What lessons can the global news media industry learn from one of the most influential figures in media today, New York Times CEO Mark Thompson?
On Wednesday, INMA members were treated to an exclusive Webinar in which INMA Executive Producer Mark Challinor interviewed Thompson live from his office in New York. The 327 people from 44 countries who registered to attend the Webinar had the opportunity to ask Thompson their questions about what lies ahead in media for 2020.
Presenting a CEO’s guide to surviving and thriving in today’s media landscape, Thompson discussed subscriptions, future payment mechanisms, new revenue streams, approaches to ad sales, his relationship with the platforms, and much more.
Challinor opened the Webinar by introducing Thompson as one of the most influential figures in media today. Since 2012, Thompson has directed the strategy and global operations of The New York Times. Under his leadership, digital subscriptions have grown from 500,000 to four million.
Leading off with his first question, Challinor asked Thompson to what he credited such amazing success.
What factors would you point to in the growth and success of The New York Times during your tenure?
“We figured out about four or five years ago that we should be a subscription service, first,” Thompson told INMA members. “The biggest thing we had to sell was our content and the quality of what The Times journalism can do. We should begin to think of ourselves more like a quality subscription service, like an HBO or a Netflix.”
For Thompson, to accomplish that meant the company needed to invest, first and foremost, in journalism. To that effect, The Times has hundreds more journalists than it did just a few years ago — about 1,750 in all.
“It’s very unusual, at this moment in history, for publishers to be hiring rather than firing journalists,” Thompson said. “But actually, we thought that was a good thing. We’re going to be different than everyone else. We’re going to be building our strength while other people are weakening, and that’s going to help us find an audience.”
He added The Times team has a strong faith that there are many people who care deeply about what is happening in the world and will pay for access to the best journalism covering it.
What trends do you see as far as digital subscriptions?
Thompson began by saying that when The Times launched its digital pay model in 2011, most of the staff didn’t have high hopes for it. They thought there might be a couple hundred thousand potential digital subscribers out there. Instead, they were still focused on the print business, and stopping its decline, rather than focusing on and growing the digital business.
“Now, we have a very different view,” he said. “We have lots of platforms — print is one of our platforms. We love our print product, we’re going to be printing for another 15 years or more, but there is no growth to be had there. Over time, the number of subscribers will decline, advertisers will decline, and ultimately the economics of that platform will fail. That’s our view. The old ship is going to sink in the end.”
It will become more and more difficult to make that economic model work and keep it cash positive, Thompson said. The task, therefore, became to grow a digital business that is big enough to cover all the costs of the company and drive profits for its shareholders. To do that, the company needs many more digital subscribers than print subscribers because less money is made on digital subscriptions.
“You need real scale. What we’re going for, perhaps more than any other newspaper in the world, is real scale. The really encouraging thing about the results we announced yesterday is that our model is currently accelerating. We added a million digital subscribers in a single year.”
This was the biggest year for The Times’ digital model in terms of new customers, Thompson reported. What he hopes to see is that million a year become the standard run rate — or higher. The company has set a goal to reach 10 million subscribers by 2025.
“I want to make it clear that this is not some glorious, imperial thing at all,” he added. “Given our cost structure, and given the reasonable expectations of our shareholders, that’s the kind of scale you want if you’re a digital-only business. Our reading of the world is scale is very important. Getting the sheer number of people to pool together to pay for the journalism to make a great company means you need scale. You need an international business. You need to get very good at things like retention. We’re still in the middle of an enormous task. I believe it’s possible.”
What changes have you seen at The Times in your eight-year tenure there?
“Other publishers are not having the luck we have had, particularly at local and regional level — and even at a national level, actually,” Thompson said. “This transition is difficult because of the scale of customers you need to really get it to work.”
The other big challenge is the culture change aspect, he said.
“We’ve been to hell and back with cultural change at The New York Times in many ways. It’s immense change. It’s a very different business. You need different skills. You need a different approach for the way you make decisions. It can’t be done the classic top-down way. You’re transitioning from a high-margin business to a relatively lower-margin business.
