Strategic Report

Lisa Kwak Shimon Jacobs William Hetfield April 20, 2005

The New York Times Company

Table of Contents

Executive Summary ...... 3

Company History ...... 4

Competitive Analysis ...... 10

Internal Rivalry...... 10

Substitutes and Complements...... 11

Buyer and Supplier Power...... 12

Entry ...... 13

Financial Analysis ...... 15

Key Issues...... 19

Solutions ...... 21

Conclusion ...... 23

References ...... 24

SageGroup, LLP 2 The New York Times Company

Executive Summary

The New York Times Company is a diversified media company that owns newspapers, television stations, radio stations, and print mills. It generates most of its revenues through its flagship newspaper, the New York Times, which has the 3rd largest circulation in the United States as a national daily newspaper. Currently, The Times is in strong financial health, and has been bucking industry trends by increasing circulation and revenues from national advertising. However, there are concerns that its free cash-flow will be compromised in the short-term as it makes investments that will, hopefully, generate longer-term profits. The New York Times Company’s main strategic concern should be maintaining its circulation and readership base. This is because advertising revenues, which account for approximately 75% of revenues generated, is directly tied to the number and quality of readership. Circulation has been declining generally in the newspaper industry because of an ageing readership population, the Internet, and implementation of the national do-not-call list.

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Company History

The New York Times was originally founded on September 18, 1851, by two reporters, Henry Jarvis Raymond and George Jones. However, the newspaper’s traditional history begins on August 18, 1896, when Adolph S. Ochs acquired The New York Times for $75,000. The newspaper was incorporated that same month. It was under Ochs’s leadership that The New York Times was transformed into a reputable news-gathering organization. Ochs coined the newspaper's now-famous slogan, "All the News That's Fit to Print." At the time of Ochs acquisition of The Times, circulation was 9,000. By the 1920’s, readership reached 780,000. Today, The New York Times is still under family control by the descendants of Ochs, principally the Sulzberger family, who have carefully led the development of The Times into a diversified media company powerhouse.

In 1935, Ochs' son-in-law Arthur Hays Sulzberger took control of The New York Times. He first diversified The Times with the purchase of two New York radio stations in 1944. Arthur Hays Sulzberger kept control over The Times until 1961. Shortly afterward, in 1963, Arthur Ochs “Punch” Sulzberger, grandson of Adolph S. Ochs, became the new visionary to head the paper. It is Punch who brought The Times to its near-legendary status in the 1960s. Sulzberger, faced with declining revenues, decided to build the world's largest news staff. The Times’ subsequent coverage of the Vietnam War and controversial publication of the Pentagon Papers ensured it a place in history.

1967 was a big year for The New York Times Company because it began co- publishing the International Herald Tribune with the Washington Post and also went public. Punch was able to maintain family control over the newspaper, despite going public. The company began a frenzy of acquisitions in the 1970’s that included small regional newspapers, magazines, publishing houses, and television cable systems. As a hedge against rising costs, Punch also invested in three pulp and paper companies.

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Arthur Ochs Sulzberger Jr. succeeded his father in 1992. The next year The New York Times bought Affiliated Publications, owner of The Boston Globe, for $1.1 billion. In 1995 it acquired a majority stake in Video News International, a news- gathering business, and invested in OVATION, a performance arts cable TV network. In 1996, The New York Times Company launched the successful Web version of its flagship newspaper (www.nytimes.com). The following year The Times switched to later deadlines and daily color.

Over the next several years, the Times became increasingly diversified. The Times invested in a software company, Abuzz Technologies, as well as the financial-news website, theStreet.com (which was sold in 2000). The company opened an online store in 1999 to sell various products. The New York Times Digital was created to oversee its online publishing operations.

The Times acquired the Worcester Telegram & Gazette, Massachusetts' third-largest daily newspaper, in 2000, for $295 million. In 2001, the Times sold its four golf magazines to Advance Publications for $435 million. Later that same year, the company bought the Boston Red Sox, Fenway Park, and the New England Sport Network. In 2004, The New York Times Company sold its headquarters for $175 million. In 2007, they will move to new headquarters that are currently under construction.

