Analysis: NYTimes' new CEO must grow sales, skirt internal strife

NEW YORK Wed Aug 15, 2012 10:48pm EDT

BBC Director General Mark Thompson poses for media on a visit to Media City the company's new northern headquarters in Salford, northern England in this May 10, 2011 file photograph. REUTERS/Nigel Roddis/Files

BBC Director General Mark Thompson poses for media on a visit to Media City the company's new northern headquarters in Salford, northern England in this May 10, 2011 file photograph.

Credit: Reuters/Nigel Roddis/Files

NEW YORK (Reuters) - The tasks that now confront Mark Thompson, the newly appointed chief executive of The New York Times Company, are essentially the same ones he faced at the BBC: usher a storied, but staid brand into an increasingly digital and global world while navigating a delicate balance between often competing political power centers.

The only difference is that now he must do it in a commercial enterprise where building advertising and content sales is paramount, rather than a government-protected one where the vast majority of revenue comes from viewers paying license fees. The BBC's commercial revenue was, for example, only $348.44 million according to its annual report for 2011/12 published in July, against $5.66 billion from licensing fees.

"This is the first time that Mark Thompson has been seriously exposed to full-on commercial pressure," said Steve Hewlett, a media consultant and BBC broadcaster. "Doing digital development at the BBC when you don't have to make a return is one thing; doing it when you've got shareholders breathing down your neck and a deteriorating business is another."

That's not to say that Thompson isn't up for the task. Sources say the Oxford-educated executive isn't scared of making tough decisions, from cost-cutting measures like canceling beloved shows and instituting layoffs to joining the fight to stop Rupert Murdoch's News Corp from taking control of satellite broadcaster BSKyB.

Thompson, 55, spent his entire career at the BBC, rising from a trainee in 1979 to stints on shows such as 'Newsnight' and the 'Nine O'Clock News' by age 30 before eventually becoming Director General, which is regarded as the U.K. television industry's most powerful post.

He joins the New York Times Company during a period of unprecedented change at the media group and in the wider U.S. newspaper industry, which has seen big declines in print circulation and advertising, and little sign that online revenue can make up much of the difference.

Readers are increasingly getting their news from smartphones and tablets, prompting a mass loss of advertising dollars from the printed product. Print advertising revenue at the Times Co fell 8 percent in the second quarter, while digital advertising slid almost 2 percent.

Indeed, sources said one of the biggest question marks surrounding Thompson is whether he will be able to apply his skill at cajoling British lawmakers and taxpayers to pony up money to getting Madison Avenue, a constituency with which he has limited experience, to buy advertising on behalf of its clients.

The Times Co was once a sprawling media conglomerate with TV and radio stations, magazines, dozens of newspapers, and stakes in sports franchises like the Boston Red Sox baseball team and Liverpool soccer club. But over the years it has been shedding its assets - last week, the company said it was in discussions to sell its Internet property About.com for a reported $270 million and in December it sold its regional newspaper group for $143 million.

As a result, the company has dwindled to its flagship paper, the New York Times -- still one of the most prominent newspapers in the world - and three sister publications, the Boston Globe, the International Herald Tribune and the Worcester Telegram & Gazette.

The Times Co's revenue and share price have shrunk along with its asset base. Revenue for the first half of the year is down 30 percent from the same period four years ago and stood at $1 billion. Its share price has plunged from a high of $53 to below $10 currently.

By contrast, according to its annual report published in July, the BBC generated a total of $6.52 billion from licensing fees, commercial operations and its world and monitoring services.

The business challenges would be enough to deal with for any new CEO, but Thompson must also navigate the internal politics of the controlling Ochs/Sulzberger family.

Sources say that though he is CEO, Thompson will actually serve as a lieutenant to Chairman Arthur Sulzberger Jr., who has firm control over the company. Thompson's predecessor, Janet Robinson, abruptly left the company in December after a 28-year career amid what sources described as clashes with Sulzberger over direction and other matters.

"It's a company that's run by the family," said Doug Arthur, an analyst with Evercore Partners. "To me the question is why did he take it?"

One possible explanation for why Thompson took the job could simply be location. Thompson is married to American writer Jane Blumberg and has three children, and according to a former associate they vacation every year at her family's home in the states. This source added that Thompson's wife wanted to be closer to her family.

And analyst Arthur also noted that, despite being family controlled, as CEO Thompson will have some degree of autonomy to operate the business and prove that he is capable of running a publicly traded company.

A Times Co representative declined comment for this story.

DIGITAL AND INTERNATIONAL

In hiring Thompson, Sulzberger is getting an executive who respects journalistic integrity, but isn't afraid to make tough decisions to bring spending on news gathering in line with economic reality.

While Sulzberger, who is also the publisher of the New York Times, has resisted the deep newsroom cuts that have hit most major dailies, Thompson was forced to undertake austerity measures that included large-scale layoffs at the BBC.

"He has actually been very effective getting organizations to perform well with reduced resources," said Emily Bell, a former Guardian news executive and current director of digital journalism at Columbia University.

Thompson also brings to the Times Co established credentials in growing digital and international businesses. He is credited with helping to develop the iPlayer, an application that enables viewers to catch up on missed programs for free online. It is widely considered a huge success.

He has also helped grow BBC.com into a major global web portal, attracting 57 million unique monthly visitors worldwide in June, according to comScore.

Last year, the Times Co rolled out a pay model for its digital products that has so far proved convincing in getting readers to pay for news. Total paid digital subscriptions for NYTimes.com and BostonGlobe.com climbed 13 percent to 532,000 at the end of the second quarter.

Thompson's deal-making with other media outlets, specifically a joint venture with ITV, and successful efforts with BBC America and other for-profit international offshoots of the public broadcaster dovetail with Sulzberger's view that the Times Co's future is in video and social media and mobile global expansion.

A source inside the New York Times' newsroom told Reuters on Tuesday that the biggest question being asked about Thompson's hire was "whether this is a signal that we are going to be getting more into the TV business, or is he just going to take what we do already and distribute it more broadly globally."

But some sources echoed the opinion of U.K. media analyst Clare Enders, who thinks that Thompson is going to have a difficult time replicating his BBC success at the Times Co.

"This is not an appointment that is crying to you: ‘This is the man who is going to transform the costs of the organization, alter the business model beyond recognition so the organization survives, maximize cash,' all the things public company shareholders would typically be looking for," said Enders.

($1=0.6371 British pounds)

(This version of the story has been corrected to fix trillion to billion in paragraph 2)

(Additional reporting by Yinka Adegoke in New York and Kate Holton and Paul Sandle in London; Writing by Peter Lauria; Editing by Leslie Gevirtz)

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