The New York Times Company

Summary Notes


In this comprehensive exploration of The New York Times' evolution, hosts Ben Gilbert and David Rosenthal unpack the storied history of the iconic newspaper. Founded in 1851, the Times has been a cornerstone of American journalism, witnessing the nation's pivotal moments from the Civil War to the digital age. Despite its stature, the Times faced financial turmoil, selling its headquarters amidst a crisis in the late 2000s. However, the paper's resurgence is notable, with its digital transformation and subscription model leading to a significant increase in readership and revenue. The episode delves into the Times' strategic maneuvers, including the sale of assets and the implementation of a metered paywall, positioning it as a dominant force in the industry. The discussion also touches on the Times' substantial impact on society and its potential future trajectory as it continues to adapt in an ever-changing media landscape.

Summary Notes

Introduction to Acquired Season Eight, Episode Two

  • The episode focuses on the history of The New York Times, a newspaper company founded over 170 years ago.
  • The New York Times is notable for its longstanding family ownership, the Ox-Solzberger family, and its significant influence on American perceptions of history.
  • The episode will explore the dramatic fall and subsequent rise of The New York Times in the face of challenges brought by the internet and social media.
  • The hosts, Ben Gilbert and David Rosenthal, introduce themselves and their professional backgrounds.

"And we are your hosts. For over a hundred years, you would have been hard-pressed to find a better business in the world than an American newspaper." "Indeed, and this today, listeners, is the story of the paper that loomed large over all the others, the New York Times."

The quotes highlight the historical significance of American newspapers, particularly The New York Times, and set the stage for the episode's exploration of its history.

The New York Times' Early History

  • The New York Times was founded before the Civil War and has been controlled by the Ox-Solzberger family for most of its existence.
  • The newspaper played a significant role in shaping American perceptions of major historical events.
  • The Times' history is marked by a dramatic fall in the late 2000s, followed by a resurgence in the digital age.

"Founded over 170 years ago, before the Civil War, the Times has seen the majority of American history, and for the majority of its life, it's been controlled by a single family."

The quote emphasizes the long-standing legacy and family ownership of The New York Times, which has been a key aspect of its identity.

The Newspaper Industry's Past Prosperity

  • American newspapers once held local monopolies and were incredibly profitable due to advertising and low marginal costs.
  • Warren Buffett cited the newspaper business as an example of a desirable franchise to own.
  • The New York Times was a prime example of this successful business model.

"For over a hundred years, you would have been hard-pressed to find a better business in the world than an American newspaper."

The quote underscores the historical profitability and business success of newspapers in the United States.

The Ox-Solzberger Family Dynasty

  • The Ox-Solzberger family has controlled The New York Times for five generations.
  • The family's influence extended through major historical events, shaping public perception across generations.
  • The family's control of the paper is relatively unknown to the public despite its significant impact.

"It is probably safe to say that the five generations of the Ox-Solzberger family have been the closest thing that America has ever seen to a dynasty."

The quote highlights the Ox-Solzberger family's long-term control of The New York Times and their status as a powerful American dynasty.

The New York Times' Challenges and Transformation

  • The advent of the internet and social media brought ruin to traditional journalism, including The New York Times.
  • The Times faced financial difficulties, selling their office building to free up cash.
  • Despite past struggles, The New York Times has been accused of being a monopoly in journalism and has successfully transitioned to a digital subscription model.

"The Internet and social media on top of it brought ruin to the entire traditional journalism industry."

The quote points to the disruptive impact of digital technology on the journalism industry, which The New York Times had to navigate.

The Founding of The New York Times

  • The New York Times was founded in 1851 during a media boom, spurred by population growth, literacy, and urbanization.
  • The founder, Henry Jarvis Raymond, was a journalist and politician who played a significant role in American politics, including the founding of the Republican Party.
  • The New York Times initially sold for a penny, making it accessible to a broader audience.

"Newspapers were sprouting up all over the country. In the year 1800, there were 200 newspapers in the US. And in the year 1860, there were 3,000 newspapers in the US."

The quote illustrates the rapid expansion of the newspaper industry in the 19th century, setting the context for the founding of The New York Times.

Adolf Ochs and the Second Founding of The New York Times

  • Adolf Ochs took over The New York Times during a financial crisis, saving it from bankruptcy.
  • Ochs was a self-made newspaperman who had previously turned around the Chattanooga Times.
  • He implemented a conservative approach to journalism and introduced the famous motto "All the News That's Fit to Print."

"The yokel from Tennessee had accomplished the impossible. He had bought The New York Times using none of his own money."

