The New York Times: Out of print in ten years?

It isn’t anything particularly special to hear people talking about the declining market for print newspapers, and how market dynamics and demographic trends have put the traditional newspaper publishing model at risk.

At the same time, most newspaper publications have found it quite challenging to “migrate” their print customers to paid-subscription digital platforms. The plethora of free news sites online makes it difficult to entice people to pay for digital access to the news – even if the quality of the “free” coverage is lower.

New York Times CEO Mark Thompson, appearing on CNBC’s Power Lunch program (February 12, 2018).

But it was quite something to hear a forecast made by Mark Thompson, The New York Times’ CEO.  Earlier this month, Thompson made remarks during CNBC’s Power Lunch broadcast that amounted to a prediction that the NYT’s print edition won’t be around in another ten years.

Thompson went on to explain that his company’s objective is to build the digital product even while print is going away:

“The key thing for us is that we’re pivoting. Our plan is to go on serving our loyal print subscribers as long as we can.  But meanwhile, to build up the digital business so that we can have a successful growing company and a successful news operation long after print is gone.”

It’s one thing for newspapers in various cities across the country to be facing the eventuality of throwing in the towel on their print product. It’s quite another for a newspaper as vaunted as The New York Times to be candidly predicting this result happening.

It would seem that the NYT, along with the Washington Post, The Wall Street Journal and possibly USA Today would be the four papers most able to preserve their print editions because of their business models (USA Today’s hotel distribution program) or simply because of their vaunted reputations as America’s only daily newspapers with anything approaching nationwide distribution.

I guess this is what makes the Thompson remarks so eyebrow-raising. If there isn’t a long-term future for The New York Times when it comes to print, what does that say about the rest of the newspaper industry?  “Hopeless” seems like the watchword.

It will be interesting indeed if, a decade from now, we find no print newspapers being published in this country save for hyper-local news publications – the ones which rely on print subscribers seeing their friends and family in the paper for weddings, funerals, community activities, school sports and other such parochial (or vanity) purposes.

Interesting … but a little depressing, too.

Downsizing hits America’s most prestigious business media properties.

bwsjThis past week, the business media world was buzzing about the inadvertent release of information concerning pending layoffs at Barron’s magazine, thanks to editor-in-chief Ed Finn mistakenly hitting “reply all” on a message intended for just one person.

But the more interesting news is what’s happening right now with two of America’s most important national print publishing properties: Barron’s and The Wall Street Journal.

Up until now, it was thought that a select handful of America’s largest and most pervasive publications with national reach and reputation would be the ones least susceptible to problems befalling the industry regarding declining advertising revenues and changing news consumption habits.

At or near the top of the list of those rarefied properties were these two publications for sure.

But now we know a different reality — or at least a more complicated one. WSJ editor-in-chief Gerard Baker announced last week that the publication is seeking a “substantial number” of employee buyouts to limit the extent of involuntary layoffs that will need to happen otherwise.

The WSJ buyout offer been extended to all news employees worldwide – managerial and non-managerial – and includes a lucrative voluntary severance benefit that’s 1.5 times larger than the company’s standard buyout package.

WSJ employees will need to make up their minds quickly, as the buyout offer is good only until the end of October.

wsjbAs for Barron’s, its situation became public only after the Ed Finn memo was received in the New York City newsroom of The Wall Street Journal in error.  The Finn memo, which had been intended for Dow Jones Media Group publisher Almar Latour, speculates on how The Wall Street Journal’s announcement might affect an upcoming round of layoffs at Barron’s.

That bit was “new news” to pretty much everyone.

Aside from the “drama” of news scoops happening because of unintentional actions, the bigger question is this: What do these layoffs and buyouts portend?  Is it the end of the adjustments – or just the beginning?

Clues to that answer come in Gerard Baker’s memo, where he reveals that The Wall Street Journal has “begun an extensive review of operations as part of a broader transformation program.”