Background

The New York Times Company divides its businesses into the following segments: Newspaper Group, Broadcast Group, New York Times Digital (NYTD) and Other Businesses. The Newspaper Group consists of The New York Times Newspaper Group, which includes The New York Times and the International Herald Tribune (IHT); the New England Newspaper Group, which includes The Boston Globe and the Worcester Telegram & Gazette; 15 regional newspapers; newspaper distributors, and certain related businesses. The Broadcast Group consists of eight network-affiliated television stations and two radio stations. NYTD consists of NYTimes.com, Boston.com and Digital Archive Distribution (DAD), which licenses archive databases of The Times and the Globe to electronic information providers.

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The Other Businesses segment include the Company's ownership interests in one newsprint mill and one mill producing supercalendered paper, a high-finish paper used in some magazines and preprinted inserts, which is a higher-value grade than newsprint, as well as in Discovery Times Channel (DTC) and New England Sports Ventures, LLC (NESV).

Newspapers Group

The Times is a standard-size daily (Monday through Saturday) and Sunday newspaper, which commenced publication in 1851. The Times is circulated in each of the 50 states, the District of Columbia and worldwide. The IHT commenced publishing in Paris in 1887. It is printed at 26 sites throughout the world and is sold in more than 180 countries. The Group's other related businesses include The New York Times Index, which produces and licenses The New York Times Index, a print publication, and The New York Times News Services Division. The New York Times News Services Division is made up of three primary units: Syndication Sales, which transmits articles, graphics and photographs from The Times, the Globe and other publications to approximately 650 newspapers and magazines in the United States and in more than 50 countries worldwide, and markets other supplemental news services and feature material, graphics and photographs from The Times and other news sources to newspapers and magazines worldwide; New York Times Television, which, using New York Times-branded and other content, creates television programming for a variety of commercial and public broadcast and cable television networks, and Business Development, which is comprised of Photo Archives, Times Agency, Book Development and a small publication unit.

The Globe is a daily (Monday through Saturday) and Sunday newspaper, which commenced publication in 1872. The Globe is distributed throughout New England, although its circulation is concentrated in the Boston metropolitan area. The T&G is a daily (Monday through Saturday) newspaper, which began publishing in 1866. Its Sunday companion, the Sunday Telegram, began in 1884. These newspapers and several Company-owned non-daily newspapers, some, published under the name Coulter Press, circulate throughout Worcester County and northeastern Connecticut.

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The Company circulates 15 regional newspapers in Alabama, California, Florida, Louisiana, North Carolina and South Carolina, which include 14 daily newspapers, of which 12 publish on Sunday, and one weekly newspaper. It also operates a newspaper distributor in the New York City metropolitan area. In addition, NYT offers news, photo and graphics services and news and features syndication. It also licenses the trademarks and copyrights of The Times and the Globe.

The Times competes with The Wall Street Journal and USA Today. The IHT's key competitors include The Wall Street Journal's European and Asian Editions, the London-based Financial Times, Time, Newsweek International and The Economist. The Globe competes with The Boston Herald.

Broadcasting

The Company's television stations are WTKR-TV in Norfolk, Virginia; WREG-TV in Memphis, Tennessee; KFOR-TV in Oklahoma City, Oklahoma; WNEP-TV in Scranton, Pennsylvania; WHO-TV in Des Moines, Iowa; WHNT-TV in Huntsville, Alabama; WQAD-TV in Moline, Illinois, and KFSM-TV in Fort Smith, Arkansas. All of the television stations have three principal sources of revenue: local advertising (sold to advertisers in the immediate geographic areas of the stations), national spot advertising (sold to national clients by individual stations rather than networks) and compensation paid by the networks for carrying commercial network programs. In each market, the Company also operates a digital television station associated with its analog station. All of the digital stations operate in the UHF band and, at present, all simultaneously broadcast the same programs (except for the digital format) as the corresponding analog stations.