The quote captures the remarkable story of Adolf Ochs's acquisition of The New York Times with no personal capital, showcasing his entrepreneurial spirit.

The Business Model of Newspapers

  • Newspapers historically relied on both subscription revenue and advertising income.
  • Circulation numbers were crucial as they directly impacted advertising rates and revenue.
  • The New York Times' strategy to cut subscription prices boosted circulation and, by extension, advertising revenue.

"So before this time, newspapers were selling, I think, around like five cents a copy. But starting in the 1850s, newspapers and in particular new newspapers dropped in price to one cent a copy."

The quote explains the shift in newspaper pricing strategy in the 19th century, which was a key factor in the growth of the industry and The New York Times.

Strategic Pricing and Market Share

  • Adolf Ochs's strategy involved undercutting competitors' pricing.
  • Ochs bet on stealing market share by offering his product at a lower price.
  • His decision to drop the price led to explosive growth in circulation.

"The bet that I can steal share from my competitors. There's plenty of people that want to read three cent news, but they will totally go to whoever's offering the three cent news at the $0.01 price."

The quote explains Ochs's strategic move to gain a competitive advantage by reducing the price of his newspaper, which significantly increased its circulation.

Circulation Growth and Influence

  • The New York Times saw a 3x growth in circulation in its first year under Ochs.
  • By 1899, circulation reached 76,000, surpassing its previous peak.
  • The paper crossed 100,000 in circulation by 1901 and 200,000 by 1912.
  • After World War I, the circulation exceeded 750,000, making The New York Times a leading journalistic entity in the U.S.

"So grows three x. In his first year, back up to 30,000 circulation by 1899, it's at 76,000."

The quote highlights the rapid growth of The New York Times's circulation, indicating the success of Ochs's strategies and the paper's increasing influence.

Dual Revenue Stream Model

  • Newspapers typically have two main revenue streams: circulation and advertising.
  • Circulation revenue has lower margins due to the costs of printing and delivery.
  • Advertising revenue is more profitable with no marginal costs and is attractive to advertisers targeting demographics with disposable income.

"This dual revenue stream nature of newspapers and the media business is just beautiful."

The quote emphasizes the advantageous business model of newspapers that allows them to earn from both sales and advertising.

Targeting Business Demographics

  • Ochs targeted businessmen, making The New York Times the premier business newspaper.
  • The strategy was to produce more business content and charge more for it.
  • The Wall Street Journal later adopted a similar strategy.

"Ox made a really big bet on we should be producing more business content, and people will be willing to pay more for it."

The quote explains Ochs's foresight in focusing on business content as a way to attract a specific, profitable demographic.

Advertising Efficacy Quote

  • Adolf Ochs originally made a statement about the inefficacy of half the money spent on advertising.
  • John Wanamaker popularized a similar quote, which is often misattributed to him.
  • The quote reflects the common sentiment in advertising about the difficulty in measuring its effectiveness.

"I affirm that more than 50% of money spent on advertising is squandered and is a sheer waste of printers ink."

The quote conveys Ochs's critical view of advertising spend, recognizing that much of it does not yield results.

Real Estate and Branding

  • The New York Times Company had an interest in prestigious headquarters and locations.
  • In 1904, the company moved to Times Tower at Longacre Square, which was later renamed Times Square.
  • The move was celebrated with a fireworks show, leading to the tradition of the New Year's Eve ball drop.

"In 19 four, the newspaper moved its headquarters to a building called the Times Tower at 1475 Broadway in what was then called Longacre Square, later renamed Times Square."

The quote describes the historical significance of The New York Times's move to Times Square, which became an iconic location and part of the paper's brand identity.

Succession Challenges

  • Adolf Ochs's passing led to a complex succession situation due to having only one child, a daughter.
  • There was sexism in the decision-making process for succession.
  • The decision was left to Ochs's daughter, Iphigene, and other family members to resolve.

"Ox only had one child, and his child, which he viewed as a problem for succession, was a daughter."

The quote highlights the gender-based challenges within the family-owned business regarding leadership succession.

Editorial Independence and Family Trust

  • The New York Times established a trust to maintain its editorial independence and integrity.
  • The trust ensures the family continues to own the paper and supports its mission.
  • The family must adhere to the trust's objectives to maintain ownership and associated wealth.

"The trustees of each 1986 trust [...] are directed to retain the class B common stock held in the trust, and not to sell, distribute, or convert such shares into class A common stock."

The quote details the legal stipulations of the family trust that safeguard The New York Times's editorial independence and the family's ownership.