“There’s a whole world of challenge in doing this, and ... many publishers are finding it very hard. The competition has been dropping away. It’s extraordinary. We face remarkably little competition in many ways.”
What above all has surprised you about the digital landscape?
“I think that we are often all guilty of assuming we know the future,” Thompson shared with INMA members. “There was a time when publishers thought there was a great business to be had from digital advertising and that was going to save them. There was a time very recently when people thought the major platforms were going to get so powerful that publishers were going to get squeezed out together.”
“I’m a journalist,” he said. “Most people hate these disruptions, these gut-wrenching changes, but I am fascinated by them. We don’t know where the story ends. We don’t know what the world is going to look like.”
What is your opinion in terms of what our relationship with the platforms should be?
There was a time when the platforms said they were doing publishers a favour by distributing their names, headlines, and even content to new global audiences, Thompson said — and this was true, in a sense. The complicated world of distribution became simpler through platforms.
“You could do a piece of news and get it to the entire world. So there was a slight sense that the platforms were doing the publishers a favour. I think now, if you’ve got a quality news brand, you’re helping a platform if you’re allowing your news brand to be associated with that platform. You’re helping Google or Facebook or Twitter with your presence, and that needs to be reflected in the relationship.
“We see ourselves re-negotiating our relationship with the big platforms and asking for value in return for using our valuable content. We do want people to be able to learn about our journalism, maybe even sample it, but if they’re going to have a full experience of our journalism we want them to do it on our platform. We want the platforms to help pay for the journalism they’re getting the benefits from.”
What’s your view on payments, for example mobile and micro payments?
Thompson replied that people don’t want things to be free, they want them to be easy. They want a transaction to be quick, simple — to execute the task and be able to enjoy what they’re paying for very rapidly.
“There was a time we found it very hard to get people to subscribe on their smartphones,” he told INMA members. The audience might read the content on their smartphones, but they associated the business of subscriptions with their desktop or laptop computer. Therefore, conversion rates on mobile were much lower than desktop.
“That’s not true anymore,” Thompson said. “The economics of paying for everything has all become much easier on our phones. That’s increasingly true of us as well, and that’s normalised that [payment via mobile]. You can become a registered user of The New York Times with your Google persona using a single tap. This means it’s much easier to get people engaged and to know a little bit more about them. This little device, the smartphone, for the coming year is by far going to be the biggest platform for The New York Times.”
The big challenge for publishers is this, Thompson said: Don’t think about the smartphone last. It needs to be all the other way around. Publishers must start with digital, out of which they get their Web site, and from that curate the physical print newspaper.
“The basic thing for legacy companies, which is psychologically very hard, is we need to put the new thing first and the old thing second — even if the old thing is still most of your economics.”
This represents an enormous internal difficulty for most companies, he said.
“Everyone in your company knows how to do the existing thing. So give the responsibility for the existing thing to a handful of your best people. Parcel it off and get them to go off and do it. And let everyone else concentrate on the future. Clear the brainspace of the majority of your people to focus on the future.”
What about other verticals? TV shows, movie business, podcasts.
The Times has moved into many other spaces, for example with its popular column Modern Love, which became a podcast and was recently turned into a hit Amazon TV show.
“We’re producing tons of stories a day, plus there are these pockets of unexploited value in lifestyle, in relationships, in fashion, in business, in tech,” Thompson said. “I don’t think we’ve even begun to exploit the riches that we’ve got.”
Thompson said he believes much of The Times’ resources can be turned into podcasts, citing the example of The Daily, which is the most popular podcast in the world. It attracts a very young, incredibly engaged audience listening for 20 to 30 minutes per day, which is unheard of. More than half of The Daily audience is Millennial, leading to the podcast becoming a phenomenon.
“When I got here, the walls were closing in on us and the options were shutting down,” Thompson said. “And many publishers feel this, that their economics are going bad, they can’t find solutions, the options are narrowing. I feel now we’ve gotten to the point where the walls are moving out and the opportunities are growing.”
