

The New York Times' history of preserving good and exterminating evil

The New York Times started with a clear vision of preserving good and exterminating evil in society. Its success and growth during the Civil War period reflected its appeal to readers focused on business and politics. The newspaper was almost lost in a draft riot when the mobs targeted newspapers siding with Lincoln and the Republican Party. Founder Raymond received help from the war department in defending the building by arming staff with rifles and Gatling guns. This event underscores the challenges and risks journalists and media organizations face to report news and operate free from political and social interference.

The Dual-Class Structure and the Story of The New York Times

The history of The New York Times is an amazing American story, and the newspaper pioneered the dual-class structure when it went public in 1969. Adolph Ochs rescued The Times in 1896 after it went bankrupt due to a financial crisis and falling circulation. Ochs was born to Jewish immigrants from Germany, and he fell in love with the newspaper business at a young age. He started as a newspaper boy, worked as a printer's devil, and eventually took over The Chattanooga Times as a 20-year-old kid. The Sulzberger family took over The Times later, but the paper's history is still relevant today as tech CEOs continue to adopt the dual-class structure.

Adolph Ochs - From Chattanooga Times to The New York Times

Adolph Ochs, a newspaperman from Tennessee, turned around the failing Chattanooga Times and made it profitable by creating an unbiased paper of the people, representing a balanced view of the world, in the melting pot city. Using his entrepreneurial hustle, he negotiated with the owners of The Times in Chattanooga to buy the paper for a downpayment of $250 and a seller's note of $5500, which he paid off by generating enough profits within 10 years. However, his speculative investment in real estate caused him a loss of $100,000. He then purchased The New York Times in 1896 from bankruptcy proceedings and convinced creditors of his legitimacy by using all possible means. His focus and determination made him the greatest newspaperman ever.

Adolph Ochs' strategy to revive The New York Times.

Adolph Ochs successfully bought The New York Times using borrowed money and a letter of endorsement from the President of the United States. Ochs had a plan to revive the struggling newspaper by providing journalistic integrity and ethical reporting while being frugal. He positioned the newspaper as a contrast to the sensationalist, yellow journalism of William Randolph Hearst and Joseph Pulitzer. Ochs' plan included a catchy motto, 'All the news that's fit to print'. Despite skepticism from the bankruptcy committee, Ochs managed to turn The New York Times around and save it from bankruptcy. Hence, success can be achieved even in difficult situations with effective planning, vision, and diligence.

The Bold Move That Made The New York Times Profitable

To make The New York Times profitable, Adolph Ochs cut its price from $3 to $1 per copy, which seemed to be a crazy move. However, this helped in increasing the subscriptions and circulation of the newspaper, making it available for an average person in New York. This was a part of his business strategy, which aimed at stealing the share from his competitors and making The Times profitable. Ochs' move was criticized, as they believed that people who read $1 tabloids are not interested in the newspaper's content. However, Ochs knew that there are plenty of people who would love to read $3 news at $1, and he was right about it. The growth of The Times exploded, and it grew 3 times in his first year.

How Adolph Ochs Built The New York Times Empire.

The New York Times became the dominant paper in America in the early 1900s under Adolph Ochs' leadership. Ochs took a big bet on producing more business content for the growing middle class, making it the business newspaper of record and this strategy was later used by The Wall Street Journal. The paper's dual revenue stream nature ensured that more readers meant more profits from subscriptions and advertising revenue, making it a nice business. Ochs was a visionary entrepreneur who never wasted a marketing opportunity, from moving the building to Longacre Square and illuminating it with a firework show, to dropping the ball on New Year's Eve. The New York Times Company's obsession with real estate started with Ochs' fancy headquarters.

The Ochs Family Legacy and the Unresolved Animosity

Adolph Ochs' sexist decision-making resulted in his daughter Iphigene being passed over for succession of The New York Times despite being an incredibly smart woman and a devoted board member until her death at 98. The contentious succession decisions that began with Ochs have continued to affect the family for generations, leading to fault lines and unresolved animosity. Ochs hoped to create a legacy with The Times that would last indefinitely, with his family members working together and marrying spouses who were also committed to The Times. However, the reality has been far from his vision, with family squabbles and short-sighted goals posing a threat to the foundation of the newspaper empire.

The Sulzberger Family Trust and The New York Times: A Legacy of Independence and Missed Opportunities.

The primary purpose of the family trust that owns The New York Times is to ensure that the family continues to own the newspaper and to maintain its editorial independence and integrity. The trust was set up by Sulzberger, the former publisher, so that all his descendants can maintain the wealth associated with The Times by not selling it and by supporting its mission. During World War II, The Times becomes the foremost chronicler of the war by vastly cutting back on advertising and upping the war reporting. However, the newspaper ignored reporting on the Holocaust due to the Sulzberger family's paranoia about being known as a Jewish newspaper, which prevented them from speaking out about anti-Semitism and potentially saving lives.