Transition to Digital and Missed Opportunities

  • The New York Times recognized the Internet's potential but faced challenges in transitioning to digital.
  • They initially partnered with AOL before launching their own website.
  • The company missed significant opportunities in cable news, particularly failing to capitalize on the lucrative market that Fox News captured.

"In 1995, they hire this guy named Martin Neisenholz to come in and run a whole new electronic media division within the company."

The quote indicates the company's efforts to adapt to the digital age by establishing a division dedicated to electronic media.

Capital Allocation Missteps

  • The New York Times made several questionable investments, including the acquisition of the Boston Globe and a stake in the popcorn channel.
  • They diversified into various non-core businesses, such as sports teams and magazines.
  • These decisions reflect a period of poor capital allocation that did not align with the company's strengths.

"In 1993, they purchased the Boston Globe for $1.1 billion."

The quote exemplifies one of the significant and ultimately regrettable investments made by The New York Times Company during a phase of aggressive diversification.

Financial Strategies and Impacts

  • The New York Times (NYT) had less revenue during the podcast's discussion than during the "go go era."
  • NYT acquired for $410 million in March 2005.
  • NYT bought back almost $3 billion of stock financed with debt over a decade.
  • The stock buybacks were financed despite the company being cash flow positive.
  • The Salzberger family, due to the trust setup, could not sell shares but monetized the business via dividends.
  • The family indirectly benefited from the stock buybacks through the increased value of their stock.
  • The company's strategy was likened to a private equity play, despite the unconventional use of debt for stock buybacks.

"The Times today has less revenue than it had during this go go era." This quote indicates that the NYT's current revenue is lower than during a previous period of high economic activity.

"They bought back almost $3 billion of stock that they financed with debt." The quote describes a financial strategy where the NYT repurchased its own stock using borrowed money, indicating a significant financial decision with long-term impacts on the company's leverage and shareholder equity.

Macroeconomic Crisis and Technological Shifts

  • The financial crisis and subsequent newspaper crisis severely impacted NYT's revenue, causing a 25% drop over two years.
  • The introduction of smartphones and the App Store accelerated the shift to digital media, which the NYT was slow to adapt to.
  • The NYT's digital newsroom was separate from its main newsroom, indicating an organizational divide between traditional journalism and digital innovation.
  • The company's internal culture distinguished between journalists ("core competency") and everyone else ("business side"), which may have hindered a unified business strategy.

"The company's spitting off three, three and a half billion dollars of revenue, a couple of hundred million dollars of operating cash flow." This quote highlights the company's financial health prior to the crisis, with substantial revenue and cash flow.

"Over the course of the next two years, they would lose 25% of their revenue in two years." The quote underscores the dramatic impact of the economic downturn on the NYT's financial stability.

Carlos Slim's Investment and Company Restructuring

  • Carlos Slim became involved with NYT during the financial crisis, providing a $250 million debt deal with high-interest rates and warrants for additional equity.
  • The deal was considered unfavorable compared to other debt financing options at the time due to the high-interest rate.
  • NYT eliminated dividends to conserve cash, highlighting the financial strain on the company.
  • The company engaged in sale-leaseback of their headquarters, which later turned out to be a savvy financial move due to the appreciation of New York real estate.
  • NYT divested various assets, including radio stations and regional media groups, to focus on its core properties and pay down debt.

"They announced a $250,000,000 debt deal with Carlos Slim, the mexican billionaire, one of the wealthiest people in the world." This quote introduces Carlos Slim's significant financial involvement with the NYT during a period of economic difficulty for the company.

"In March, they announced a $225,000,000,000 sale and leaseback of a portion of the headquarters building." The quote details a strategic financial maneuver by the NYT to generate immediate cash while retaining the option to repurchase the property in the future.

Digital Transformation and Innovation

  • The NYT's digital subscriber growth was substantial but accompanied by a decrease in website traffic due to the implementation of a metered paywall.
  • The innovation report led by A.G. Sulzberger highlighted the need for the NYT to evolve internally and focus on distribution and technology.
  • The NYT launched successful digital products such as the cooking and crossword apps, indicating a diversification of revenue streams.
  • The Daily podcast became a significant success, reaching a new, younger audience and generating substantial advertising revenue.

"They finally get their act together and introduce a paywall, a metered paywall for" This quote refers to the NYT's strategic decision to monetize its digital content through a subscription model, reflecting a significant shift in the company's approach to revenue generation.

"The traffic to the site drops by over half during this time." The quote reveals the unintended consequence of the paywall implementation, which led to a reduction in website visitors, a challenge for the company's digital strategy.

