Time May Be Running Out for the New York Times

October 24, 2008

Henry Blodget’s “New York Times (NYT) Running on Fumes” is an important Web post. You can read the full text here. The New York Times was one of the main revenue drivers for the Nexis news service. Lexis was the legal side of the online service that moved from start up to Mead Paper and eventually to Reed Elsevier, the Frankenstein company with Dutch and English ownership. Along the way, the NYT decided to pull its full text content from the Nexis service. The NYT, like many newsosaurs, assumed that its print reputation would translate to riches for the New York Times Co. What happened was that Nexis never regained its revenue horsepower. The NYT floundered in indexing, online, and its “new media” operations. I find it amusing to reflect on the unexpected consequences, the New York Times’s online decisions triggered. Indeed, some of today’s challenges are outgrowths of management’s inability to think at an appropriate level of abstraction about the impact of online on traditional “dead tree” operations.

Mr. Blodget’s analysis summarizes a quarter century of operations in an increasingly online world. The result is a potential financial crisis for the Gray Lady, as the newspaper is fondly known. For me, the most important comment in Mr. Blodget’s analysis which you will want to read in its entirety was:

The company has only $46 million of cash. It appears to be burning more than it is taking in–and plugging the hole with debt.  Specifically, it is funding operations by rolling over short-term loans–the kind that banks worldwide are canceling…

When I read this passage, I immediately visualized another BearStearns’s meltdown with confused professionals so confident of their future and power wandering around on New York sidewalks with banker boxes. If Mr. Blodget’s analysis is accurate (and I think it is dead on), changes will be coming to the New York Times. I anticipate downsizing, crazy pop ups on the online service, and a smaller news hole. My daily delivery in rural Kentucky is likely to be replaced with a US mail option. Someone will step forward and buy the property, maybe Rupert Murdoch, maybe a billionaire with a yen to control a major US daily?

Do you think the New York Times could have saved itself with a more prescient online strategy? I do. Agree? Disagree? Help me learn.

Stephen Arnold, October 24, 2008


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