Let’s see what kind of “silver bullet” business strategy they end up devising – and whether it will have its intended effect.

Home Ownership as an Investment Comes Under Fire

Home ownership isn't quite the financial investment many think it is.
Home ownership as a foolproof way to financial well-being? Think again.
Here’s an interesting statistic: Market observers including Deloitte and Oxford Economics estimate that there are ~10.5 million households in the United States that have a net worth of $1 million or more. (The number is calculated including the primary home.)

I for one was a bit surprised by the number, figuring it might be higher.

But here’s another interesting number – and one that explains a lot: There were ~12.7 million such “millionaire households” in America back in 2006.

The difference? Housing property values, of course. They’ve declined by ~15% since 2006 … which makes it little surprise that the number of millionaire households in the country has dropped by a similar percentage.

Over past several years we’ve witnessed millions of homeowners become upside down in their home mortgages. For this reason alone, it would be nice if more people’s net worth wasn’t so tied up in houses.

It’s as if we’re all farmers, the ultimate “land poor” demographic group.

Many people have an aversion to other types of investment, pointing to a stock market that has seen little net upward movement over the past decade. Others simply prefer a solid asset like owning property – or maybe gold.

But if the past few years have taught us anything, it’s that home ownership isn’t always the road to financial well-being.

In fact, real estate specialist and Wall Street Journal editor David Crook wrote an article recently (“Why Your Home Isn’t the Investment You Think It Is“) which spells out a pretty convincing argument that home ownership doesn’t work as the best investment vehicle.

And that’s not just by looking over the past few years … but over the past several decades.

It’s a thought-provoking article that’s well worth a read.

Is Green No Longer Golden?

Green Marketing HypeA funny thing’s happening on the way to nirvana in the environmental world. Consumers are balking.

That’s the conclusion drawn by several articles appearing recently in The Wall Street Journal and Advertising Age.

The Wall Street Journal article, written by Stephanie Simon and published in October 2010, focuses on what motivates consumers to “turn green.” Is it the strength of the environmental message? Appealing to our better nature? A feeling of affinity with nature?

Hardly. It turns out it’s good old fashioned guilt. In particular, if people are aware that their colleagues or neighbors are doing a better job than they are on the green scene, they’re more likely to respond to the peer pressure.

Simon references two recent studies to illustrate the point. In the first, a mid-size hotel attempted to promote towel reuse by placing placards in guest rooms. One placard was headlined “Help Save the Environment,” while another one trumpeted, “Join Your Fellow Guests in Helping to Save the Environment.”

Guests who saw the second placard were 25% more likely to reuse their towels. And in a follow-up to the initial experiment, guests who were informed what percent of past guests in their room had reused towels, the compliance rate went even higher.

In the other study, middle-income residential utility customers in San Marcos, CA were given one of four doorknob hangers that promoted the use of fans instead of air conditioning, each touting a different message:

Hang-tag #1: Save $54 a month on your utility bill!
Hang-tag #2: Prevent the release of 262 pounds of greenhouse gases per month!
Hang-tag #3: Conservation: It’s the socially responsible thing to do!
Hang-tag #4: 77% of your neighbors already use fans instead of air conditioning – it’s your community’s popular choice!

The result? Consumers presented with the fourth hang-tag reduced their energy consumption by an average of ~10% … compared to 3% or less reduction in energy consumption for any of the other hang-tags.

But peer pressure lasts only so long, as the study found that all four groups slipped in their conservation as time went on.

If the Wall Street Journal article poses some interesting perspectives regarding motivational factors, a November 2010 Advertising Age article by Jack Neff claims that a quiet backlash may be growing against green products and green marketing. Neff reports slowing sales in key green categories such as cleaning products and water filtration devices.

Timothy Kenyon, a senior marketing analyst at GfK Roper Consulting and author of the 2010 Green Gauge® study, dubs the slowdown “green fatigue.” But the phenomenon may be more than simply fatigue, because greater numbers of people are exhibiting outright disbelief in claims that up until now have gone essentially unchallenged.

