strategy and strategic alliances for the new york times
DESCRIPTION
Discussion of strategy and competitive analysis of the New York Times within the context of Strategic Alliances.TRANSCRIPT
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WuTangRiskManagement(SEB)
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"Thebasisofourgovernmentsbeingtheopinionofthepeople,theveryfirstobjectshouldbetokeepthatright;andwereitle>tometodecidewhetherweshouldhaveagovernmentwithoutnewspapersornewspaperswithoutagovernment,Ishouldnothesitateamomenttopreferthela@er.ButIshouldmeanthateverymanshouldreceive
thosepapersandbecapableofreadingthem.”
‐‐ThomasJeffersontoEdwardCarrington,1787.ME6:5
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Outline
• ProblemStatement(SEB)
• Compe==veSitua=on(AJP)• NewsCompanyComparisonsByTheNumbers(BHR)• Technology/Innova=on(SEB)• NYTStrategicAlliancesandManagement(BHR)• Conclusion(SEB)
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TheProblem
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Problem
• NYT(andothernewspapers)circula=ondropping• Revenuestreamsdropping
– Adver=sing– Subscribers– Newsstand
• ButNYTiswidelyconsideredtohavegoodcontent• Whygiveitawayforfreeontheweb?• Howtomone=zecontentOTHERthanincreasingcircula=on?
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ByStaciD.Kramer‐Fri13Mar200905:13PMPST
TheNewYorkTimesCompany(NYSE:NYT)isonceagainlookingatseriouswaysbeyondadver=singtomakeitscontentpay—andthis=methenewscomesfromthehighestsource,ChairmanArthurSulzberger,Jr..
SulzbergerraisedthesubjectinacarefullyplannedkeynoteonmedialiteracyatStonyBrookUniversityThursday,explaining:
“Today,inthefaceoftheeconomicdownturn,wehaverenewedouranalysisofhowpaidcontentcanaugmentourcoreadver9singbusiness.Thetrick,ofcourse,istogarnerincrementalrevenuefromtheuserwithoutsignificantlycannibalizingthehighrateadpagesthatnowaccountforaverysignificantamountofmoney.”
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ByStaciD.Kramer‐Fri13Mar200905:13PMPST(con=nued…)
ButSulzbergerraisedotherissuesaswell:
“Mostofourthinkingrevolvesaroundthefactthatwehavealmostuniquelyachievedsubstan9alscalethroughouttheworldandhavebecomepartandparceloftheglobaldiscourse.
Thisachievementhassignificantjournalis9candfinancialramifica9onsandwedonotwanttotakeanystepsthatsignificantlyreducesourpresenceontheWeb.Otherprominentnews‐gatheringsitesmaybelessinterestedinscaleandthatmightgivethemtheflexibilitytopursueanevenmoreaggressivepaidcontentstrategy.
WhatwehavelearnedoverthelastdecadeandhalfisthattheWebhasveryfewgenerallyacceptedrulesforfinancialsuccess,andtheyareinevitablyoverturnedbythenextdigitalcycleandnextbreakthroughalgorithm.”
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NewYorkTimesCompanyPurpose
TheNewYorkTimesCompany,aleadingmediacompanywith2008revenuesof$2.9billion,includesTheNewYorkTimes,theInterna=onalHeraldTribune,TheBostonGlobe,16otherdailynewspapers,WQXR‐FMandmorethan50Websites,includingNYTimes.com,Boston.comandAbout.com.
TheCompany’scorepurposeistoenhancesocietybycrea=ng,collec=nganddistribu=nghigh‐qualitynews,informa=onandentertainment.
Note: No stated Mission or Vision in 10k or NYT Co website
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FromNYTEthicalJournalism
“Reporters,editors,photographersandallmembersofthenewsstaffofTheNewYorkTimesshareacommonandessen9alinterestinprotec9ngtheintegrityofthenewspaper.Asthenews,editorialandbusinessleadershipofthenewspaperdeclaredjointlyin1998:
‘Ourgreateststrengthistheauthorityandreputa9onofTheTimes.Wemustdonothingthatwouldundermineordiluteitandeverythingpossibletoenhanceit.’”
GuidelinesonOurIntegrity,May1999
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Compe==veSitua=on
WuTangRiskManagement(AJP)
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Round1Analysis……
Structure
Func=on
Process
NYTimesiscompe=ngwithWashingtonPost,USAToday,WallStreetJournal…..
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NYTimesiscompe=ngwithWashingtonPost,USAToday,WallStreetJournal…..
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Round2Analysis……
Structure
Func=on
Process
NYTimesiscompe=ngwithWeb,Radio,iPods,Television,periodicals….
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StrategyRela=vetoCompe=tors?
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Compe==vePosi=on
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Round3Analysis……
Structure
Func=on
Process
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"Therailroadsdidnotstopgrowingbecausetheneedforpassengerandfreighttransporta9ondeclined.Thatgrew.