The Company's two radio stations serve the New York City metropolitan area. WQXR(FM) is a commercial classical music station serving this market. In December 1998, the Company entered into a Time Brokerage Agreement with ABC, Inc., under which ABC, Inc. is providing substantially all of the programming for WQEW(AM) for an eight-year period. Under a separate option agreement, ABC, Inc. has acquired the right to purchase WQEW(AM) at the end of the eight-year period.

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WQXR(FM) competes for listeners primarily with two all-news commercial radio stations and with WNYC(FM), a non-commercial station, which features both news and classical music.

New York Times Digital

NYTD derives most of its revenue from the sale of advertising on its two Websites, NYTimes.com and Boston.com. NYTimes.com and Boston.com continue to reach wide audiences across the New York and Boston metropolitan regions, the nation and around the world. In the United States alone, unique users visiting NYTD's Websites reached over 12.1 million in the month of December 2003, compared to 9.3 million in December 2002. In 2003, over 80,000 subscription orders for The Times or the Globe originated from these two Websites. Non-advertising revenue is primarily from the Company's Digital Archive Distribution business, which licenses archived information in databases to resellers of that information.

New York Times Digital primarily competes with other advertising-supported news and information Websites, such as Yahoo! News and CNN.com, as well as classified advertising portals, such as Monster.com (help-wanted advertising).

Other Businesses

NYT has a 49% equity interest in a Canadian newsprint company, Donohue Malbaie Inc. The other 51% is owned by Abitibi-Consolidated (Abitibi), a global manufacturer of paper. Malbaie purchases pulp from Abitibi and manufactures newsprint from this raw material on the paper machine it owns within the Abitibi paper mill at Clermont, Quebec. The Company also has a 40% equity interest in a partnership operating a supercalendered paper mill in Madison, Maine, known as Madison Paper Industries. In 2003, Madison produced 195,000 metric tons, of which 12,000 tons were sold to the Company.

In 2002, the Company and Discovery Communications, Inc. entered into a joint venture to own and operate DTC, a digital cable television channel. NYT owns a 50% interest in DTC. The Company also owns an interest of approximately 17% in

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NESV, which owns the Boston Red Sox baseball club, including Fenway Park, and approximately 80% of New England Sports Network, a regional cable sports network.

DTC is a non-fiction channel that offers documentary programming on recent history and newsworthy events. It competes with cable channels such as A&E and the History Channel.

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Competitive Analysis

Internal Rivalry

The New York Times Company operates in the realm of Media, specifically printing and publishing. Traditionally, newspaper companies were family run-businesses and published papers for the local geographic area. Today, the New York Times Company is one of the last remaining family-owned newspaper companies. Over the years, newspaper companies have gone public and evolved into huge diversified businesses. Many media companies own national, international, regional, and local newspapers, as well as television broadcast stations, radio stations, internet websites, and print mills. As newspaper companies evolved, control over newspapers became consolidated and some now have a national audience.

TOP 10 NATIONAL DAILY NEWSPAPERS (United States) Newspaper Company Avg Daily Circulation 1. USA Today Gannett Co 2,280,761 2. Wall Street Journal Dow Jones 2,101,017 3. New York Times New York Times 1,133,763 4. Los Angeles Times Tribune Company 983,727 5. Washington Post Washington Post Co. 772,553 6. Daily News Mort Zuckerman 747,053 7. New York Post News Corporation 678,012 8. Chicago Tribune Tribune Company 614,548 9. Newsday Tribune Company 580,346 10. Houston Chronicle Heart Corporation 549,300

The New York Times Company’s main competitors are Gannett Company, Inc., Dow Jones & Company, Tribune Company, and The Washington Post Corporation. This market is defined by being a publisher of a leading national daily newspaper. All these of these companies publish one or more of the top ten daily national newspapers in the United States. These companies also hold diversified media holdings, similar to the New York Times Company.