In fact, 61% of the respondents in that Green Gauge® study believe that green products are too expensive, up significantly from the 53% who held this view in 2008. One-third of respondents think that green products “don’t work as well” (the figure was closer to 25% in 2008). Most startlingly, nearly 40% of the respondents feel that “green products aren’t really better for the environment” – again, up from 30% two years earlier.

With this degree of environmental skepticism now charting with American consumers, the Advertising Age article suggests several ways for companies to keep green marketing relevant and worthwhile as a message platform:

Don’t expect any real sacrifice from consumers – whether it’s paying more, accepting lower performance or sacrificing convenience, it’s likely to be a non-starter.

Don’t overstate the case – many people already think green products don’t work as well as their conventional counterparts, and they will punish brands that purport to perform better but fail to live up to the claim.

Promote product benefits that go beyond “green” – green features are really just tie-breakers in the decision to purchase a product, so it’s better to have something else to talk about as well.

The bottom line these days: Green is no longer gold, and consumers have moved well beyond the siren call of “green for green’s sake.”

The novelty has worn off … and the skepticism has set in.

The Big Dig: Scraping and Scooping the Web

Data ScrapersI’ve blogged before about how the Internet is making people’s lives pretty much an open book.

Most people who are online are pretty aware of how their reputation can be affected by their Facebook or MySpace pages and other public or quasi-public online information. But The Wall Street Journal has been publishing a series of stories on how much more pervasive than that digital snooping has become.

The series is titled “What They Know” … and it’s well-worth checking out. The most recent article appeared on the front page of the October 12, 2010 edition of the WSJ, and focuses on the phenomenon of “data scraping.”

For those who aren’t familiar with the term, “scraping” is a method by which sophisticated software is used to access and scoop up information that has been posted anonymously on sites that are supposed to be closed to prying eyes. One example cited in the WSJ article of a site that has been scraped is PatientsLikeMe, which has message boards and forums dealing with mental disorders, depression and other issues that most people would prefer to keep private.

People who post on discussion forums like these do so using pseudonyms, and the identity of the posters is carefully guarded by the host sites.

But it turns out that these sites are little match for the sophisticated IT capabilities of companies like Nielsen and PeekYou, who are in the business of matching psychographics as well as demographics to individual people for purposes of serving up relevant advertising — and goodness knows what else.

Think of it as the “lifestyle” direct mail lists of yesteryear – but now on steroids.

PeekYou has applied for a patent on a system whereby it matches real people to the pseudonyms used on forums, blogs, Twitter and other social media outlets. Taking a “peek” at the company’s patent application reveals the great lengths their systems go to ferret out and cross-analyze small, innocuous bits of information that, taken together, find the “needle in a haystack” match to the actual individual:

 Birthday match
 Age match
 First name match
 Nickname match
 Middle name match
 Middle initial match
 Gender match
 e-Mail address match
 Phone number match
 Physical address match
 Username match

When you consider that the same type of powerful computers that are used to analyze and process search engine queries are the ones processing millions or billions of information bits and instantaneously testing and slotting them based on relational patterns … it’s not hard to understand how, over time, eerily accurate portraits of individuals can be drawn that not only correctly reflect the “demographics” of the person, but also a host of psychographic and behavioral aspects such as:

 Shopping habits
 Recreational pursuits
 Personal finance profile
 Health information
 Political leanings
 Hobbies and interests
 Spirituality/religiosity
 Sexual preference or sexual proclivities

The WSJ articles detail how web sites are attempting to stay one step ahead of the “scrapers” by employing software that alerts them to suspicious “bot” activity on forums and other password-protected areas. It’s often a losing battle … and is that particularly surprising?

These days, not even the Orthodox monks at Mount Athos are protected, probably!

Newspapers Turn on Each Other

Dinosaurs in Disney's FantasiaLast week, the Associated Press reported that U.S. newspaper advertising revenues declined dramatically in 2009, bringing ad receipts to the lowest level recorded in nearly 25 years.