The New York Times' Mistakes and Transformative Changes

The New York Times failed to depict Hitler's methodical extermination of the Jews of Europe as a horror beyond all other horrors in World War II which was a significant loss of credibility. The Times had to self-reflect and realize its mistakes. The organization underwent criticism for its discrimination against women and people of color which led to lawsuits. Today, The Times has a Black man as the Executive Editor and a woman as CEO. The newspaper brought a huge change when it chose to interpret the facts, explain the meaning behind them, and tell people why they are important. This helped differentiate from TV news, and it was a significant change in The Times newsroom that went beyond just impartially reporting facts.

The Evolution of The New York Times as a Business

The New York Times invested heavily in copy editing, editors, and the op-ed page to avoid making a mockery of Ochs motto about objectivity. The person leading the newsroom at The New York Times has traditionally not been a member of the family to create a distance between the publisher, the people responsible for The Times as a business and the ones making calls on what stories run in their paper. The company went public in 1969 on the American Stock Exchange to make acquisitions with liquid public stocks. The Broadcast Media Group was sold to a private equity firm in 2007 for about $600 million. The Times didn't own their own rights to their content until they negotiated for the archives.

Missed Opportunities and Successful Launches: The Evolution of Online Media and Cable News

The New York Times missed the chance to be the first major media outlet to charge for its online content by opting to offer it for free instead. This decision helped build their audience, but had long-term consequences for the industry. If The Times and a few other early content websites had gone pro-paid, it could've been culturally acceptable for existing media outlets to charge on the web. Rupert Murdoch saw a huge opportunity in the growing appetite for cable news and a market for a conservative news organization, which led to the successful launch of Fox News. He even paid cable systems to carry Fox News and give it prime placement in their lineup, unlike the usual cable network model.

A Tale of Two Media Giants: Fox News and The New York Times.

Fox News is an incredible business which generated $5.4 billion in revenue and $2.5 billion of EBITDA as of 2019, with a near 50% EBITDA margin, making it the most watched news network on American television for 19 straight years. In contrast, The New York Times missed the boat on the opportunity for cable news, focusing instead on poor capital allocation decisions, including buying The Boston Globe and investing in the Popcorn Channel, a cable network that solely showed movie previews. The Times failed to leverage its diversification initiatives and this can serve as an important lesson for companies in the media industries to recognize opportunities in emerging segments of the market.

The Financial Struggles of The New York Times

The New York Times made several questionable financial decisions, including buying back $3 billion of stock with debt, which has impacted their cash flow and dividend payouts. They also built a flashy new headquarters just before the financial crisis hit and lost 25% of their revenue. The rise and fall of ad revenue coupled with the rise of smartphones and the App Store led to a shift in the business model, which the Times struggled to adapt to due to a massive disconnect between the journalism side and the business side. Carlos Slim, a Mexican billionaire, bailed them out with a $250 million debt deal at a 14% interest rate, which is significantly higher than the current rates.

The New York Times' Struggle with Financial Troubles and Paywall Implementation

The New York Times faced financial difficulties, resulting in various asset sales to pay down debt. They even implemented a metered paywall for nytimes.com which was initially controversial. The company's asset sales generated approximately $1 billion that went toward paying down debt. Amidst all the divestitures, by 2013, The Times' $3 billion revenue was down to $1.4 billion. However, in the second year of their metered paywall, they gained 260,000 paid digital subscribers. They now have about 6 million subscribers. The Times made a savvy investment when they sold their floors in 2009 for $225 million and bought them back in 2019 for $250 million, quintupling the value of their holdings.

Innovating the Newsroom: Strategies for Successful Content Distribution

The Innovation Report of The New York Times revealed the need of completely changing the working of the newsroom. Instead of launching a new product, the report highlights the importance of always authoring with distribution in mind and thinking about what properties the content is going to be released in. The report focuses on getting the journalism to readers by adopting tech, product, distribution, marketing, and growth leaders. Ultimately, it emphasizes holding the values of great journalism with an intense focus on integrity while fixing the business. The report is an eye-opener for the organization that had believed in its journalism, but failed to get it to readers, thereby falling behind its competitors like BuzzFeed and Vox who had more traffic.

The New York Times' Digital Success through Innovative Products and Podcasts

The New York Times' success in the digital age is attributed to constantly launching successful apps and products like The Daily, the cooking app, and the crossword app, all of which have high-margin revenue. The Times' digital subscriber base has grown dramatically, surpassing print revenue for the first time in 2020, with 7 million new subscribers, compared to their closest competitor, The Washington Post, which has only 2 million subscribers. The Daily, their flagship podcast, receives 4 million downloads per episode and reaches a younger demographic, making it attractive to advertisers. The Times' success is fueled by the Trump presidency, but they have also retired all their debt and buy back their headquarters.

The New York Times' Shift to a Subscription Business Model

The New York Times has seen an incredible growth in its subscriber base, with 2.3 million digital-only subscribers added this year, making it a scale business. However, the pandemic affected its ad revenue, which fell 26% year over year. The subscription business is now three times larger than the advertising business, which is a significant shift from the past. The Times is aiming to hit 10 million subscribers by 2025 and is currently ahead of schedule. The organization underwent a significant overhaul in its advertising department between 2012 and 2015, turning over 85% of its staff to stay ahead of the curve. Mine Safety Disclosures, a website that tracks 13Fs and fund managers, provides excellent analysis of The Times.

