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CASE 15

The New York Times: Seeking Salvation

within a Declining Industry

TEACHING NOTE

■ SYNOPSIS ■

Newspapers are a declining industry. As sources of information, newspapers are being displaced by online

media sources. As readership falls, so does advertising revenue. Classified advertising has almost disappeared;

display advertising is much reduced. The financial crisis and its aftermath has exacerbated the woes of the

industry. Meanwhile the rise of new online advertising vehicles such as Facebook and Twitter has accelerated

the migration of advertising from print and broadcast media to the internet.

With the arrival of a new CEO—Mark Thompson, the former director-general of the BBC—NYT’s efforts to

build a financially-viable online model were invigorated. Thompson realized that creating a new business

model was not enough. If NYT was to survive and prosper it would need to compete more effectively with the

likes of Google, Yahoo!, BuzzFeed, Huffington Post, and the growing array of online sources of news,

comment, and opinion. In the same way that the Times print version was delivered to the reader’s doorstep,

NYT’s online version needed to find a better way of positioning itself at readers’ digital doorsteps.

■ TEACHING OBJECTIVES ■

The declining sales and threat of obsolescence with (the advent of?) technological change is a problem that is

common to many industries. In the media sector, the advent (or arrival?) of digital technologies and the internet

For the NYT, there are two key issues that need to be addressed:

 How can NYT survive its current financial squeeze as revenues continue to decline?

In investigating these issues, students develop competence in the following areas:

1. Assessing the challenges of industry decline for long-established, industry leaders and understanding

■ POSITION IN THE COURSE ■

I wrote this case to explore the topic “Competitive Advantage in Mature Industries.” However, the case can

also be used as a case in strategic change and strategic innovation. In relation to both of these topics, a key

culture: so what strategy (can be adopted to?) monetize these strengths more effectively?

■ ASSIGNMENT QUESTIONS ■

1. Assess the situation that NYT faces in mid-2015.

2. What are the main strategy options available to NYT? What business models are there for NYT’s

online business and what are their relative merits?

■ READING ■

R. M. Grant, Contemporary Strategy Analysis (9th edn.), Wiley, 2016, Chapter 10, “Competitive Advantage in

Mature Industries,” especially the sections on “Innovation” (pp. 277-280), “Strategy Implementation in Mature

■ CASE DISCUSSION AND ANALYSIS ■

The Situation that NYT Faces in Mid-2015

NYT’s problems can be separated into the short-term financial problems and the long-term strategic position.

Short-term financial problems

I start off by asking how serious is NYT’s financial situation? With the limited financial data available (Tables

1, 4 and 5), a detailed financial analysis is not possible. However, several features of NYT’s financial

performance stand out:

 The net loss of $14.4m in the first quarter of 2015 was mainly due to “pension and termination

charges”—presumably non-recurring items.

 Despite declining revenues (down by about 50% between 2007 and 2014), NYT has been effective in

cutting operating costs. NYT’s vigorous shrinking of its business activities is evident in the big fall in

Overall it looks as though NYT is managing its decline effectively and the threat of bankruptcy (that several

analysts and observers predicted) has receded. Moreover, there is likely to be no shortage of willing investors—

although the Ochs/Sulzberger family is unwilling to accept any investment that will weaken their control. The

NYT’s improved financial situation of late is reflected in the recovery of its share price between 2012 and 2015

(see Figure 1).

Long-term strategic position

Looking longer term, NYT is trapped in a situation of industry decline as a result of the shrinking readership of

newspapers. The Times and Globe are both experiencing declining circulation. However, the biggest fall in

revenue is from advertising, which has been moving rapidly from traditional to online media in recent years

With revenues from print media continuing to decline, NYT’s future performance will depend increasingly on

its ability to expand its online revenues. The Times has been one of the world’s most successful newspapers in

establishing a web presence. With 57m monthly visitors, the Times is one of the most popular news sites on the

The Inputs to Strategy Formulation: The External and Internal Environments

As a background to identifying and assessing alternative strategies, it is useful to explore a little more deeply

the core drivers of strategy: first, the characteristics of the external environment and, second, NYT’s portfolio

of resources and capabilities.

1. External environment. We have observed that the traditional newspaper industry is in decline while the

growing online readership generates much lower revenues. Thus the problem is not lack of customer

demand: the demand for news and analysis and commentary on current events is growing. The problem

is the structure of the industry: too many information producers and low entry barriers, together with

2. Internal resources and capabilities. Supporting its differentiation strategy are some powerful resources

and capabilities:

 Brand reputation. The Times’ reputation for accurate news, investigative journalism and

penetrating analysis is reinforced by its many journalistic awards.

Strategy Options for NYT

1. Adjusting to decline. The least risky strategy is for the NYT to accept declining print readership and

the consequent reduction in revenues from both newspaper sales and advertising, but simultaneously to

sustain profitability by cutting costs. Indeed, so far the company seems to have been fairly successful

in pursuing this strategy (judging from the financial data). However, looking ahead it is difficult to see

2. Choosing an online revenue model. Long before the arrival of Mark Thompson as CEO, Chairman

Sulzberger emphasized NYT’s strategy as transitioning from “publishing our content on the web to

becoming full web publishers.” Although Sulzberger indicated that value for customers would be

created through “interactivity, community, and multimedia”, the challenge for NYT has been to

appropriate that value in revenue to the company. Since 1998, NYT has experimented with different

revenue models:

 free access with revenues derived from advertising

However, it seems likely that annual online subscriptions will? monetize only part of the user base that

is willing to pay for NYT content. Apps for mobile devices have the potential to generate both user

revenues (paid downloads) and additional sources of advertising revenue. Such apps can be focused

3. Going all-digital. The proposal made by several observers (see p. 605) to abandon NYT’s hybrid

model and to close down the print operation appears risky. The loss of revenue in the short term would

4. Enhancing NYT’s online offerings. The NYT’s Innovation Report pointed to numerous opportunities

for NYT to compete more effectively in the market for online news and information. Some of these

5. New business development. Are there ways in which NYT can exploit its news gathering and news

analysis capabilities in additional markets? One possibility might be deploying these journalistic

6. A different financing model. Given NYT’s prestige and mission, does it need to be financially viable

as a for-profit enterprise? One possibility is to sell to a wealthy individual who is willing to provide on–

Assessing the different options requires consideration of the company’s overall identity and mission.

Sulzberger has outlined NYT’s ongoing mission as (aiming to be) “the leader in its field of quality journalism”

which would be based upon “a quality audience strategy” (p. 602). But what does “quality journalism” entail

and what does delivering “quality journalism” to a “quality audience” imply in terms of NYT’s product

offerings and how they are delivered?

The challenge for students is to do a better job of defining NYT’s “value proposition” more clearly in terms of

■ KEY TAKE-AWAYS FROM THE CASE DISCUSSION ■

1. Strategy analysis in a declining industry. Adaptation to decline through cost cutting and asset sales is

effective not only in fending off bankruptcy in a declining industry, but it can also fund investment

into new technology.

2. Adapting to disruptive technology. Compared to “born online” news sites such as Huffington Post, the

3. Initiating strategic innovation. It is not enough for an established player like NYT simply to imitate the