In search for new boss, Times Co steps into new era
NEW YORK (Reuters) - Janet Robinson, the outgoing chief executive of The New York Times Co, understood the dynamics of the print publishing business. But the newspaper business isn't what it used to be.
Rather, publishing is now a complicated Venn diagram of digital advertising, online subscriptions, and video, all designed to offset the declining fundamentals of print.
In this new world, Robinson's results were mixed.
For instance, in 2005, the year after being named CEO, Robinson signed off on the roughly $400 million acquisition of About.com, a website that relies on user-generated expert content to surface high in search results. But About.com has struggled of late as a result of competition from Demand Media and others, as well as changes made by Google to its search algorithm. As a result, About's revenue plummeted almost 21 percent in the third quarter due to declines in cost-per-click and display advertising.
The About Group was largely responsible for the Times Co's 4.5 percent decline in overall digital revenue in the third quarter.
Moreover, the Times Co's first attempt at a paid digital model under its own banner, a service called Times Select that asked readers to pay for access to its opinion columnists, failed. Executives learned from the mistakes of that experiment, however, and the subsequent meter-modeled pay wall instituted at the flagship New York Times, which grants readers access to 20 articles per month for free before requiring them to pay for additional content, is so far considered a success.
Still, even that has its critics, who complain that the model is too pricey and that the company is, as Morningstar analyst Joscelyn MacKay put it, "pricing in assumptions that are way too lofty."
Faced with an industry in upheaval, and a depressed share price, Times Co Chairman Arthur Sulzberger Jr. recently came to believe it was it was time for a leadership change, according to a source close to the matter. No official reason was given for Robinson's sudden decision to retire after 28 years with the company, the last seven as its CEO. A representative for the Times Co declined to comment on Robinson's departure beyond the statement issued by the company on Thursday.
As the Times Co embarks on its search for a new CEO, industry observers expect that it will go outside the traditionally insular walls of both the company and print publishing and tap the executive talent in digital advertising and digital media.
"It makes sense that they would say, 'If we are going to become a mainly digital company, how do we build on our current foundation?'" said Ken Doctor, a media and publishing analyst with Outsell Research. "That argues for a digital native, rather than a digital immigrant."
Sulzberger could look to tap a digital hotshot such as Facebook Chief Operating Officer Sheryl Sandberg or Yahoo Inc Executive Vice President Ross Levinsohn, who oversees the company's business in the Americas, according to analysts.
A representative for Facebook declined to comment. A representative for Yahoo was not immediately available for comment.
Such a move would mirror Time Warner Inc's decision last month to hire Laura Lang of advertising firm Digitas to run Time Inc.
While running the Times Co offers plenty of prestige, it's no easy task at the moment. The company's share price is down about 25 percent this year, and worries are mounting about the advertising market in 2012, particularly in the first quarter if retail sales don't hold up. Every major forecaster has cut predictions for overall ad spending in the new year.
Print advertising will again be among the worst performers, which is the main reason that the Times Co and others have scrambled to find a digital strategy. The newspaper industry has been in a tailspin for the last decade, and the decline in spending on print advertising has only been exacerbated by the sluggish economy. Globally, newspaper ad spending dropped to an estimated $91 billion this year from $123 billion in 2008. It is forecast in 2012 to drop by another $1.6 billion, or nearly 2 percent, according to ZenithOptimedia.
At the Times Co, only five years ago print advertising made up 57 percent of its revenue. Today, it accounts for just 37 percent of revenue, while digital advertising accounts for 14 percent. Digital advertising keeps growing at double-digit rates, but has slowed from its earlier, blistering pace.
"When Janet became head of the company, where was the prime revenue? Print advertising," said Doctor. "Janet knows that business. Now where is the money going to come from? Digital. And you need someone who understands that advertising is sold and bought in a very different way than when Janet started in advertising sales."
Complicating matters is the fact that Robinson's unexpected retirement creates a leadership vacuum in the Times Co, which does not have a succession plan in place and whose top digital officer, Martin Nisenholtz, will retire at the end of the year. The departure of both Robinson and Nisenholtz has led some to speculate that the New York Times Co could combine the chief executive and chief digital officer roles.
For its part, the Times Co has said it will look at both external and internal candidates.
Beyond the digital strategy, the next Times Co boss will also be confronted by questions about whether to revisit a sale of The Boston Globe; and he or she will be under pressure to find ways to cut more costs company-wide after an earlier series of gut-wrenching staff reductions.
The CEO also must contend with the often tricky politics of the Time Co, which has been controlled by the Ochs-Sulzberger family since 1896. Under the voting structure, the family controls the company, meaning a new CEO will only have so much say in major strategic decisions.
"Anyone who comes in there will have to understand there is a guy in the chairman's office that totally controls the destiny of the company," said Ed Atorino, an analyst with The Benchmark Co. "But Arthur Sulzberger can't be totally oblivious to what's going on in the world and if he wants to save his family business he has to get someone in there that understands the dynamics of the business."
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