Rivalry in an industry can significantly affect the ability of a firm to earn profits. The publishing of national daily newspaper industry is moderately competitive with

SageGroup, LLP 10 The New York Times Company a fair number of firms. These newspaper companies do not have a history of cooperative pricing and there are not significant cost differences among firms in terms of publishing a daily newspaper. The general cost structure at newspaper companies involves three components: labor (~75%), newsprint (~20%), and other costs such as advertising and promotion (~5%). However, the New York Times Company has a less flexible cost structure and higher than average costs, comparatively. At The Times, 17% of total expenses belong to editorial, compared to an industry average of 9%. The company is also heavily unionized.

There is intense pressure between firms to increase circulation and readership in an industry that is stagnating, in a time with a maturing population and declining circulation. Newspapers earn approximately 75% of their revenue from advertising and 25% from circulation. However, the amount of advertising a newspaper can bring in is directly affected by its circulation: the number, scope, and location of its readership. Many newspaper readers are brand loyal as there is significant product differentiation between newspapers by factors such as ideology, writing style, and layout. Furthermore, many readers come to enjoy reading articles by specific journalists. Therefore, newspapers have been actively trying to recruit younger readers who have not yet settled on one source for news. As a new generation comes of age that increasingly relies on electronic and free information on the internet, newspaper companies are struggling to increase readership among this generation without alienating them. Many firms have increased circulation numbers by partnering with academic institutions and offering up to 50% education- discounted newspapers.

Substitutes and Complements

Television and radio are both substitutes for newspapers. However, both are mature media industries (like newspapers) and are experiencing greater stagnation and decline in audiences than newspapers, e.g. Television audience declined 2.4% in 2004. Moreover, newspapers reach more adults in the US every week than television or radio, so it is not very likely that newspapers would lose a significant amount of advertising to those mediums.

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The main threat as a substitute is the Internet. Internet news is a substitute that will undoubtedly change the future of newspaper readership. The younger population spends more time online, thus reducing the audience for newspaper circulation and advertising. Also, the Internet allows local newspapers to leverage their local market position and develop and internet presence. Moreover, advertisers may be tempted to use the internet to target a specific or younger demographic. Giant media firms must adapt to the new generation and changing times.

Buyer and Supplier Power

The main suppliers of these diversified media groups are newsprint companies and the journalists, editors, etc. who work for these companies. Newsprint suppliers are highly concentrated. The two top producers, Abitibi and Bowater comprise more than 50% of US capacity. The top 5 producers make up nearly 80% of capacity. Despite the concentrated nature of newsprint suppliers, newspaper companies still maintain much of the power in this relationship because most of the demand for newsprint comes from the newspaper and their own demand dynamics. Newspapers have generally avoided major price increases by decreasing demand. The consolidation of newsprint producers is a response to this power dynamic.

Price of newsprint is very cyclical and follows advertising revenues. As the economy strengthens, then advertising revenues rise, followed by an increase in the price of newsprint. This works the other way as well. As advertising decreases, then demand for newsprint declines, thus causing the price of newsprint to fall. Therefore, newspapers have natural hedge against slowdown in advertising

Newsprint is currently priced at $565 per metric ton, and increases are usually made in increments of $50. These increases are typically announced several months in advance. However, price increases are not billed until the end of the month. Therefore, newspapers can still negotiate amounts and timing depending on the actual demand for newspapers. For example, a $50 price increase in September 2004 did not entirely stick in October, when newspapers resisted, due to slow demand.

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One factor that could be influential on the supplier side is that employees of newsprint manufacturers tend to be heavily unionized. A strike by a newsprint manufacturer’s union would have the capability to seriously limit supply and drive up prices.

Newspaper company employees tend to be heavily unionized. Wage contracts generally include fixed-wage increases of 2%-3% a year. Poor labor relations could greatly destabilize a profitable newspaper. The heavily unionized laborers could also present a hold-up problem, as with many newspaper companies, including the New York Times, have fallen behind in pension-plan payments.

There is little but increasing buyer power. No one consumer can affect a giant newspaper company. However, aggregate these consumers and they can pose a huge threat to profitability, especially considering that about 25% of revenues come from circulation, and that advertising revenue is heavily dependent on circulation base. Specifically, the upcoming younger generation, who spend more and more time on the internet, are used to accessing quality information for free. Also, due to the proliferation of craigslist.org and other posting websites, many are also unaccustomed to paying for classified ads. This poses a potential problem for newspaper companies in the near future.

