Streamlined N.Y. Times Gives Heir Apparent Less Room for Error

  • Times shares are down 14 percent while News Corp. stock rises
  • Two newspaper owners take different strategies for survival

Arthur Gregg Sulzberger.

Photographer: Todd Heisler/The New York Times via Redux

New York Times Co.’s heir apparent is inheriting a newspaper company that’s struggling to transform itself. His cross-town rival is getting more support from Wall Street as it faces the same challenges.

Times Co. shares are down 14 percent this year -- while the Wall Street Journal owner’s stock has risen slightly -- as investors question whether the Times’ new global strategy can offset the exodus of advertisers. Last quarter, the loss of print advertising accelerated, while digital ad revenue slumped for the second period in a row.

The Journal has had its own struggles, but its parent News Corp. has other divisions to rely on. The Times sold off its other units in recent years, putting all its eggs in one basket: journalism.

Arthur Gregg Sulzberger, 36, whose promotion to deputy publisher on Wednesday positions him to become the Times’ next publisher and chairman, will eventually take over a company that looks very different from the one that his father, Arthur Sulzberger Jr., has led for two decades. Gone are the website, other newspapers like the Boston Globe and an investment in the Discovery Times cable channel.

“The New York Times sold everything that’s not nailed down to pay down their debt, so they have as long a runway as possible to deliver a digital business,” said Paul Sweeney, an analyst at Bloomberg Intelligence. “While the company has clearly established a vibrant digital business, the jury is still out on whether that can offset the declining print business.”

The Times’ strategy stands in contrast to the one employed by Rupert Murdoch’s News Corp., which owns the Wall Street Journal, but is diversifying to be less exposed to the newspaper industry’s struggles. The company, spun off from 21st Century Fox Inc. in 2013, has found growth in its digital real estate unit, where sales rose 21 percent last quarter. It also owns book publisher Harper Collins, newspapers in the U.K. and a pay-TV company in Australia. It recently got into the British radio business as well.

News Corp. shares were up 2.2 percent this year through Wednesday even though the flagship newspaper has struggled like the Times. The more diverse revenue base has made shareholders more forgiving. Of four analysts who cover Times Co., none recommends buying the stock, according to data compiled by Bloomberg. Six out of 12 advise buying News Corp. shares.

“Because they are investing in non-newspaper businesses, and specifically in digital businesses, there’s more diversity,” said Alexia Quadrani, a media analyst at JPMorgan Chase & Co. who has a “hold” rating on the stock. “It gives investors hope.”

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. in providing financial news and services.

Cutting Costs

Both newspapers are taking measures to cut costs and reshape themselves to contend with the industry’s threats. In May, the Times offered buyouts to newsroom staffers and employees in its business departments, without ruling out the possibility of firings. News Corp.’s Dow Jones division told the union at the Wall Street Journal it’s preparing to restructure and may eliminate some jobs, the newspaper reported this week. In a memo Wednesday, William Lewis, chief executive officer of Dow Jones, said he was starting a review of the Journal’s operations.

“These are challenging times,” Lewis said. “I thank you in advance for your patience and understanding as we set about the difficult task of continuing to build our digital future while responding to the decline in traditional advertising.”

The rest of the newspaper industry isn’t doing much better. Publishers are merging and slashing costs to buy time while figuring out how to make more money online. A fortunate few newspapers have been bought by billionaires -- like the Washington Post’s Jeff Bezos -- who are willing to give the newsroom time and resources to try new things. As readers get more of their news online, newspaper advertising is expected to shrink to $5 billion by 2019 from a peak of $49 billion in 2005, according to the ad agency Magna Global.

The Times has outlined its own strategy for adapting to the shifting landscape. It plans to rely more on readers paying for its journalism and double its digital revenue in the next four years. A big part of that effort will involve spending $50 million to expand its audience around the world. Last week, for instance, the Times unveiled a new, redesigned international edition, in print and online, to attract paid readers outside the U.S.

‘Amazing Success’

Quadrani said the Times has had “amazing success” with its online subscription business, which has more than 1.4 million customers. The Wall Street Journal recently topped 1 million digital-only subscribers. The Times and Journal “are the only two newspapers in this country that have created viable and vibrant digital platforms,” Sweeney said.

Few understand the Times’ challenges better than the younger Sulzberger, who has been responsible for leading a team focused on the newsroom’s digital transformation. He led the task force that two years ago wrote its “Innovation Report,” which detailed how the newspaper needed to adapt to new competition from digital media companies such as BuzzFeed and the Huffington Post. A new report on how the Times will prepare for the future is now under way.

“He has a strong technological background,” Sweeney said of Sulzberger. “It’s a new generation of family ownership that understands the opportunity of the digital world.”

The Times, like Murdoch’s News Corp. and many other media companies, has two classes of voting shares that insulate the controlling family from Wall Street pressure. Thanks to its 11 percent stake in the company, the Sulzberger family, including a trust, receives about $2.8 million a year in dividends, based on company filings. The Times suspended the dividend in 2009 as it coped with the increasing damage the internet was inflicting on print advertising. A 4-cent a share quarterly payout was restored in late 2013.

“Many newspaper families have sold out because they recognized the newspaper business can no longer support dividends and equity value,” Sweeney said. “But the Sulzberger family really believes that the New York Times plays a role in society and has global value.”

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