Could the New York Times Fold This Summer?

In a seminal piece in this month’s Atlantic Monthly (which is looking rather spiffy after a jazzy rebrand), Michael Hirschorn asks the question the American newspaper industry has been dreading: what would happen if the print edition of the New York Times, possibly the world’s most high profile newspaper, were to die? What if that happened in, say… less than five months time?

A little context: like most American newspaper companies, the New York Times Company, which is owned by the Ochs-Sulzberger family, is getting creamed right now by the worst recession since the Wall Street Crash, declining print circulations, and the slow growth of online advertising revenue at a time when print advertising revenues are falling through the floor. Much of the money from these ad budgets has migrated into the maw of ’search’, which is dominated by Google, and unlikely to come back anytime soon.

Ok, so the climate isn’t great for newspapers right now, but surely a title that has existed for over 150 years should be able to weather the storm? Hirschorn says no, as earnings reports released in October show that the New York Times Company will default on US $400 million of debt in May unless they perform a massive reconstructive surgery on their finances. The company is already carrying US $1 billion of debt, and only had $46 million cash reserves as of October.

“At some point soon – sooner than most of us think – the print edition, and with it The Times as we know it, will no longer exist,” says Hirschorn. “And it will likely have plenty of company. In December, the Fitch Ratings service, which monitors the health of media companies, predicted a widespread newspaper die-off: ‘Fitch believes more newspapers and news – paper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010.’”

(As we reported recently, American mogul Sam Zell’s recent travails with the Tribune company further illustrate this apocalyptic trend in the American newspaper industry.)

Options for the Ochs-Sulzbergers are to sell some of their other assets – such as the Boston Globe and the Boston Redsox baseball team – to raise cash, or they could sell their headquarters, expensively built for $600 million, in a diving property market and buy themselves some time to turn things around. Another option is to sell the company altogether, and hope that a liberal billionaire like Carlos Slim or Michael Bloomberg will take it on as a trophy asset. Failing that, they could sell out to Murdoch (assuming he’s interested), or even a company like Google or Microsoft, who might “strip it for parts, and turn it into a content mill to goose its own page views,” as Hirschorn has it.

In any case, he sees the future of the New York Times as being web-only, and not very far away, with up to 80% of the company’s journalists being laid off and the rest focusing on domestic reporting, while tapping into other journalistic networks to outsource foreign coverage.

Hirschorn’s overall outlook is optimistic though: that the newspaper will get back to the kind of hard reporting it’s good at, and ditch the fluff lifestyle features that previously underwrote the Pulitzers.

“In this scenario, nytimes.com would begin to resemble a bigger, better, and less partisan version of the Huffington Post, which, until someone smarter or more deep-pocketed comes along, is the prototype for the future of journalism: a healthy dose of aggregation, a wide range of contributors, and a growing offering of original reporting.”

Ah, yes – the Huffington Post, who of course raised multiple millions from American venture capitalists last month by pushing themselves as ‘The Internet Newspaper’. However, in the Observer yesterday, grizzled commentator Peter Preston poured scorn on the HuffPost’s projections as new media hype, pointing out that despite a supposed $100 million evaluation, the company only took $302,000 in advertising revenue between January and August last year according to a TNS Media Intelligence analysis published in Advertising Age;

“Maybe $2m would be a better guess… Take a closer look at where the lifeblood news on which they comment comes from. Huffington Post provides a long source list, including an impressive roll call of bloggers, but the basic facts and developments arrive far more conventionally: from 40-plus newspapers and broadcasting station newsrooms catalogued as providers (including the Guardian, Times and Indy over here). Dig a little deeper among individual strands, moreover, and you wonder how on earth either Huff or Beast could get by without the Associated Press and New York Times.”

And therein lies the crux of the problem, a conundrum that will likely come back to bite Internet news aggregators: the HuffPost currently pays it’s contributors nothing but will surely be forced to amend this business model in the face of its massive injection of capital. If that happens, and their online advertising revenues don’t increase markedly in accord, this will cease to be a laughing matter and their investors could even pull out. Meanwhile, unless someone conceives a genius new business model to save print dinosaurs like the New York Times, the prospects for most newspapers in the US, and also Britain, look dire. 

Posted by Jack Roberts in Creative Economy | January 12, 2009 2:55PM |