The New York Times is cutting 100 jobs from its newsroom, and you’d get the impression from the reaction that it’s about to turn out the lights.
The headline news is not as bad as it seems. For one, the Times had actually added 80 journalists in 2014. The upcoming cuts will put the newsroom down 20 people from the first of the year. That’s a decline of 1.6 percent.
That the NYT is reversing its hiring spree so quickly shows that it seriously overestimated its growth prospects early in the year, banking on a boom in new revenue from its expanded paywall offerings that wasn’t to be. No one succeeds at everything, and it’s good that the NYT launched these experiments, particularly NYT Now. Even if the direct revenue prospects were always hard to imagine, NYT Now makes the paper’s full subscription more valuable and it’s teaching the organization a lot about mobile.
But you have to wonder just what company brass Mark Thompson and Arthur Sulzberger thought the potential market was for NYT Opinion, an app that brings you the likes of Frank Bruni and Maureen Dowd, without all that extraneous news stuff, for $6.50 a month.
Brought you, I should say. The Times is killing its NYT Opinion app after just a few months in operation because “it hasn’t attracted the kind of new audience it would need to be truly scalable,” Sulzberger and Thompson write in a letter to employees that was disclosed in a securities filing.
Here’s hoping the Times has learned its lesson after two opinion-paywall failures. The company dealt a nearly fatal blow to the digital-subscriptions movement in 2005 with TimesSelect, which got things exactly backward, corralling opinion writers behind a paywall while letting the news and analysis run free. That failure set back paywalls by at least half a decade, scaring off other papers and emboldening critics ideologically opposed to paying for stuff online. Recall Jeff Jarvis‘s typically prescient announcement in 2007 that “TimesSelect is dead. It was a cynical act doomed from the start. With it goes any hope of charging for content online. Content is now and forever free.”
By the time the NYT got it right, in 2011, and infrastructure like Press+ was in place to enable rapid, industry-wide adoption, most other newspapers were shells of their former selves, having gutted their newsrooms. That has made it more difficult for them to justify charging online.
The Times, by contrast, never took the chainsaw to its newsroom. It’s a real credit to Sulzberger. If the paper had been owned by Tribune Company, say, it would surely look more like the Los Angeles Times, its one-time rival whose newsroom has been cut nearly in half.
In fact, the Times reports that the 2014 hires brought its newsroom to a near-record 1,330. It will drop to around 1,230 after the current round of buyouts and/or layoffs.
NYT Company stock jumped 10 percent on the news, leading lots of people to bemoan Wall Street’s penchant for rewarding of layoffs. And certainly, investors were applauding the company’s cost cutting and re-emphasized focus on profits. There’s more to the stock surge than that, though: There were also some positive signs from the business.
Most important, digital advertising, which has been horrible since the beginning of 2012, jumped 16 percent in the third quarter. That’s a huge number for a paper that until earlier this year had seen two years of declines in digital ad revenue, and even last quarter were up a mere 3 percent.
And, as suspected, the slowdown in digital subscription gains that triggered a big selloff in NYT shares since April proved to be overhyped. The Times says it added about 40,000 new digital subscribers in the third quarter, with most of them paying full price. That’s the biggest gain in seven quarters, and a 20 percent jump from a year ago. The circulation boost will get the Times to zero this quarter on revenues, where it had predicted a decline.
On the ad front, the Times has been pushing into native ads and video ads—two major growth areas for publishers, and those bets appear to be paying off. That 16 percent jump means it added about $5.2 million in digital ads in the quarter. It also added roughly $1.5 million in digital subscriptions (which translates to about $6 million in annual revenue. Was this surge in digital ads a blip or is it the start of something bigger?
Another critical question is this: How much is the NYT spending to generate this new revenue? Video is expensive to produce, as is native advertising. You wouldn’t expect the Times‘s revenue from those to exceed costs just yet—they’re both pretty new. But the company has ramped up operating costs significantly this year and it expects its operating profit to be down.
With the layoffs, is the Times moving resources out of text-based journalism and into video? If so, that’s something to watch.
Finally, it’s worth remembering that it was just a year and a week ago that Sulzberger and Thompson reinstated the NYT’s dividend payout to investors after a four-year hiatus, a move that was too much, too soon. The dividend costs the company $24 million a year, money that could be invested in new businesses, expanding existing ones, or simply maintaining them. It’s true that Sulzberger has heirs to feed, never a small consideration in a family dynasty two decades into its fourth generation. The current round of layoffs will save the Times roughly $15 million a year in labor costs.
Put it this way: Those 100 Times journalists have to go so the Sulzberger family can stay. While that’s much better than being sold to some private-equity outfit, it’s still an unfortunate bit of short-term strategy.
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 rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.