Why The New York Times Will Disappear As We Know It By 2015

1The End Game for the New York TimesGone as a Stand-Alone Newspaper by 2015April 5th, 2012Eric Jackson

2• The New York Times is the most recognizable newspaper in the world• Yet it’s been ravaged in the last 5 years by an evaporation of advertising revenue• Cost reductions have hit a plateau recently • Ad revenues appear set to continue declining without help from paywalls or other digital efforts• With current trends, it appears the NYT will be unable to continue as a stand‐alone business by 2015• The rest of the newspaper industry should face a similar crisis even sooner The New York Times: About to Stare Into the Abyss

3 NYT Media Group Revenues Disappeared in the Financial Crisis and Aren’t Coming Back$1,400$1,200$1,000 $800 $600 $400 $200 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 NYTMG Ad Revs NYTMG Circ Revs Circulation Price Increases Can’t Compensate for Ad Losses - #s in Millions

4 NYT Group Costs Have Gone Down But Have Also Recently Flat‐Lined$1,600$1,400$1,200$1,000 $800 $600 $400 $200 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 SG&A Wages Raw Materials Numbers Reported In Millions

5How Low Can You Go? NYT Full‐Time Employees 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Headcount Flat Since Financial Crisis Abated

6The Historical Trends are Clear – And Seemingly Irreversible $600 $400 $200 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 ‐$200 ‐$400 ‐$600 NYT Operating Profit (MM) NYT Cash Flow from Operations (MM) 2012 On Track To Be the First of Many Years to Come of Losses from Operations

7Staring Down the Barrel of a Gun:• Cash at the end of 2011 was $280 million, down from $400 million at the end of 2010• Cash from operations likely to be negative in 2012 if historical trends hold• Even though nearly half the headcount has been cut since 2003, cuts since 2008 have leveled off• NYT owes $283 million in contractual obligations this year, including almost half of that in pensions and benefits• NYT owes $405 million in contractual obligations in 2013 – 2014 and another $879 million in 2005 ‐ 2016• Pension and benefits costs are rising 2.7% a year in the coming years

8What Can Be Done?• Merge• Sell• Restructure through bankruptcy• Refinance• Sell non‐core assets and smaller papers

9Other Issues:• iPad proliferation suggests that Ad revenue could decline faster than the 2009 – 2011 trend• Circulation might start to trend down in the coming years instead of modest increases, as price increases can’t compensate for cancelled subscriptions• The Paywall vs. non‐Paywall debate seems to miss the larger point: this ad‐revenue supported business model will no longer be viable after 2015• Why would Carlos Slim or other financiers want to refinance based on this business model?• 2014 appears to be the key year for the Times management and board to decide how they can exist after 2015

10Conclusions:• Newspapers supported by classifieds and ads will likely cease to exist after 2015• The only viable news business models moving forward appear to be: – (1) Financial data subscription (e.g., Bloomberg/ThomsonReuters), – (2) Cable subscription (e.g., Comcast, Disney, CBS), – (3) Costs for digital news getting spread across page views of larger Internet company (e.g., Yahoo!) or – (4) Copycat blogging supported by banner ads (e.g., Huffington Post)• Only other possible model is support by a benefactor (e.g., Apple or the Steve Jobs Foundation)• If the New York Times can’t make it alone, why would any other smaller newspaper?• Investigative reporting will become even more invisible than it is today in the coming years

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Why The New York Times Will Disappear As We Know It By 2015

by Eric Jackson

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