Audit Notes: NYT’s Web bonanza, Doctor on paywalls, capital gains taxes

The paper sells its stake in a jobs site for a stunning profit

The New York Times Company has sold its stake in the jobs site for $100 million profit, which ain’t bad, considering it bought it for just $5 million or so in 2005.

That’s a 2000 percent return in seven years—not a bad Internet investment for a newspaper company. Put it this way, it’s more than Apple shares have returned over the same period.

Alas, it’s not a billion dollars. AllThingsD’s Peter Kafka puts the want-ads jackpot in perspective:

The bad news is that even that return won’t plug the hole left by the Times’ vaporized jobs ads.

In 2005, the Times was generating $189 million from help-wanted classifieds. By last year, that business had shrunk to $34 million.

— Ken Doctor has a great post at the Nieman Journalism Lab on the success of paywalls:

Take The Post and Courier of Charleston, S.C., and its spring paywall launch. The 85,000-circulation daily benefited by being a fast follower, learning from early paywall adopters, when it launched on May 1. The big result so far: a run rate that will produce a 10 percent annual circulation revenue increase…

Circulation has turned from a means (getting ad-rich papers to shoppers) to an end unto itself, actually getting readers to pay a significant share of the journalism costs. It’s a simple proposition: You ask the people who really value you and your journalism to pay you more. Surprisingly to some, it looks like many of us are willing to. Why didn’t we think of this earlier, before the carnage of cuts overwhelmed the profession? Call it a brew of misunderstanding the digital transition, of timidity, of Steve Jobs’ iRevolutions…and of desperation.

Doctor estimates that the Post and Courier subscription model is already on pace to bring in about $2 million a year in new revenue. What’s critically important here is how newspapers are finally converting over their print circulation base to digital subscriptions. The Charleston paper is doing that by making the paper part of an all access package that includes Web access, apps, and deals—and raising the price. It’s a backdoor way of getting readers used to paying for digital news.

This next part is somewhat surprising—and heartening (emphasis mine):

Price isn’t a big deal. We’ve learned that trusted news access has been long undervalued, and we’re now testing not pricing floors, but pricing ceilings. How much is too much? How much forces too many readers to stop paying? That’s a good problem to have. Certainly, we’ll see ceilings bumped soon, as publishers further price up, but this year and next, there’s new money to be had.

That sounds a lot better than “that value is about zero.”

— Noah Millman argues in The American Conservative that capital gains are “a theoretically incoherent concept” and writes that investment income is actually a kind of labor income and should be taxed as such:

From a theoretical perspective, in aggregate all returns are returns to human activity - that is to say, to labor of one sort or another. And yet, we tax different kinds of labor differently - we tax wages one way, and we tax returns to labor (sweat equity or the labor involved in allocating capital) differently. Lower. Much lower…

Capital, absent a human being engaged in the labor of allocating it, is inert. All returns are returns to labor.

We should reform the corporate income tax to dramatically lower the rate and wipe out the deductions, bringing it more into line with practice in other countries. And we should raise the tax on dividends and capital gains to the same rate at which we tax other income. Corporations need to pay something to avoid wanton creation of corporations to hide income, but it should be an internationally competitive rate. But they are not people. People are people. And when people earn a return, that is a return to their labor. Because there’s no place else for returns to come from.

I’d doubt Paris Hilton, say, is responsible for whatever alpha she gets from her investments, but I get the point.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,