The New York Times was an early convert and success story to the idea that revenue needs to come from subscriptions instead of advertising. Because of that, the company is in a rare position to handle the global pandemic, yet — like other media companies worldwide — it is still figuring out issues like remote working, advertiser category comebacks, new products, and new audiences.
And these are not short-term challenges and opportunities. The media industry will be feeling the effects of the pandemic for the next few years, CEO Mark Thompson predicted.
In early January, Thompson sat down with INMA members for an exclusive live interview that mapped out his company’s vision for subscriptions, digital transformation, culture, platforms, and advertising in a prolonged economic growth period.
The world has transformed since that update. So on Wednesday, Thompson talked with INMA’s Mark Challinor for a second interview, sharing focusing on The New York Times’ response to the coronavirus with INMA members.
Opening the interview, Challinor repeated a comment Thompson had made in January: “I think that we are often all guilty of assuming we know the future.”
“Here we are three months later,” Challinor said, “and those words are proving true.”
“That Webinar seems a lifetime ago,” Thompson responded.
How has The Times been affected by the COVID-19 pandemic, and what does the landscape there look like now?
At the beginning of March, in the early days of the pandemic reaching the United States, Thompson was in San Francisco for an investor conference. At that time, his update to investors changed the guidance: “What I said to investors was that we believe we were better placed, because of our particular situation and our strategy, to cope with this major crisis than many news organisations,” he reported.
With advertising bringing in less than 25% of total revenue for The Times, the loss of ad revenue would not affect the company in a debilitating way, as the large majority of revenue comes from subscriptions.
“We knew, even then, that the public interest in the coronavirus meant that we were going to get a very big audiences,” Thompson said. “It meant that we were very well placed.”
The company’s balance sheet is very strong, he added, which gives it a strong position to deal with short-term issues: “We expected to take a transient hit to advertising. We changed our guidance and said we expected guidance in the first quarter. This expectation was for an approximate 15% drop in ad revenue. The subscription guidance was left exactly where it had been.
“Our story then to investors was, we knew this was going to have a very significant impact on advertising for the entire industry, including us, but that we thought that overall, the company was pretty well placed to thrive in this very, very difficult environment.”
Getting to a new normal
Challinor mentioned that throughout the INMA membership, companies are talking about getting to a “new normal” and what that would look like. “Does that ring true for you as well?” he asked Thompson.
“Very much so,” Thompson said. “We just don’t know. I think we also have to just lean into this and acknowledge as leaders in the industry that we don’t know exactly what’s going to happen.”
Strategic planning in the current situation has evolved into scenario planning, he said. What does a company do if different potential scenarios emerge from the pandemic? One way The Times is scenario planning is using a graph of possible economic scenarios emerging from COVID-19 by McKinsey & Company.
The first scenario The Times is planning for, Thompson said, is that there is a bounce-back towards the end of 2020. Scenario two is bleaker and forecasts that recovery will be slower and won’t happen until 2021.
“We’ve taken these two scenarios — not because we think either of them are going to happen, we just don’t know — but we’ve taken them as two representative points on a spectrum, and we’ve modelled out the business and our likely responses in both these cases.”
In some revenue models, they are leaning more toward the first scenario, while in others they lean toward the second, he added: “This is really so that the company can respond and is ready, whether or not this is something we come out rather quickly — or if there’s a further period that looks pretty much like a coma still.”
Transition to remote working
Challinor asked Thompson what his biggest concerns are at the moment. Employees working from home, which started on March 11, topped the list.
“We’ve found the move to home working to be quite revelatory,” he said. The team had already done extensive working-from-home exercises and drills, from production and printing on up, for disaster planning. “Now we’re seeing how that’s working a month-plus in. Sometimes people are in quite cramped accommodations, they can get actually quite isolated.”
Others have small children at home while they’re trying to work. “There’s a whole set of human issues around, what happens if this is another month or longer? How do you cope with that?”
Operationally, however, Thompson said the transition has been fairly smooth. “We’re still a probably 85-90% of productivity and capability. I think our coverage of the coronavirus has been very, very strong, and we’ve seen an amazing audience response.”
The Times is not just focusing on COVID-19 coverage, however. For example, the news publisher rolled out a new section called “At Home,” which is a daily guide with suggestions and issues for living life at home in these times.
“We’re trying to make sure that we’re still keeping a rounded offering to the public,” Thompson said. “So we’re approaching a new steady state. It’s not a particularly comfortable state for any of us, but that seems to be going quite well.”
Challinor asked how the transition to working from home was going, especially with team members from different disciplines. “How are they adapting, and have you had to repurpose any staff?”
“We’ve now got three streams of live corona coverage running simultaneously,” Thompson said. “Some of these streams have been running now for two months. It is an incredibly time-consuming activity.”
The Times’ strategy and model for growing its digital business depends on incredibly close interdisciplinary working, Thompson said. One of the challenges has been trying to figure out how to get that kind of teamwork to work effectively in this new environment, where people are physically distant from each other but still have to work closely together.
“We have to get the heart side of that right, as well as the head side.”
Staffing for growth
Many news publishers, including major ones, have been laying off staff or instituting pay cuts. Challinor asked if the Times was exempt from that.
“Yes, we are at the moment,” Thompson answered. “Newspaper groups which are heavily dependent on advertising, and magazine groups as well, have got a very hard road through this. The [advertising] clients just aren’t there at the moment.”
The Times is in a different category, with 75% of its revenue coming directly from subscribers rather than advertising. “Our plan is to lean into our strategy,” Thompson said. “We haven’t yet laid off any staff or furloughed any staff. We’re continuing to hire for our newsroom and digital product and engineering and data science. So we’re continuing to execute our strategy, which is a growth strategy.”