Entry

There are significant barriers to entry into publishing a daily national newspaper. While it would be relatively simple for a new firm to access distribution channels and raw materials, the structure of the industry is reliant on reputation and established brand loyalties. This would make it incredibly difficult for a new entrant to garner market share. Moreover, since newspapers are heavily reliant on advertising as a source of income, and advertising is dependent on circulation base and market share, it is extremely unlikely that a newcomer to the market would be able to garner the needed amount of advertising to stay in business. A new entrant to the market would also need knowledgeable, educated, and experienced reporters, editors, etc. Finally, it seems extremely unlikely that a new entrant to the marketplace would be able to establish itself as a leading national

SageGroup, LLP 13 The New York Times Company newspaper. It would be more likely that a newspaper could establish itself at the local level than at the national level and use the method acquisitions to grow itself.

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Financial Analysis

The New York Times is currently in good financial health and has had increasing revenues for the past four consecutive years.

Yearly Revenues Year Total Revenue Percentage Change 2001 $ 3,015,958 N/A 2002 $ 3,079,007 2.09 2003 $ 3,227,200 4.81 2004 $ 3,303,642 2.37

Total cash flow from operations has fluctuated over the past few years.

Cash Flow Trend Year Total Cash Flows from Percentage Change Operating Activities 2001 $ 471, 238,000 N/A 2002 $ 273,284,000 (42.0) 2003 $ 466,285,000 70.6 2004 $ 444,038,000 (4.77)

There are two main reasons for the fluctuation in cash flow from operations. In 2002, the New York Times Company put more money towards its long-term retirement benefit obligations, which it did not do in 2001 or 2003. In fact, the 2002 benefit obligation payment was almost double what The Times contributed in 2003 ($112 million versus $61 million).

The drop in total cash flow from operating activities in 2004 can be attributed to an increase in other operating expenses, as can be noted in the 2004 Statement of Cash Flows. Net Other Expenses was positive in 2003, at $4,084,000, compared with -$17,152,000, in 2004. The New York Times Company is planning to increase investments for 2005 at its flagship, The New York Times newspaper. These investments may cut into short-term profits but should result in increased longer- term revenue growth. Recent investments include the acquisition of About.com, revamping several of its sections to attract more ad dollars, developing its website – nytimes.com – into a combination of print and online classifieds as well as local search, ramping up the color, content, and distribution of the International Herald

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Tribune since taking 100% ownership, expanding The Boston Globe and other regional newspapers into magazines and other print sections, and investments into the Discovery Times Channel for exposure into a potentially fast-growing cable business.

The New York Times Company has been bucking the industry trend and has experienced circulation growth while driving through robust price increases and expanded home delivery into new markets. Generally, industry-wide, the average circulation decline is 0~1% annually. The table below illustrates the New York Times’ remarkable revenue growth from circulation. On December 30th, 2002, the New York Times increased its price from $0.75 to $1 per copy, allowing it to boost revenues even further.

Yearly Change in Circulation Revenue for New York Times Co. Year % Change in Revenue 2000 5.3 2001 6.6 2002 11.0 2003 3.6

Since 1996, the New York Times has moved into more markets and has established itself as a national newspaper. It is currently available in 235 markets, versus 57 previously. Hence, it has been able to increasingly garner more national advertisers. Generally, advertising accounts for approximately 75% of a newspaper’s revenues. Currently, the New York Times Company derives 45% of revenue from national advertising, well ahead of its competitors. The Times also has a national circulation among higher-income, higher-education demographic, that is very attractive advertisers. Therefore, the New York Times stands to benefit from any possible upward trend in national newspaper advertising.

The Times has also improved revenues by making significant investments in color printing. The proportion of color advertising has increased from 13% of advertising revenues in 2000 to 27% in 2004. Color premium rates rose 25% in 2004. Because of the price premium, 26% of the newspaper’s total revenue now comes

SageGroup, LLP 16 The New York Times Company from color. If the economy continues to grow, then the New York Times Company can expect to see increased revenue through color advertising.

