WuTangRiskManagement(SEB)

"Thebasisofourgovernmentsbeingtheopinionofthepeople,theveryfirstobjectshouldbetokeepthatright;andwereitle>tometodecidewhetherweshouldhaveagovernmentwithoutnewspapersornewspaperswithoutagovernment,Ishouldnothesitateamomenttopreferthela@er.ButIshouldmeanthateverymanshouldreceive

thosepapersandbecapableofreadingthem.”

‐‐ThomasJeffersontoEdwardCarrington,1787.ME6:5

Outline

•  ProblemStatement(SEB)

•  Compe==veSitua=on(AJP)•  NewsCompanyComparisonsByTheNumbers(BHR)•  Technology/Innova=on(SEB)•  NYTStrategicAlliancesandManagement(BHR)•  Conclusion(SEB)

TheProblem

Problem

•  NYT(andothernewspapers)circula=ondropping•  Revenuestreamsdropping

– Adver=sing–  Subscribers– Newsstand

•  ButNYTiswidelyconsideredtohavegoodcontent•  Whygiveitawayforfreeontheweb?•  Howtomone=zecontentOTHERthanincreasingcircula=on?

ByStaciD.Kramer‐Fri13Mar200905:13PMPST

TheNewYorkTimesCompany(NYSE:NYT)isonceagainlookingatseriouswaysbeyondadver=singtomakeitscontentpay—andthis=methenewscomesfromthehighestsource,ChairmanArthurSulzberger,Jr..

SulzbergerraisedthesubjectinacarefullyplannedkeynoteonmedialiteracyatStonyBrookUniversityThursday,explaining:

“Today,inthefaceoftheeconomicdownturn,wehaverenewedouranalysisofhowpaidcontentcanaugmentourcoreadver9singbusiness.Thetrick,ofcourse,istogarnerincrementalrevenuefromtheuserwithoutsignificantlycannibalizingthehighrateadpagesthatnowaccountforaverysignificantamountofmoney.”

ByStaciD.Kramer‐Fri13Mar200905:13PMPST(con=nued…)

ButSulzbergerraisedotherissuesaswell:

“Mostofourthinkingrevolvesaroundthefactthatwehavealmostuniquelyachievedsubstan9alscalethroughouttheworldandhavebecomepartandparceloftheglobaldiscourse.

Thisachievementhassignificantjournalis9candfinancialramifica9onsandwedonotwanttotakeanystepsthatsignificantlyreducesourpresenceontheWeb.Otherprominentnews‐gatheringsitesmaybelessinterestedinscaleandthatmightgivethemtheflexibilitytopursueanevenmoreaggressivepaidcontentstrategy.

WhatwehavelearnedoverthelastdecadeandhalfisthattheWebhasveryfewgenerallyacceptedrulesforfinancialsuccess,andtheyareinevitablyoverturnedbythenextdigitalcycleandnextbreakthroughalgorithm.”

NewYorkTimesCompanyPurpose

TheNewYorkTimesCompany,aleadingmediacompanywith2008revenuesof$2.9billion,includesTheNewYorkTimes,theInterna=onalHeraldTribune,TheBostonGlobe,16otherdailynewspapers,WQXR‐FMandmorethan50Websites,includingNYTimes.com,Boston.comandAbout.com.

TheCompany’scorepurposeistoenhancesocietybycrea=ng,collec=nganddistribu=nghigh‐qualitynews,informa=onandentertainment.

Note: No stated Mission or Vision in 10k or NYT Co website

FromNYTEthicalJournalism

“Reporters,editors,photographersandallmembersofthenewsstaffofTheNewYorkTimesshareacommonandessen9alinterestinprotec9ngtheintegrityofthenewspaper.Asthenews,editorialandbusinessleadershipofthenewspaperdeclaredjointlyin1998:

‘Ourgreateststrengthistheauthorityandreputa9onofTheTimes.Wemustdonothingthatwouldundermineordiluteitandeverythingpossibletoenhanceit.’”

GuidelinesonOurIntegrity,May1999

Compe==veSitua=on

WuTangRiskManagement(AJP)

Round1Analysis……

Structure

Func=on

Process

NYTimesiscompe=ngwithWashingtonPost,USAToday,WallStreetJournal…..

NYTimesiscompe=ngwithWashingtonPost,USAToday,WallStreetJournal…..

Round2Analysis……

Structure

Func=on

Process

NYTimesiscompe=ngwithWeb,Radio,iPods,Television,periodicals….

StrategyRela=vetoCompe=tors?

Compe==vePosi=on

Round3Analysis……

Structure

Func=on

Process

"Therailroadsdidnotstopgrowingbecausetheneedforpassengerandfreighttransporta9ondeclined.Thatgrew.

Therailroadsareintroubletodaynotbecausethatneedwasfilledbyothers(cars,trucks,airplanes,andeventelephones)butbecauseitwasnotfilledbytherailroadsthemselves.

