Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

My Thoughts

Is The New York Times making Money?

Strangely, America’s paper of record; the legendary New York Times, is attracting lots of new subscribers. For instance, the Gray Lady received 265,000 new digital subscriptions in the last quarter of 2018, the Associated Press estimates.

Interestingly, The New York Times is adding journalists to its newsroom staff, something unheard of in an era when reporters are driving Uber in other cities. In fact, the AP claims the Times’ newsroom staff was the largest in the paper’s history at the end of 2018.

Conversely, The New York Times paper circulation fell below a half million in 2018. Statista estimates The Times average weekday circulation in 2018 at 487,000 copies. Therefore, the Times’ paper circulation is less than the half what it was in 2008. Statista estimates the Times 2008 circulation at 1.03 million?

Can The New York Times make money?

The divergent stories at The Gray Lady raise the question: “does The New York Times Co. (NYSE: NYT) make money?”

Currently, The New York Times makes a little money from its operations. Specifically, Stockrow estimates The Times made a gross profit of $248.06 million on revenues of $436.36 million in the quarter ending on 30 June 2019.

In addition, The Times reported $34.59 million in earnings before taxes and a net income of $25.17 million for the same period. Thus The Times makes money, but its present earnings are far from the rivers of cash newspapers generated in the late 20th Century.

In addition, The Times reported $34.59 million in earnings before taxes and a net income of $25.17 million for the same period. Thus The Times makes money, but its present earnings are far from the rivers of cash newspapers generated in the late 20th Century.

Who is The New York Times’ Competition?

Thirty years ago naming The New York Times competitors was easy. The Times’ main competitors were local papers like The New York Post and The Daily News.

Today, however, The New York Times is a national digital news organization that prints a New York newspaper as a side line. Therefore, figuring out who The Times’ competitors are can be tough.

The Times’ biggest direct national competitors are other serious national news organizations including National Public Radio (NPR), The Washington Post, The Wall Street Journal, and The HuffPost. In addition, The Times faces an odd challenge from The Guardian, a historic British newspaper that publishes an aggressive American digital edition.

The Washington Post, in particular, is a major menace to The New York Times because America’s richest man, Jeff Bezos owns it. Thus, The Wash Post has Bezos’ $112.9 billion fortune and the Amazon (NASDAQ: AMZN) empire behind it. Bezos claims The Post and Amazon are separate, but does anybody believe him?

Notably, you can find The Washington Post digital access on Amazon, but The Post’s special deal for Prime members is history. However, such a deal could return if The Post’s revenues fall.

Can Newspapers Survive in the 21st Century?

The New York Times, The Guardian, and The  Washington Post prove newspapers can survive in the 21st Century – but not as newspapers. All three papers survive by creating a strong digital presence.

Indeed, I consider The New York Times, The Guardian, and The Post digital news organizations. For instance, I have been reading all three for years, yet I have never seen a paper copy of either The Wash Post or The Guardian.

Thus, The Times survives because its management understands the product is news not the paper. Correspondingly, The New York Times Co concentrates on improving its news product, and neglects the paper edition.

Why Local Newspapers are dying

This runs counter to traditional newspaper strategy which emphasized building paper circulation at all cost. Strangely, I think the obsession with high circulation is  is killing most American newspapers.

To explain, newspapers like The Denver Post became so obsessed with high circulation levels they neglected everything else. The Denver Post, for instance, offended many readers by paying homeless people to hock its papers on Denver’s streets to boost circulation.

In addition, The Denver Post created no content of interest to anybody outside Colorado. Thus, there was no reason for anybody except Broncos fans and Coloradoans to visit The Denver Post’s website.

Why the New York Times Survives

The New York Times survives and makes a little money because it offers vast amounts of content of interest to people who live far from New York. There is no reason regional or local newspapers like The Denver Post could not do something similar.

The Denver Post could have made itself a national authority on skiing, brewing, trout fishing, the environment, country cooking, or libertarian politics, for example. People all over the world are interested in those subjects, so such a focus could put some eyeballs on The Denver Post’s website.

Notably, The New York Times draws internet traffic because it is an authority on books, publishing, politics, travel, theater, and a host of other subjects. Part of that authority is luck, New York is the center of American theater, American entertainment, global finance, and the publishing industry. In addition, most of what passes for “high culture” in America is New York-based.

How The New York Times builds a National Audience

The New York Times offers a wide variety of interesting features people who have never been to New York might read. Book reviews, interviews, The New York Times Magazine, and investigative reporting to name a few.

Finally, the reputation of being the voice of American liberalism; and the journal of the left, is great advertising for The New York Times. Notably, The New York Times is getting lots of great advertising from President Donald J. Trump (R-New York); a dyed-in-the-wool New Yorker and loyal Times reader, who is constantly attacking the paper in Tweets.  

Every time Trump attacks The Times in a Tweet he tells his 62.4 million Twitter followers to visit the paper’s website. Similarly, The Times gets free publicity any time any other political figure; such as U.S. Senate Minority Leader Mitch McConnell (R-Kentucky), attacks it.

Can Newspapers develop a National Following to Survive?

However, the only other newspaper in a similar position in America is The Washington Post. To explain, The Post has a huge national following because of its reputation as the main news source for national politics.

Okay, most regional newspapers could not replicate The New York Times and The Washington Post’s geographic advantage. However, a few papers can cover subjects of national interest.

The Los Angeles Times could cover entertainment news, The Detroit papers could report on autos, and The Chicago Tribune can cover a variety of financial stories, for instance. In addition, The Houston Chronicle is in a position to cover oil and gas, while The Seattle Times could cover Amazon.

Plus, papers like The Chicago Tribune could compete directly with the Times and the Washington Post in areas like politics. For much of the 20th Century, The Chicago Tribune’s political coverage rivaled The New York Times in popularity. However, today’s Tribune is a pale shadow of that paper in its prime.

How to Kill a Great Newspaper

Unfortunately, it could be too late for many newspapers to develop, or rebuild, a national following. To explain, those papers no longer any content of interest to people outside their traditional circulation areas.

Notably, many newspapers cut reporting staffs, and have not offered meaningful reporting for decades. Once content like sports, or news, coverage and its audience are gone, it is hard to replace.

Thus newspapers can develop a national following with good content but it is hard. Notably, The Washington Post and New York Times built national reputations because they were independent entities and not part of national newspaper chains.

Families; not corporations run by advertising salesmen, owned those papers and ran them right. For instance, the Ochs-Sulzberger family; America’s last great newspaper dynasty, has controlled The New York Times since 1896.

Newspaper companies like Tribune wrecked most of America’s great regional newspapers including The Denver Post, The Chicago Tribune, and The Los Angeles Times. Notably, MediaNews Group’s Dean Singleton operated The Denver Post like a small town daily; and drove most of its readers and advertisers, away before bankrupting the paper.

Is the New York Times a Value Investment?

The New York Times is cheap but I do not consider its stock a value investment. I think Mr. Market overpriced New York Times Company shares at $29.20 on 17 September 2019.

In addition, the 5₵ quarterly dividend, last paid on 9 July 2019, does not justify the NYT share price. Notably, NYT shares offered investors a dividend yield of 0.68%, an annualized payout of 20₵, and a payout ratio of 23.8% on 17 September 2019. In addition reports no recent dividend growth at The Times.

The only reasons to own New York Times Company stock are to own a piece of newspaper history or make a stand for quality journalism or American liberalism. In the final analysis, I think The New York Times will survive and make some people happy, but it will make a lot of money.

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