The Daily is a completely new, and lucrative, revenue stream for the Times, with more than two million listeners every day and 40 million each month. These listeners are deeply engaged, and this allows The Times to reach a completely new audience.
Thompson explained to the INMA audience why he thinks The Daily has struck such a chord: “It’s quite a warm show, and while the Times is generally a serious newspaper, this brings a bit of heart to the proceedings as well. It draws the listener into the whole business of journalism. It’s captivating.”
It’s also a major revenue stream. Thompson shared that each podcast includes two 30-second ads — which bring in tens of millions of dollars in revenue. “It’s a very attractive business. This stuff is cash-positive from day one. This is not some long overhang. With things like TV and podcasting, we’re making profit from day one.”
In your time there, what are you the most proud of?
“That we’ve got 300 more journalists now than when I started,” he replied. “I believe in journalists. I am a journalist. We found an economic way of actually justifying building our newsroom at a time when the world really does need great journalism.”
What were some of your biggest mistakes?
Thompson wasted no time in saying that the list of mistakes his team have made is endless. “We’ve launched products that didn’t work. We predicted things that didn’t happen. I sometimes say I think I’ve been more lucky with success than some of predecessors because I’ve made more mistakes.”
But the key, he said, was that the team opened itself up to failing.
“If you threaten people that they’ll be in big trouble if something doesn’t work, they’ll be timid. By the time you wait until you’re sure, it’s too late. You’ve got to accept that this is a place in media history where you’ve got to risk capital. We’ve tried to learn from Silicon Valley. You’ve got to bet the farm on stuff.”
The biggest challenges, however, came from inside the building. “It’s so easy to blame Google or Facebook when the real issue you face is the people down the corridor, or maybe look in the mirror. It’s very easy to be a CEO who asks for innovation while quietly going around killing it.”
A company has to embrace culture change and understand that most of the seasoned veterans are going to be risk averse and not likely to come up with the big, new, innovative ideas, he said: “You need the kind of maniacs in their 20s and 30s and early 40s to be out there winning the new battles, and you’ve got to be on their side.”
Looking at predictions for 2020, how do you think editorial will change?
Look at what has been happening in the world just in the first opening days of 2020, Thompson said.
“You think of a planet with bushfires raging in Australia and other environmental and weather related events happening right now, the U.S. and Iran coming to the brink of war. What a year in politics. Another big Brexit year, and the big question mark about Boris. In the U.S., this year is what most people believe will be the most important election of their lifetime.”
The challenge of the news media, he posed, is to rise to the occasion: “This is a big time in history, and the biggest thing is we need to lean into that and get those stories right. I think in terms of selling subscriptions and selling advertising, this is potentially a very rich year actually. Getting the messages right and solving these practical problems like what digital product is going to engage people, how do you think about your customer journey and the process. How can we take advantage of this moment with the big platforms? I see an incredibly busy year.”
He reiterated that legacy media is far from dead. The big news brands are still powerful, and Thompson doesn’t believe they are going away.
He related a personal example of the Nixon/Watergate story, which is what led him to get into journalism. It was The New York Times and The Washington Post “battling it out” for coverage of that story. Today, with the Trump impeachment story, it is still those same two legacy news brands bringing the story.
“That hasn’t changed. Half a century later, the names haven’t changed. Legacy media, which not too long ago was an insult, is a colossal advantage now. Having a brand, a masthead — which people associate with trust and reliability and consistency — is an immense advantage.”
Who should lead the media strategy?
Thompson believes the most important thing is to have someone leading strategy who is able to ask really honest and penetrating questions. “The questions aren’t even that hard, but you’ve got to be brave about asking fundamental questions about your business. I think strategy is a process of inquiry.”
What do you think is the impact of paywalls on advertising revenue?