This growth strategy is based around two things:
- Improving the user experience, the quality and breadth of journalism and how it engages people with Times’ digital products.
- Growing the digital subscription business.
“Engagement and growth are the two key headings of what we’re doing, and at the moment we continue to hire into that,” Thompson said.
The coronavirus story, as a whole, is possibly the biggest story he has been involved with in his 40-year career in journalism, Thompson added. It has intense public interest, and it’s multi-dimensional.
“It’s a geo-political story, it’s a health story, it’s a science story. It’s a domestic political story in most countries. It’s a social and cultural story, and so on. The task of helping the public make sense of this story is one of the most important things that any news organisation has ever done.”
The New York Times does not put any coronavirus-related news coverage behind the paywall: “Our public mission is more important to us than anything,” Thompson said.
Pivoting back to the topic of the significant drop in advertising, Challinor asked Thompson if The Times had any particular strategy around its ad model: “Do you think there will be a pent-up demand from advertisers when this is all through?” Challinor asked.
When it comes to planning the advertising strategy, Thompson said, there are different trajectories and categories The Times addresses. Tech, advocacy, and financial services are all big categories for the company, which could perhaps spring back quite quickly. Other categories such as tourism and live entertainment might rebound more slowly.
“I think the truth is probably there are some completely unknowable things,” Thompson said. Some of these are when social distancing will ease off, when retail beyond essential services re-open, and when travel will resume. “Different industries are going to have different paths out of this.”
Even for industries doing well now with increased demand, such as streaming television and movies, there is a big problem with producing new films and series, Thompson said: “You can’t really make movies right now, so their supply chain of new intellectual property to put in front of subscribers has just stalled completely. That may be a problem for them down the road.”
The importance of journalism
When it comes to the question of paywalls, subscriptions, and charging for news, Thompson said that of course it’s a money-making endeavour. Content from The New York Times was never given away for free, and a digital edition costs money to produce, just as a print edition does. However, there is still the inherent mission of journalism to consider.
“I think of newspapers as public services with a public mission,” Thompson said. “In times of great need, your immediate responsibility is to make sure people have access to the news. Giving new readers a chance to sample and understand the value of what you do in a time of great need, in many ways in terms of marketing, is pure gold. It’s 24-karat gold.
“When you really help someone, when they really want to know what’s going on, you were there for them. I think people remember that. I think these are defining moments for news organisations.”
One important change The Times made in 2019 was upping its capability in terms of real-time news coverage. Of course, this presents a tactical challenge in the current crisis, but strategically it is an important moment to rise to the occasion.
“If you do rise to the occasion successfully, potentially new loyal readers have something to build on for the future,” Thompson said. “We’re trying very hard to think about the opportunities that this terrible episode is offering news media organisations, as well as the obvious challenges and problems.”
New product offerings
The coronavirus pandemic and resulting social distancing is likely to push forward other products such as podcasting and e-commerce.
Podcasts are an interesting product because they were already doing quite well before COVID-19, Thompson said. In some cases, listening might actually be down because most people are not commuting to work. However, the warmth and intimacy of the podcast experience is unique.
“Our instinct is that one of the likely effects of the coronavirus is that it’s likely to accelerate pre-existing trends,” Thompson said. “For example, the shift from print advertising to digital advertising. We think podcasting gets bigger. We think digital usage, the way people use devices, probably gets a shunt forward.”
It’s incumbent on media organisations to think about acceleration, he added: “It’s difficult to do that because you always want to batten down the hatches and stop your change programmes just to get through this. Actually I think the wiser course is to regard this as an accelerant change.”
Predicting the future
“When you’re looking a year from now, when the dust has settled, what do you think in terms of how our revenue mixes may have changed?” Challinor asked.
Thompson mentioned a further shift from advertising to subscriptions and a shift from synchronous, schedule-based TV and radio consumption to on-demand. The large tech platforms, he believes, will be stronger than ever.
“I don’t think that we’ll be through this in a year,” he said. “I think we’ll feel the effects of this thing probably for two or three years. But there will be bright spots and there will be industries that recover well. I think it will be a complicated landscape.”
It will also be a landscape for opportunities, and Thompson said the real challenge for a company is being agile enough to navigate that.
“To me, if you want to succeed in media right now, you have to accept this is a capital-intensive kind of period for investment and change, and experimentation and growth. The question is, are you going to grow anything, or are you simply managing decline?”
Advice for news media companies
Challinor closed the Webinar interview by asking Thompson what advice he would have for other news publishers, small or large, when navigating this new territory.
“Consider different scenarios and plan for them,” Thompson said. Those scenarios may or may not prove to be correct, but that is how The Times is approaching it, he added.
“For example, what does back to work look like? Does it happen quickly? Does it happen slowly? Are you still observing social distancing in the office? How are you going to minimise the risk of positive coronavirus infections in the middle of your redeployment?”
The Times is looking at countries that have already dealt with this on an earlier time frame than the United States and preparing for several different models. This may be different in the printing department than editorial.
“I would say keeping really open-minded and flexible, and learning from whomever you can is really important,” Thompson said. “I personally believe that the direct relationship with the end user ... you’ve got a growing, deepening relationship with them.”
For The Times, the areas in which they had already planned were those that went well after the COVID-19 crisis hit, Thompson said: “I’m a big believer in rehearsing and scenario planning. What you don’t want to be doing is running a company and also running to catch up at the same time. If you can, you want to have your moves worked out in advance.”