In fact, newspaper publishers’ total advertising revenues last year came in below $28 billion, down $10 billion from 2008. According to the Newspaper Association of America, annual ad revenues have now fallen by nearly $22 billion – a whopping 44% — since 2006.

And now, amid this toxic environment comes word that The Wall Street Journal has declared an all-out war on The New York Times for local advertising. In mid-April, the Journal — up to now focused almost exclusively on national and international news — is set to introduce a New York-focused section as part of its paper. Outside observers believe this will put as much as ~20% of the New York Times’ retail advertising revenues at risk.

And this isn’t a minor foray on the part of the WSJ, either. It will be spending upwards of $15 million to produce the new 12-page section which will cover local business, real estate, sports and cultural events. The financial outlay includes salaries for ~35 editorial writers – surely one of the few instances of new editor jobs actually becoming available.

The WSJ action couldn’t come at a worse time for the Times, which has experienced sharper ad revenue declines than the industry average. It’s responding by launching a major trade marketing campaign of its own, touting its audience strength with female readers and “high culture” afficionados.

But just how effective this countermove will be is debatable, as recent moves by the paper haven’t exactly telegraphed a continuing commitment to the local news scene. In the last few years alone, the Times has consolidated weekly sections covering specific regions of the New York metro area (Long Island, Westchester, Northern New Jersey), as well as axing its stand-alone “City” and “Metro” sections.

Over the coming months, it’ll be interesting to see how effective the WSJ is with its new local-focused section – whether or not it’ll land a major blow on its rival.

Either way, the vision of two venerable newspapers engaged in a Herculean struggle, fighting over an ever-shrinking advertising pie is isn’t exactly a pretty sight.

It reminds me of the famous scenes in the Disney movie Fantasia of the huge dinosaurs furiously going after one other – even as the world’s changing ecosystem is rendering the entire species extinct.

Mathematicians and the Meltdown

I can’t wait for the release of The Quants, a new book by Wall Street Journal reporter Scott Patterson about the role of so-called “quant funds” in the financial near-meltdown in September 2008, to be published on February 2. The weekend edition of The Wall Street Journal printed excerpts from the book, a powerful indictment of the mathematicians and computer whizzes who “nearly destroyed Wall Street.”

According to Patterson, “quants” was a name given to “traders and financial engineers who used brain-twisting math and super-powered computers to pluck billions in fleeting dollars out of the market.” In a major departure from traditional trading – evaluating individual companies’ management, performance and competitive positions – the quants used mathematical formulae to wager on which stocks will rise or fall.

Because of breakthroughs in the application of mathematics to financial markets – some of them so novel so as to have won their discoverers Nobel Prize awards — quant funds had quickly come to dominate Wall Street, with most of them piling up profits day after day. (To the senior brass at the investment houses, who likely knew little if anything about how these funds operated except that they made a lot of money, a hands-off policy seemed just the thing.)

And just as in so many other fields, technology elevated the “nerds” to the position of “stars” – with commensurately stratospheric compensation.

Unfortunately, in September 2008 the quant funds could not anticipate the effect of the collapse of the housing market bubble. In fact, this development turned the mathematical formulae of the quant funds on their head: What should have declined, rising … and what should be going up, dropping.

Patterson’s book promises to go into the details of just how things spun out of control, as seen through the eyes of key Wall Street managers such as the piano-playing, songwriting Peter Muller, founder of Morgan Stanley’s Process Driven Trading (PDT) quant fund, and Cliff Asness, formerly of Goldman Sachs and leader of the Applied Quantitative Research (AGR) quant fund.

In addition to presenting all the facts and all the drama, I’m hoping that Patterson will offer a few observations on how we can avoid a debacle like this from happening again in the future.

Another key question is whether any of the proposed regulations being debated in Congress will address the practices of quant funds – or is it all too complicated for anyone to figure out?

If that’s so, it’s pretty scary.