When Michael Hirschorn talks nonsense about the New York Times, it’s silly, but at least it’s understood that he’s not a stock analyst by trading, and that he’s more interested in making waves than being helpful. Henry Blodget, by contrast, really is a stock analyst by training — and what’s more, he’s an internet publisher himself, so the errors he’s making in today’s analysis of the NYT are far less forgivable. I suspect that he, too, is just being a provocateur, but it’s still worth pointing out the many areas where he’s wrong.
First, Blodget wants the NYT to cut costs by 40% across the board, including in the newsroom. Since there have been fewer job losses at the NYT than at many other papers, this is not quite as ludicrous as it seems at first blush — but it is still very silly.
Blodget’s first idea for cutting costs is to cut editors rather than writers: maybe he thinks that since his blogs manage to get by perfectly well without editors, then the NYT should be able to as well. But the NYT’s editors are its most important employees: as a paper of record, it’s vastly more important that the NYT bends over backwards to be error-free than it is that Blodget, say, not make any mistakes. The New York Times is the most scrutinized newspaper in the world: it needs its editors.
But Henry’s only getting started. Next he starts going down the pay-per-view road:
Productive writers can be retained and unproductive ones can be released (thanks to the web stats, this can be determined scientifically: look at a several years of click data and it will be crystal clear).
Got that? If you don’t have the "click data", fear for your job! If you snark about the president, or how to analyze your husband "the way a trainer considers an exotic animal", then you’re probably fine. If you’re an investigative reporter who spends months at a time uncovering secrets, not so much. And if you’re a war correspondent putting your life on the line to cover important conflicts around the world, well, remember to include lots of pictures of kittens to boost that all-important click data.
"Yes," says Blodget, "some sections that some readers love might disappear". But those kind of fluffy, feature-driven sections — the ones that might be cut — aren’t expensive: by contrast, they’re profitable. That’s why they exist: they subsidize the important news hole, which is less attractive to advertisers.
Next, Blodget decrees that "management needs to make certain that printing and distributing papers is a highly profitable business". Never mind that printing and distributing papers has never been a highly profitable business for any newspaper: Blodget seems to think that the selling-news-to-readers business model, which has never worked in the past, can somehow manage to supplant the selling-readers-to-advertisers business model on which newspapers have always historically been based.
If you’re running a print newspaper, the single best way of maximizing your revenue is to maximize your readership. Most newspapers lose money on printing and distribution, and are happy to do so. Does Blodget have a clue how much the NYT would have to charge, per paper, in order to turn a profit on printing and distribution? His plan would cut the NYT’s circulation even further — probably to the point at which the NYT could no longer even come close to competing with the WSJ and USA Today outside the New York metropolitan area. The NYT’s one great hope is to become a truly national newspaper: Blodget’s plan would kill that hope dead.
And then Blodget completely loses it, saying that the NYT’s first-rate website should be artificially crippled with the introduction of subscriber firewalls.
"Some people consider NYT content worth paying for," he writes, pointing to the paper’s print subscribers. But he doesn’t stop to realise that those people aren’t paying for content, they’re paying for their newspaper. You’re welcome to try to print out the NYT’s daily content from your web browser — I can assure you that no matter how efficient your printer, it’ll cost you much more than just buying the paper. Reading the physical paper in the morning is something millions of people love to do — including myself. But the people who do that don’t tend to kid themselves that they’re paying for content. And a huge number of them are commuters who want something to read on their way in to work — where a newspaper is a wonderful source of easily-accessed content, and the internet just isn’t.
Blodget also seems to have deluded himself that people stop subscribing to the print edition of the newspaper because they can read the same content online for free. But newspapers aren’t competing with their own websites: they’re competing with everybody else’s websites. If I read a physical newspaper, I’m vastly more likely to visit that newspaper’s website than someone who doesn’t. Similarly, if I read a certain newspaper’s website regularly, then that’s the newspaper I’m likely to pick up at the airport newsstand when I need something to read on my flight. It’s called synergy. If you cripple your website, people will just go elsewhere.
Over the course of the day, I put together links for my "extra credit" link round-up blog entry. Sometimes there’s important news which I feel needs a link, but which I haven’t devoted a whole blog entry to; today, for instance, it’s the fact that Dick Parsons is taking over as chairman of Citigroup. For that kind of thing I’ll always link to the NYT when I can, because I have faith that the page will look good in perpetuity and that it won’t break or disappear behind a firewall. I often get the news first from the FT or WSJ, but I’m much more hesitant to link to them, because there’s a good chance that link won’t work for many of my readers, and those websites make it pretty much impossible for me to tell which stories are linkable and which will result in readers reaching a firewall instead.
Blodget’s proposed hybrid subscription model is silly for all the same reasons that the FT’s current model is silly, or that any subscription model is silly. People don’t understand such things, and they avoid sites they don’t understand. No one likes visiting a website, clicking on a link, and bumping into a subscription firewall. And so people tend to avoid such sites, given the choice. With the WSJ, they often have no choice: the WSJ has much less competition, for most of its coverage, than than the NYT has. But with the NYT, there’s pretty much always a choice: it deals in news, and news is a commodity.
Then Blodget runs the numbers, and reckons, improbably, that the NYT could find 750,000 people willing to pay $80 per year for a subscription. That’s $60 million a year, which compares to current advertising revenue at nytimes.com of double that. Blodget reckons that net-net the NYT wouldn’t lose money by moving to a subscription model — but even if it didn’t lose money, it would certainly lose an enormous amount of goodwill and brand value. All for the sake of a few million dollars a year in extra revenue: it’s just not conceivably worth it.
More than anything else, Blodget’s plan would be an admission of defeat. All of his ideas destroy brand value and the iconic New York Times franchise: the really smart thing to do would be to build that up instead. Is that possible as a publicly-listed company? Maybe not: and if it’s not, then the Sulzbergers should find a way to go private, or non-profit, or something along those lines. But a slash-and-burn approach where you fire your most important reporters for lack of "productivity" and make it as hard as possible for your most loyal and valuable readers to read your content? That’s just idiotic.