One threat to financial profitability comes from The Times’ heavy exposure to the New York and Boston economies. Approximately 90% of EBITDA is concentrated in its New York and Boston properties. These two cities typically have growth rates that lag behind U.S. real GDP growth. For example, the New York State comptroller expects 3.5% real GDP growth in 2005, compared with Bear Stearns economists’ expectation for U.S. real GDP growth of 3.9%.

Another investment risk is limited free cash flow in the immediate future. As previously aforementioned, the New York Times Company will be making several investments in 2005 that can limit its cash flow. Generally, the company generates good free cash flow about approximately $100 million. Investments in 2005 include a new corporate headquarters in New York City, added color printing capacity, and seven new printing facilities across the United States, in an effort to increase national circulation. The new headquarters is estimated to cost between $576- $606 million, net of sales proceeds. Additionally, the company has one of the most under-funded pension plans in comparison to its competitors. At the end of 2003, it was under-funded by 28%. If the Times does contribute more to its pension plan in the next few years, this will further reduce the amount of free cash flow.

Additionally, a higher interest rate environment could affect the company’s profitability. Classified advertising accounts for 30% of the New York Times Company’s advertising revenue. The majority of classified advertising is for cars and real-estate. The demand for both of these is tied to the interest rate. A higher interest rate environment can lead to a slow down in the demand for cars and real- estate, leading to diminished classified advertising revenues.

As of April 20, 2005, the New York Times Company stock is trading at $33.11. There are approximately 145.8 million shares outstanding with a market capitalization of $4.83 billion. A discounted cash-flow analysis demonstrates that the current share price accurately reflects the company’s future earnings potential and growth.

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Key Issue

Circulation: Mature Market, the Do-Not-Call List, and the Internet (Threat)

Newspaper printing and publishing is a mature and slightly declining industry. As previously noted, circulation has been declining at the approximate rate of 0~1% annually. However, the real impact of these declines in circulation, in terms of profitability and quality of readership, can only be uncovered by breaking down the specific changes in circulation.

Newspaper circulation consists primarily of single-copy sales and subscription sales, as well as, “other paid” sales. Other paid sales include copies for employees and Newspapers in Education (NIE) programs, and third-party bulk sales. These other paid sales are generally at discounts as high as 50%. Therefore, “other paid” sales, which have increased over the years, generate significantly less revenue than single-copy or subscription sales. Furthermore, its readership is less valued by advertisers. The increase in “other paid” sales, off-sets the declining circulation in single-copy or subscriptions. In real terms, however, the average circulation decline could be as much as 8% for single copies and 3% for subscriptions. Newspapers generally increase advertising rates annually of 3%-4%. Considering that the amount of advertising a newspaper can garner is heavily dependent on its circulation and readership, advertisers may resist price increases if it perceives above-average declines and a lower quality of readership. This, in turn, would affect profitability.

Specifically to the New York Times, in the period ranging from September 2003 to September 2004, the average paid circulation rate increased 0.2%. This is line with the fact that the New York Times, unlike many of its competitors, has been able to increase circulation over the past few years. However, circulation of single-copy or subscriptions declined by -3.4%, while “other paid” circulation increased by 30.6% in the same period.

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Another area of concern concerning circulation (and revenues in general) has to do with the passage and implementation of the National do-not-call list that restricts telemarketing. Telemarketing once generated approximately 54% of subscription sales. With the absence of telemarketing, other costs will increase and detract from revenues as the New York Times must find other ways to solicit new customers to maintain its customer base.

The final area of strategic concern involves the younger generation and the Internet. The first, and foremost concern, is that the younger population spends more time online, reducing the audience for newspaper circulation and advertising. This is exacerbated by an ageing readership base. Hence, circulation numbers are falling, which directly affects the ability of newspapers to appear attractive to advertisers. Moreover, with the fragmentation of media, newspapers are becoming less appealing to advertisers, as they can turn to other sources on the internet (such as Yahoo! and Google) who offer highly targeted advertising to the younger demographic.

