July 18, 2006
Downsizing the New York TimesBy Thomas Lifson
A profitable company is to shutter a factory it built in 1992 as part of a much—hailed visionary strategy to take advantage of technology. But now it is just a cost to be cut. Eight hundred jobs, many of them well—paying blue collar positions (supposedly an endangered species) will disappear, while managerial and professional jobs are being protected.
Normally, this would be a juicy target for series of articles on the front and business pages of the New York Times. You know the drill: a parade of blue collar people victimized by the Bush administration, and now facing a bleak future. Meanwhile the insiders make out fine. There's even a fat cat CEO whose compensation package has done a whole lot better than its profits or stock. If Howell Raines still were editor, he'd get at least 40 stories out of it.
But today, the company in question is the New York Times Company. So don't expect the same rules to apply.
Nothing personal — it's just business.
The underlying story
The print edition of the New York Times in its local metropolitan market is in serious decline. Management won't openly admit it in so many words, but circulation is declining and its advertising sales force is facing more competition from new media, while traditional advertisers like department stores decline. The future is bleak, so it is time to get their money out of a loser.
Jacks Risko and I noted 5 months ago that
The metropolitan physical print edition of the New York Times is still the most profitable part of its business, but it is now officially what consultants call a cash—cow. The company is pulling cash out of the business, cutting expenses, and raising prices. Margins and profits can be good for awhile as cash is pulled out, but a rapidly diminishing resource is being exploited.
The funds taken out of the physical metro New York Times are being deployed elsewhere. Management is searching for more profitable means of delivering its news content electronically, and diversifying with substantial investments in existing internet websites. It is an is an open question whether or not profits from the new businesses will prove lush enough to replace the inevitable decline of the profits from the old local paper.
The ignominious end of Pinch's grand strategy
Family shareholders control the New York Times Company through a dual class shareholding system. When Arthur Ochs ('Pinch') Sulzberger became assistant publisher of the family business in 1987, and then deputy publisher in 1988, he led the investing of hundreds of millions of dollars in modern printing technology. This would mean eventually closing the historic printing presses in Manhattan, where people could pick up the latest news 'hot off the press.' The company would build one plant for the east metro in New Jersey and a second plant in Queens. Pinch's strategy, as he took over more responsibility for the company, anticipated growing circulation and built up the capacity to handle it. But under his leadership, local circulation has plunged.
When it opened in 1992, the new Edison, NJ printing plant featured modern color printing presses able to run color pictures, charts and graphs. More importantly, however, it could print color advertising, which sells for a sizable premium over black & white.
But the Times editorial side was not able to go with color until the company built a second modern printing plant in Queens, on the other side of Manhattan. When that plant came on—stream, the Times silenced its old Manhattan presses, and the physical newspaper was able to enter the wonderful world of color in 1996, only a decade ago.
It was a bold bet on the future of the print medium, just as the internet was getting going. That bet is now being liquidated.
The new print edition
The physical Times that New Yorkers hold in their hands will get a new look. The Times is taking an inch and a half off its width, cutting page size by 11%. The company will add more pages of advertising and news, so the actual decline in space for news will be 5%. That is still 'retrenchment' as editor Bill Keller admitted.
More importantly, advertisers who buy display ads for a full page or a fraction thereof will get 11% less space. The Times may cut prices for full page ads, but they will try to cut them much less than 11% for as long as possible. And they will have more of them to sell, too. This is a classic way to maximize revenues while milking a business. Market share will decline, but so what? It is declining anyway. Take the money and run.
The unkindest cut of all
The Times is well known for its elitism and its unconscious condescension toward those occupying less lofty stations in life. Editor Bill Keller let slip a telling remark in remarks reported* by the AP:
The blue collar denizens of Jersey never quite made it being considered staff, after all. Not in the eyes of Bill Keller his colleagues in Manhattan. Not even close.
Ed Lasky helped with the research for this article.
*[editor's note: the Houston Cronicle has pulled the posting of the page containing this quotation, which was based on an AP report. ]
Thomas Lifson is editor and publisher of the American Thinker.