Wednesday, June 21, 2006

Al’s Revenge

Times to Sell Ads on Front of Business Section

That’s the headline in today’s New York Times, and in case you’re wondering whether the story is any more complicated or interesting than the headline…it is not.

The story itself begins as follows:

The New York Times plans to sell advertisements on the front of its Business Day section starting in two weeks, Bill Keller, the paper’s executive editor, said yesterday.

This incredibly dull news comes during the newspaper industry’s annual New York City confab in which the various newspaper chains get up in front of analysts and explain away declining subscriber counts while highlighting extensive cost-cutting measures and the fabulous growth in their internet properties.

Unfortunately, the internet side of the newspaper business is, generally, 1) insignificant, revenue-wise, and 2) not very profitable anyway. Thus something must be done to find incremental revenue, and the newspapers are pulling out all the stops.

The ads are expected to sell at a premium rate because of the prominent showcase the front of the section affords.

Stop the presses! More ads at higher rates for fewer readers!

Now, I hope my friend Al saw this story. If he did, I’m sure he’s smiling right now.

Al used to work in the newsprint business, selling the low-grade paper on which the New York Times and its ilk are printed. Newsprint is a lousy, cyclical, brutally competitive business if there ever was one, yet the newspaper chains always complained whenever things got good and the newsprint guys tried to raise prices.

Al was forever griping about the power of his newspaper customers to complain about alleged price-fixing among newsprint makers in great big front-page muckraking stories, while at the same time operating near-monopolies that could raise prices at will, giving them steady double-digit profit margins year in, year out, and cash flow to die for.

But how the mighty have fallen, thanks to Craigslist, Google, Yahoo! and the rest; and so the New York Times is left to slapping ads on the front page of a business section that fewer and fewer people are bothering to read.

If that’s the best a once-mighty near-monopoly can do to help cover the enormous fixed-cost burden of a slowly dying distribution model, it’s a sorry response to the underlying problem. Sadder still is the near-complete denial evident in paper’s placement of blame, which I am not making up:

The change comes as The Times, along with other newspapers, faces an increasingly difficult economic environment.

Beg pardon? “Difficult economic environment”? What are they smoking? Last I checked, the economy was screaming, employment booming and household net wealth at all-time highs.

It’s not the economy. Just call it “Al’s Revenge.”

Jeff Matthews
I Am Not Making This Up

© 2006 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


gvtucker said...

"economic environment" doesn't have to refer to macroeconomic environment. From the context of the article, it is pretty clear to me that they're referring to the microeconomic environment specific to newspapers.

cdub said...

A thought the same thing, and from senior editor at the Times: "Perhaps our statement wasn't clear. We did not say that there is a difficult economic environment across all industries or across the nation. We were referring to the newspaper industry.

Hence, we wrote: The Times, along with other newspapers, faces ....

Indeed, our economic environment is very difficult right now. So we are working hard to manage that so that we do not have to cut back the quality and quantity of our news coverage.

I hope this helps explain the statement."

whydibuy said...

Looks like they've adopted the post office business model. As you lose business, just keep raising the prices to compensate. Funny how all monopolies think alike.

medford1 said...

What ever the intent/interpretation Jeff's point still holds. Who says 'our economic environment' its clearly euphamistic and an attempt to gloss over the point that business/industry sucks, as a normal person would have noneuphamistically phrased it. The interesting point here is that the implicit denial is not fooling anyone and only serves to freeze management into inaction or non serious action like rearranging ad placement.