Therailroadsareintroubletodaynotbecausethatneedwasfilledbyothers(cars,trucks,airplanes,andeventelephones)butbecauseitwasnotfilledbytherailroadsthemselves.
Theyletotherstakecustomersawayfromthembecausetheyassumedthemselvestobeintherailroadbusinessrather
thaninthetransporta9onbusiness.Thereasontheydefinedtheirindustryincorrectlywasthattheywererailroadorientedinsteadoftransporta9onoriented;theywere
productorientedinsteadofcustomeroriented.”
‐‐HarvardProfessorTheodoreLeviEMarkeGngMyopia,1960
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NewsCompanyComparisons
WuTangRiskManagement(BHR)
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In thousands 2008 2007 2006 Revenues: $2,948,856 $3,195,077 $3,289,903
Adver=sing $1,672,159 $1,950,021 $2,077,542
Profitability ($57,839) $208,704 ($543,443)
Circula=on 1,248227 1,321,426 1,384,204
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In thousands 2008 2007 2006 Revenues: $4,461,580 $4,180,406 $3,904,927
Adver=sing $1,083,084 $1,234,643 $1,358,739
Profitability $65,776 $287,655 $323,478 Circula=on 639,724 657,918 681,510
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NewspaperandInfoServices
In thousands 2008 2007 2006
Revenues $6,248,000 $4,486,000 $4,095,000
Opera=ngIncome $767,000 $653,000 $517,000
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In thousands 2008 2007 2006
Revenues $6,767,650 $7,439,460 $7,847,613
Profitability ($544,310) ($202,019) ($222,509)
Circula=on
USATODAYonly 2,255,295 2,300,400 x
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Consumers?Organiza=ons?
Internet
Television
Radio
Periodicals
Subscrip=on
Adver=sing
Technology
“Today,inthefaceoftheeconomicdownturn,wehaverenewedouranalysisofhowpaidcontentcanaugmentourcoreadver9singbusiness.Thetrick,ofcourse,istogarnerincrementalrevenuefromtheuserwithoutsignificantlycannibalizingthehighrateadpagesthatnowaccountforaverysignificantamountofmoney.”
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FromPrinttoPixels:Technology
WuTangRiskManagement(SEB)
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WonderhowNYTmightreduceCOGS?
Source:NYTCo10‐Kand17Mar09interviewwithNickBilton,NewYorkTimes
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MoreonNYTCOGSdistribu=oncosts….
COGS EsGmates
Prin=ng/Distribu=on $644M
NewsroomSalaries $161M
NYTSubscribers 830,000
Kindle2RetailPrice $359
PrinJngtheNewYorkTimescostsovertwiceasmuchassendingeverysubscriberafreeKindle2!
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NYTInTechnology
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StrategicAlliancesfortheNYTimes
WuTangRiskManagement(BHR)
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RecommendthattheNYTimes• Pursueanon‐equity,vendorrela=onshipalliance• PreservetheNYTbrandandreputa=on• Fund$200kpertranche,8tranchestotal
– Television(3)– Periodicals(3)– Radio(2)
• Thisincludesrela=onshipmanager,T&E
• Exploit/expandsuccess,shutdownfailuresOurgreateststrengthistheauthorityandreputaJonofTheTimes.Wemustdonothingthatwouldundermineordiluteitandeverythingpossibletoenhanceit.
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NYTAllianceOffice
(constella=onstrategy)
Television
CNN MSNBC DiscoveryHD
Periodicals
Economist Atlan=c NewYorker
Radio
XM/Sirius HDRadio
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ManagingtheNYTAlliances
• EstablishingLicensingObjec=vesforNYTContent• DefiningastrategyforNYTfocus• Managingthemessage:print/broadcast/Internet
• Developingprocessformetricsmanagement
• Acknowledge/Acceptorganiza=onaltradeoffs
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Poten=alVendorAllianceROI(growcontentdistribu=oninallmedia)Television
$$$• CNN• MSNBC• CNBC• DiscoveryHD
Periodicals
$$• Economist• NewYorker• Harpers• VanityFair
Radio
$• Sirius/XMRadio
• HDRadio• ClearChannel
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NYTimesCoGrowthProjec=ons(baseduponnewStrategicAlliances)In thousands 2009 2010 2011
Revenues
(10%increase) $3,336,511 $3,670,162 $4,037,178
COGS(reduceby10%)
$2,178,438 $1,960,594 $1,764,535
GrossProfits $1,158,073 $1,709,568 $2,272,644
Subscribers(allmedia)
15%growth 954,500 1,097,675 1,262,326
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Conclusion:TheNewYorkTimesshould….
• Capitalizetheirpremium“nicetohave”content
• Broadencontentdistribu=onbeyondtradi=onalsubscriberbase
• Getotherindividualsandorganiza=onsto“pay”forNYTcontent,regardlessofmedium
• ReduceCOGSbymovingfromprinttopixels
• Build/enhancebrandthroughstrategicalliances– Television– Broadcast– Periodicals– Radio
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