Whither the New York Times? Whither journalism?

A few days back, Henry Blodget posted a plan to fix the New York Times that drew withering criticism from Felix Salmon.  Blodget's plan to fix the New York Times:

Our Plan To Fix The New York Times

  1. Cut costs 40% by 2010.
  2. Continue to raise print subscription prices
  3. Explore charging an online subscription fee

In other words, fire a bunch of people, especially editors, charge more for the product, and wall off your front page.


Felix says this is daft:

Got that? If you don't have the "click data", fear for your job! If you snark about the president, or how to analyze your husband "the way a trainer considers an exotic animal", then you're probably fine. If you're an investigative reporter who spends months at a time uncovering secrets, not so much. And if you're a war correspondent putting your life on the line to cover important conflicts around the world, well, remember to include lots of pictures of kittens to boost that all-important click data.

"Yes," says Blodget, "some sections that some readers love might disappear". But those kind of fluffy, feature-driven sections -- the ones that might be cut -- aren't expensive: by contrast, they're profitable. That's why they exist: they subsidize the important news hole, which is less attractive to advertisers.

Next, Blodget decrees that "management needs to make certain that printing and distributing papers is a highly profitable business". Never mind that printing and distributing papers has never been a highly profitable business for any newspaper: Blodget seems to think that the selling-news-to-readers business model, which has never worked in the past, can somehow manage to supplant the selling-readers-to-advertisers business model on which newspapers have always historically been based.

Perhaps I'm biased, since I got my start in journalism at The Economist, which calls itself a newspaper, and never sells a subscription at a loss.  And my current company owns properties like the National Journal, which certainly make a profit selling subscriptions--and how.

The fact is that lots of magazines and newspapers tried that "boost your circ figs by any means necessary" on the print side--and lost a ton of money.  USA Today got an impressive circulation boost from distributing its papers practically free to half the budget hotels in the country.  But advertisers are not interested in people who carry the paper around under their arm for a while before chucking it.  They're interested in actual readers.  Preferably readers in a demographic they'd like to sell into.

On the web, of course, you're only paying for actual readers--but the demographic problem not only persists; in some ways it's magnified. In theory, the web allows heretofore undreamt of targeting ability.  In practice, privacy concerns and fear of regulation have held it back. The New York Times used to know at least two things about its readers:  they lived in New York, and they could afford a daily paper.  That made things like local retail advertising a big profit center for them.  But no one wants to pay to tell a brand new reader in Bangkok to come on down to 48th and 9th for a terrific deal on cameras.

Quantity, in other words, is not the only thing papers need to make a profit; they also need quality.  As Blodget points out:

  • NYTimes.com currently has a vast glut of inventory, so much so that it is selling ads at a reported $5 CPM.  This excess inventory devalues the per-unit prices the company can command. 
  • Much of this inventory would remain if the company maintained search engine and third-party link access to the site.
  • The unit rates on remaining NYTimes.com ad inventory would rise as the inventory became less scarce
  • NYTimes.com would be able to charge more for ads served against known, paying subscribers (the company would have some demographic info).

The glut of web advertising inventory is the central problem.  Most business stories about the media lament the fact that advertisers won't pay for web as much as they would for print, but of course the very costs that Felix is talking about made print advertising a (relatively) scarce commodity.

That said, I'm not quite as sanguine as Mr. Blodget that the web can be made to pay just by putting things behind a subscription wall.  The Wall Street Journal is different from the New York Times in two important ways.  First, there's less competition in business journalism than general political news, in part because journalists would rather cover the government than boring old companies.  And second, many--maybe most--of the people who pay for the Wall Street Journal have to read it for work.  They are thus fairly price inelastic.

And Felix is right on when he points out that for a long, long time, articles on swinging into spring with patent leather have been subsidizing coverage of less-popular-yet-more-vital topics like foreign policy and the Department of Agriculture.  The web is rapidly disaggregating the readers, and hence the subsidy.  And that's a big problem for society.  One for which so far, no one has proposed any very satisfactory solution.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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