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Solutions

As part of The New York Times Company’s long-term growth strategy, SageGroup, LLP recommends:

• Maintaining NIE Programs Providing low cost newspapers to students is an excellent way to develop brand recognition and loyalty from a customer base that is notorious for utilizing digital forms of media. This may later produce additional subscribers to the newspaper, once out of the educational system. Additionally, even if it does not result in newspaper subscriptions, the exposure to the Times itself increases the likelihood that the younger demographic would turn to the nytimes.com online versus other digital news sources.

• Credit Card Subscriptions Subscriptions that are paid for with, and automatically renewed by credit cards would result in a significantly lower subscription turnover rate. This would be especially helpful given that newspaper subscriptions tend to be cyclical by seasons (as the weather gets warmer, subscriptions tend to be cancelled). A lower subscription turnover rate would increase revenues, as well as maintain (or increase) the circulation base. This, in turn, would enhance the attractiveness of The Times to advertisers.

• Alternative Methods of Self-Promotion With the implementation of the national do-not-call list, the New York Times must find other ways to find subscribers. The Times must invest in alternative tools such as door-to-door sales, kiosks, internet ads, and overall brand promotion. Self-promotion will increase consumer awareness and subscriptions to the New York Times.

• Continue Development, Acquisition, and Diversification into Digital Given the ageing readership of the Times, and its main circulation base of higher-income, higher-education readers, the Times should view the Internet

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as an opportunity, and not a threat, to expand its reach. The acquisition of About.com is an excellent example. 85% of About.com’s audience is unduplicated. Moreover, the median age of a reader was 27, five to six years younger than that of the Times. The average income of an About.com user is $61k versus $80k for nytimes.com users. Finally, About.com has much more of a female skew than the New York Times.

Another aspect of digital is the nytimes.com website. Most newspaper websites, including nytimes.com, has remained free. One major competing newspaper, however, has a paid subscription service: the Wall Street Journal (wsj.com). The younger Internet-savvy generation is resistant to paying for many digital forms of media as can be evidenced by the massive illegal downloading of movies, television shows, and most notably music, as well as the huge disparity in the number of subscribers of the nytimes.com and wsj.com. Wsj.com currently had 714,000 subscribers at the end of 2004. Contrastingly, the nytimes.com website had 9.2 million average unique users visiting the site each month (compared with 8.9 million in 2003). Moreover, over 3.2 million people receive requested newsletters from NYTimes.com each day. Nytimes.com offers free subscriptions to read current news but requires each user to register before using. This allows the Times to keep track of the demographics that visit its website; statistics that could be very useful in attracting advertisers and competing with Yahoo! or Google, in terms of online advertising. Keeping its website free, the New York Times Company will be able to boost its advertising revenues and garner a loyal and younger readership.

Finally, the New York Times Company should consider specialized digital services on the Internet. The younger generation may not be willing to pay to read general news, but would most likely be willing to pay for specific services, such as updates on the stock market, local entertainment, etc.

The goal of these strategies is to maintain and increase circulation and readership to maintain long-term growth revenues.

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Conclusion

The New York Times Company is in a prime position to capitalize on the changes in media, though a mature industry, to generate long-term growth and increased revenues. The Times is under good management, but needs to able to remain flexible to adapt to the changing dynamics of the media industry, as well as deal with the slower growth associated with mature industries. Our partners strongly recommend taking measures to maintain and grow readership and circulation so that future advertising revenues are not compromised, as they comprise a large portion of profits. The Internet should be viewed as an opportunity, not a threat, to increase brand awareness and loyalty among the younger demographic, as well as a method to gain exposure to different audiences. Overall, the New York Times Company has the means to makes its mark as a diversified media powerhouse in the 21st century.

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References

The Wall Street Journal

Yahoo! Finance

Morgan Stanley Corporate Website

Hoovers Online

Bear, Stearns Equity Research

New York Times Company 10-K

NYTCO.com

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