Subscription Business Model

  • The New York Times (NYT) employs a subscription model similar to old school newspapers but adapted for the digital environment.
  • Despite not being a geographic monopoly, NYT faces challenges in the digital space where news can be accessed from various sources.
  • NYT has 7.5 million paying subscribers compared to Netflix's 200 million, indicating a smaller total addressable market (TAM) for NYT.
  • NYT's average revenue per subscriber is comparable to Netflix's, making it an interesting comparison from a revenue perspective.

"The Times has seven and a half million paying subscribers. Netflix has 200 million paying subscribers. The Times estimates that their total addressable market is half of Netflix's current subscriber base."

This quote highlights the scale of NYT's subscription base in relation to Netflix, emphasizing the difference in TAM and the potential for growth in the digital subscription space.

Conflict Between Business Model and Mission

  • NYT's subscription model may conflict with its mission as the paper of record, aiming to reach everyone authoritatively.
  • Subscriptions are typically for niche providers, which may incentivize NYT to cater to a particular audience rather than maintain neutrality.
  • The concern is whether NYT can build a significant business by being neutral or if it will succumb to creating content that appeals to specific biases to attract subscribers.

"There's kind of a conflict here between their business model and their stated mission, where if you're really going to be the paper of record and you're really going to be the paper for everyone, the authoritative source, your business model actually should not be to get a small number of people to subscribe to you."

The quote discusses the inherent tension between striving to be an authoritative source for all and the need to secure subscribers in a business model, which may lead to a more targeted and potentially biased approach.

Historical Branding Strategy

  • NYT's reputation as the paper of record stems from a strategic decision to publish an index for researchers and libraries, establishing it as a primary news source.
  • This historical branding strategy targeted a niche group of academics and researchers, which contrasts with the current challenge of balancing broad reach with subscription growth.

"The New York Times as the paper of record. That saying and quote actually comes from a very specific business strategy from the Times."

The quote references the origin of NYT's status as the paper of record, linking it to a deliberate business strategy that focused on a specific audience, which is relevant to understanding its current market positioning.

Subscriber Affinity and Neutrality

  • NYT faces the challenge of creating strong subscriber affinity while maintaining high-quality, neutral journalism.
  • The question is whether the pursuit of neutrality can stimulate subscription decisions as effectively as appealing to biases.
  • The comparison with Fox News, which targets a conservative demographic, raises the question of whether neutrality can be as lucrative as catering to a specific audience.

"Can you similarly get people to fork over their money for neutrality and as driving them away that they're willing to?"

This quote questions the viability of a subscription model based on neutrality in journalism, considering the success of media outlets with clear political leanings in attracting paying audiences.

Growth and Revenue Dynamics

  • NYT has seen impressive subscriber growth, but this has not translated into proportional revenue growth.
  • The company's total revenue has been flat in recent years, and the challenge is to increase revenue while managing costs.
  • NYT's past revenue was significantly higher, and there is a narrative that the company is restructuring to potentially increase profitability.

"Whoa, this is a killer subscription business that is growing 40% year over year in their number of paying digital subscribers."

The quote emphasizes the rapid growth of NYT's digital subscriber base, which is a positive indicator, but also notes the need for revenue to catch up to subscriber growth for sustained success.

Power Dynamics in Media

  • Hamilton Helmer's "7 Powers" framework is applied to evaluate NYT's strategic position.
  • NYT exhibits strong brand power, with its reputation influencing the perceived truth and value of its content.
  • Scale economies are evident in NYT's ability to spread costs across a large subscriber base, outperforming other news organizations.
  • Process power may be present due to NYT's long-standing tradition and institutional knowledge in journalism.

"The New York Times has incredible brand power. They can print things that I wouldn't even believe if some blogger printed it."

This quote underscores the significance of NYT's brand power in establishing credibility and trust with its audience, which is a key strategic advantage in the media landscape.

Media Landscape and Business Strategy

  • NYT operates in a "barbell" media landscape with a few scale players and many niche players, leaving little room for the middle.
  • The company's strategy mirrors Disney's focus on high-quality content and international expansion.
  • NYT's success is partly due to its ability to adapt to the digital-first environment while maintaining its core values and journalistic quality.

"If you're going to publish on the Internet, you need to escape to one side or the other. You need to either have a dramatically lower cost structure or you need to be the big guy."

The quote highlights the strategic imperative for media companies to either operate at a large scale or adopt a low-cost structure to succeed in the digital landscape, which is a key consideration for NYT's business strategy.

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