The jugular vein of the New York Times Company is local advertising in the New York editions, and the company just acquired a price-slashing competitor that is likely to cost it dearly. In early 2006, Jack Risko and I explained why local ads in the New York market are so important to the Times' revenues, and why they are highly vulnerable to competition from Rupert Murdoch of News Corp. In mid 2007, I predicted that with the Wall Street Journal under News Corp control, upscale New York readers were going to be targeted for circulation, and that eventually the WSJ was going after the Times' biggest local advertisers, and was likely to cut prices.
Yesterday came the announcement I have been waiting for. Jennifer Saba of Reuters writes:
The Wall Street Journal is offering some businesses firesale prices for full-page ads in its highly anticipated New York edition to seduce advertisers away from The New York Times.
Wall Street Journal Managing Editor Robert Thomson and other executives plan to unveil the edition during a press briefing on Monday morning.
The section will cover local news, culture and sports, and will be incorporated within the Wall Street Journal. It will be circulated in the New York area. [snip]
To entice advertisers onto the pages of the New York edition, the Wall Street Journal is deeply cutting the cost of a full-page ad and, as a bonus, throwing in a full-page ad in the New York Post, also owned by News Corp.
Some local businesses can buy a full-page ad for $19,000, according to a Wall Street Journal presentation to advertisers that was shown to Reuters by a source. That is a steep discount to full-page print ads in large newspapers that can cost up to $90,000.
Keep in mind that even if the Wall Street Journal doesn't win over a large percentage of NYT advertisers, those that stay with the Times will undoubtedly demand steep discounts in order to keep their business at the Times. In years past, the Times has managed to increase advertising rates considerably because it held a perceived monopoly on upscale readers in the New York metropolitan area. If you want to sell luxury goods to New Yorkers, you used to need the New York Times. Now that there is a price-cutting alternative, the Times will have to cut prices to keep advertisers on board.
Last year, Pinch Sulzberger doubled his own compensation to $6 million, which did not improve morale among rank and filers who have had to accept layoffs, cuts, and expense account reductions. With advertising revenues under pressure, will Pinch continue to cash in?