Theyletotherstakecustomersawayfromthembecausetheyassumedthemselvestobeintherailroadbusinessrather

thaninthetransporta9onbusiness.Thereasontheydefinedtheirindustryincorrectlywasthattheywererailroadorientedinsteadoftransporta9onoriented;theywere

productorientedinsteadofcustomeroriented.”

‐‐HarvardProfessorTheodoreLeviEMarkeGngMyopia,1960

NewsCompanyComparisons

WuTangRiskManagement(BHR)

In thousands 2008 2007 2006 Revenues: $2,948,856 $3,195,077 $3,289,903

Adver=sing $1,672,159 $1,950,021 $2,077,542

Profitability ($57,839) $208,704 ($543,443)

Circula=on 1,248227 1,321,426 1,384,204

In thousands 2008 2007 2006 Revenues: $4,461,580 $4,180,406 $3,904,927

Adver=sing $1,083,084 $1,234,643 $1,358,739

Profitability $65,776 $287,655 $323,478 Circula=on 639,724 657,918 681,510

NewspaperandInfoServices

In thousands 2008 2007 2006

Revenues $6,248,000 $4,486,000 $4,095,000

Opera=ngIncome $767,000 $653,000 $517,000

In thousands 2008 2007 2006

Revenues $6,767,650 $7,439,460 $7,847,613

Profitability ($544,310) ($202,019) ($222,509)

Circula=on

USATODAYonly 2,255,295 2,300,400 x

Consumers?Organiza=ons?

Internet

Television

Radio

Periodicals

Subscrip=on

Adver=sing

Technology

“Today,inthefaceoftheeconomicdownturn,wehaverenewedouranalysisofhowpaidcontentcanaugmentourcoreadver9singbusiness.Thetrick,ofcourse,istogarnerincrementalrevenuefromtheuserwithoutsignificantlycannibalizingthehighrateadpagesthatnowaccountforaverysignificantamountofmoney.”

FromPrinttoPixels:Technology

WuTangRiskManagement(SEB)

WonderhowNYTmightreduceCOGS?

Source:NYTCo10‐Kand17Mar09interviewwithNickBilton,NewYorkTimes

MoreonNYTCOGSdistribu=oncosts….

COGS EsGmates

Prin=ng/Distribu=on $644M

NewsroomSalaries $161M

NYTSubscribers 830,000

Kindle2RetailPrice $359

PrinJngtheNewYorkTimescostsovertwiceasmuchassendingeverysubscriberafreeKindle2!

NYTInTechnology

StrategicAlliancesfortheNYTimes

WuTangRiskManagement(BHR)

RecommendthattheNYTimes•  Pursueanon‐equity,vendorrela=onshipalliance•  PreservetheNYTbrandandreputa=on•  Fund$200kpertranche,8tranchestotal

– Television(3)– Periodicals(3)– Radio(2)

•  Thisincludesrela=onshipmanager,T&E

•  Exploit/expandsuccess,shutdownfailuresOurgreateststrengthistheauthorityandreputaJonofTheTimes.Wemustdonothingthatwouldundermineordiluteitandeverythingpossibletoenhanceit.

NYTAllianceOffice

(constella=onstrategy)

Television

CNN MSNBC DiscoveryHD

Periodicals

Economist Atlan=c NewYorker

Radio

XM/Sirius HDRadio

ManagingtheNYTAlliances

•  EstablishingLicensingObjec=vesforNYTContent•  DefiningastrategyforNYTfocus•  Managingthemessage:print/broadcast/Internet

•  Developingprocessformetricsmanagement

•  Acknowledge/Acceptorganiza=onaltradeoffs

Poten=alVendorAllianceROI(growcontentdistribu=oninallmedia)Television

$$$• CNN• MSNBC• CNBC• DiscoveryHD

Periodicals

$$• Economist• NewYorker• Harpers• VanityFair

Radio

$• Sirius/XMRadio

• HDRadio• ClearChannel

NYTimesCoGrowthProjec=ons(baseduponnewStrategicAlliances)In thousands 2009 2010 2011

Revenues

(10%increase) $3,336,511 $3,670,162 $4,037,178

COGS(reduceby10%)

$2,178,438 $1,960,594 $1,764,535

GrossProfits $1,158,073 $1,709,568 $2,272,644

Subscribers(allmedia)

15%growth 954,500 1,097,675 1,262,326

Conclusion:TheNewYorkTimesshould….

•  Capitalizetheirpremium“nicetohave”content

•  Broadencontentdistribu=onbeyondtradi=onalsubscriberbase

•  Getotherindividualsandorganiza=onsto“pay”forNYTcontent,regardlessofmedium

•  ReduceCOGSbymovingfromprinttopixels

•  Build/enhancebrandthroughstrategicalliances–  Television–  Broadcast–  Periodicals–  Radio

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