The New York Times' Successful Transition to a Subscription-Based Model

The New York Times is transitioning from a big business model to a subscription-based model while remaining a major player in internet advertising. The company currently has 4,300 employees, of which 1,700 are journalists, and has more digital subscribers than The Wall Street Journal, The Washington Post, and the 250 local Gannett papers combined. With a 7.5 million person subscriber base and a TAM of 100 million English-speaking people, The Times is poised for fast-growing and large scale success. As The Times shifts its cost structure from one that is largely variable to one that is fixed, their revenue is actually connected to their audience. This allows them to pay high salaries for journalists and acquire content with scale economies much like Netflix.

The New York Times' Struggle with Maintaining Trust and Growth

The New York Times is not a tech company but has adapted well to digital transformation and is more tech- and growth-forward than any other news organization. However, the trust in their brand that they need to maintain with such level of journalistic integrity is holding them back from behaving like a startup. The organization with power inside this company is still in the newsroom, and the most important thing to The Times is their brand, objectivity, and ability to be discerning in this world. While The Times estimates that their total addressable market is half of Netflix's current subscriber base, their revenue per subscriber is not growing as fast. The Times has 7 million paying subscribers, while Netflix has 200 million paying subscribers.

The Conflict Between New York Times' Subscriber-Only Model and Mission

The New York Times business model of subscriber-only may conflict with their mission to be the paper of record for everyone. To reach a larger audience and adhere to their mission, they should figure out how to run a successful advertising-based publication. However, their current business model incentivizes creating strong affinity with a certain group, which may not align with journalistic neutrality. The Times' history as the paper of record comes from a specific business strategy to target a niche group of researchers and academics. The question remains if a subscription-based model can drive people to pay for neutrality. The incentive and mission misalignment creates a fascinating discussion of all subscription-based model incentives and figure out if it jives with the mission.

The New York Times’ Revenue and Power Factors

The total revenue of The New York Times has been flat in recent years and declined over 50% from their glory days in the early 2000s. Although the subscriber growth story is compelling, it doesn't necessarily mean increase in total revenue. This shows that it's vital to look beyond surface level and evaluate the company's cost structure and profitability. The New York Times has exceptional brand power due to their years of trust-building and delivering repeatable results. They have also demonstrated scale economies by being able to amortize the salaries of their reporters and journalists across a larger subscriber base. In addition, The New York Times might have process power due to their over 170 years of institutional knowledge and experience in high-quality journalism. These power factors contribute to their long-term differential profit margins.

The Importance of Producing High Quality Content in a Barbell Media Landscape.

The key takeaway here is that the barbell media landscape on the Internet exists where businesses need to either have a dramatically lower cost structure or be the big guy to succeed and avoid the lost middle. The New York Times is pursuing the strategy of being the one scale player by producing the best original content in the news world, highest quality journalism, and opening more international bureaus. Content is king, and producing good quality content is valuable. The media business also benefits from dual revenue streams, like The Times' subscription and advertising revenue, and their successful expansion into non-news digital revenue with their cooking and crossword apps.

The New York Times' strategy shift to maximize revenue.

The New York Times media property, Wirecutter, is a great acquisition that generates $50 million a year in affiliate revenue, and the company aims to make it the new Consumer Reports along with introducing a digital subscription. The Times' strategy of maximizing print subscription revenue from loyal subscribers while shifting their business is commendable. The Internet has created globally addressable markets, which allows companies to target customers who love their products worldwide. In the 90s, making money seemed easy, and now Capchase helps fast-growing SaaS companies finance growth without taking on debt or dilution. The first component of value creation and value capture involves comparing how companies capture value compared to the value they create in the world.

The New York Times' Growth Strategy for Success.

The New York Times has created immense value for the world over their 170 years and is capturing $4-5 billion in their market cap. They have won 130 Pulitzer prizes and are a pillar of a functioning society. The A+ scenario for them is to reduce fixed costs, continue acquiring subscribers, and monetize revenue opportunities lying around. They need to increase ARPU for subscribers, prove that people are willing to continue subscribing in year two and three. The F case is unlikely to happen as everyone has learned their lesson about aggregating and arbitraging value. The Times need to experiment, learn, and rapidly iterate to turn into more of a tech company.

The New York Times' Centrism, Undervalued Netflix, and John D. Rockefeller's Contradictory Legacy

The New York Times faces challenges in trying to maintain a centrist position in an increasingly hyper-partisan environment. Despite being perceived as left-leaning, The Times has a desire to be in the middle, which may not be sustainable. However, compared to Netflix, The New York Times is undervalued despite having a similar business model and digital subscriber growth rate. Additionally, John D. Rockefeller, the founder of Standard Oil and a philanthropist, is a fascinating historical figure, who despite his ruthless business practices, was also deeply religious and gave away most of his wealth to causes he saw fit.

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