“For us it’s essentially been neutral. We give registered users only a few articles each month before they have to pay. This has not affected our numbers of unique users in any way. I can’t see any significant downward impact on this in our advertising.”
He added that paywalls used to be an “either/or” idea — either you were going to have to sacrifice advertising revenue or subscription revenue. However, that has turned out not to be true.
How do you balance journalistic gut feeling versus statistics and data?
“I think it depends on the media organisation. Our tradition is very solidly human. We know when we talk to our users and subscribers, when you start talking about personalisation they get very twitchy. They want human editors to show them the stories. We are very wedded to the idea of human judge\ment in journalism.”
How are you approaching subscriber growth internationally?
“We don’t believe that we should be aiming to compete with local media extensively. We have 43 global bureaus, but it’s to cover the world for the world. We complement the local media. We don’t think this is going to require extensive additional journalism cost. We think price is very important. In a developing country you’ll never get any volume at all with the [U.S.] price of $15 a month. One of the reasons we’ve had big success with international news recently is because many readers from other countries come to us to find out what the hell is happening in the U.S.”
When it comes to publishers who do short, simple news, how can a paid Web site compete with a free one?
This is a difficult area, Thompson said.
“If you have a reputation for great news and real reliability, which I think you have to build up with distinctive journalism, then I think whatever you do gets that aura. I think the path for a news organisation that’s only got short, generic news is very limited, because that stuff is available for free on the Internet.”
He warned that a publisher can’t have it both ways; they can’t attain the revenue of a premium service with the cost of a free service. “The model where you had a captive advertising audience, as long as you held the audience with ‘OK’ content, you could get the advertisers to pay. That world has ended. That audience can now be reached by many people on many platforms. That’s a failed business model.”
Do you have any suggestions for small- to medium-sized local media who feel their size is a limitation to their growth?
Smaller geographies and the media that goes with them probably can’t scale to the same extent as the large, legacy media organisations, Thompson said. But on the plus side, the barriers to entry are potentially very high for competitors.
“If you can figure out a cost structure of delivering relatively high-quality news, it will be very hard for other players to do that. When something of global relevance happens in Japan, we’ll cover it. But we cannot compete with local news there. That idea of people being prepared to pay for news, even at a local level, is not a new one. But [the content has] to be good. Human beings want to know what’s going on. There’s no reason to think if you provide something valuable, people won’t pay for it. The question is to develop the right cost model.”
Would you be willing to share information about The Times churn rates?
While he could not share specific data, Thompson did say The Times experienced churn in its digital product between 2014 and 2017.
“We did a lot of testing on different kinds of introductory offers to The Times and did a lot of cohort testing over that time. We discovered that some offers were really strong at recruiting subscribers rather than others, and we got much better at working out the kind of offers that work in terms of retention. We also took the whole subscriber file and divided them into green, yellow, and red to discover the propensity to churn.
“The bottom line is that people who aren’t using the product are likely to churn. And what you can do is e-mail them, reach out to remind them what you’re doing and what’s of value to them.”
He also advised publishers to consider what their approach is when someone tries to cancel.
“What do you offer them? We’ve got years of experience on this with our print product. We’ve tried to apply that to digital. We’ve worked very hard at this, and we’re now pretty close to the frontier of the best retention in media. And I’m not just talking about newspapers. We think we’re slightly better than Netflix now.”
Can you comment on frequency and habit?
“I think habit is the right word,” Thompson said. “We want to be in people’s lives. We want to be indispensable. We want to be part of their daily routine.”
The Times wants people to wake up and look at the app on their smartphones to find out what’s happened in the world. A morning briefing to get them going, and the same in the evening, are good tactics, Thompson said.
“These fixed points during the day are important. Our morning podcast is a really good tool. There are lots of tactics, and I think a lot of this also is about your data science. Is it good enough that when you try something like a briefing, you’re optimising what you’re putting out there.”
In closing, Thompson said nothing in terms of programming structure should ever be fixed: “You actually find out by trial and error what works. Everything is a work in progress. Everything is still subject to improvement.”