The New York Times Company

0:00 All right. High energy. Yeah. Need some energy to get through. Hundred and uh seventy years. Woo It's literally a hundred and seventy years. It's crazy.

0:22 Welcome to Season 8, Episode 2 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder of Pioneer Square Labs, a startup studio and venture capital firm in Seattle. And I'm David Rosenthal and I am an angel investor based in San Francisco. And we Are your hosts.

0:46 For over a hundred years, you would have been hard pressed to find a better business in the world than an American newspaper. Each one had a local monopoly, an incredibly profitable advertising business, and it was one of the earliest examples of a reasonably low marginal cost business and It's dirt cheap to just print another copy of the paper. The newspaper business was For a long time, Warren Buffett's canonical example of a franchise, like the best

1:13 type of business you can possibly own. Indeed. And this today, listeners, is the story of the paper that loomed large over all the others. The New York Times. Today we peer into what I think is the oldest company we've ever done on this show, founded over 170 years ago before the Civil War.

1:34 The Times has seen the majority of American history. And for the majority of its life. It's been controlled by a single family. And for many of you A family you've probably never heard of.

1:46 This is a family whose paper shaped the American perception of current events through World War One. World War Two Vietnam. I mean really their newspaper shaped your perception of America itself. and your parents' perception.

2:01 And your grandparents' perception. You get it. It is probably safe to say that the five generations of the Ox Sulzberger family has been the closest thing that America has ever seen to a dynasty. After a century of near continuous prosperity, the New York Times has seen an incredibly dramatic fall. And then rise just in the last twenty years.

2:23 The internet and social media on top of it. brought ruin to the entire traditional journalism industry. In the late two thousands, the New York Times got to such a low point that they even sold their office building to free up some cash Well they rented it back from the buyer. Oof, indeed.

2:40 Can't wait to talk about that part of the history. And yet, somehow today, they've been accused of being a monopoly in the journalism industry, and they have more digital subscribers than they ever did in print. And they employ the former editors in chief of BuzzFeed, Recode, And Vox.

2:58 As columnists. So how did they turn it around? Who is this mysterious family? And what does the future hold for the New York Times? Today.

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3:39 And if you wanna talk all things acquired, the goings on of the tech world and find just a genuinely smart community to talk about all this stuff, you should join the Slack. at acquire dot fm slash slack. All right listeners. Now is a great time to talk about a new partner of ours here on Acquired, Lagora.

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6:24 Entertainment purposes. Oh boy. Was this ever an entertaining one to research? A hundred and seventy years. This is crazy. We're gonna we're gonna start with the founding of the company. And it's gonna be the farthest back in history, other than Bitcoin when we were talking about the banking system. I think this is gonna be the second farthest back in history we've ever started. And I'm not even going back before the company.

6:48 You started with like uh something older than this, I think with Uber, right? Oh actually no, because any auto eighteen ninety. Wow. Yeah. There there were there were no cars when the New York Times was started. Crazy.

7:02 Uh crazy. Okay. We go back to eighteen Fifty. And the founding of the

7:12 Well known. World renowned New hyphen York. Daily. Times.

7:22 Doesn't quite have the same ring. No. New new hyphen New York Daily Times. New York Daily Times. Okay. So What was going on in eighteen fifty one? It was a media boom time. in the US. There was a growing population in the country. Increasing literacy rates, vastly increasing literacy rates. Urbanization.

7:44 And of course War on the Somewhat near term horizon in the coming civil war, US Civil War, and then as now Bad news.

7:56 Sells newspapers. Uh, and so there was hugely, hugely growing demand for news. Uh new newspapers were sprouting up all over the country. In The year eighteen hundred there were two hundred newspapers in the US.

8:10 And in the year eighteen sixty there were three thousand newspapers in the US. Isn't that crazy? So did printing presses get way cheaper too? Yes. Huh. Yeah, so it got a lot cheaper to print newspapers must have been various forms of machinery.

8:27 Rudimentary automation. And just the demand, like the growing population, the demand for news, literacy, it was like uh it was like the sub stacks of eighteen fifty one. Everybody was starting a newspaper. Uh and um Also because of the advances in production technology, not only could you make more newspapers and people could start them, but you could sell them cheaper. So Before this time, newspapers were selling, I think around like five, six cents a copy.

8:59 But uh starting in the eighteen fifties. newspapers and in particular new newspapers dropped in price to one cent. This is gonna come back later. So you could reach a whole new Mass market. So here we are.

9:13 In September. of that year of eighteen fifty one. The well known New York journalist and politician, Henry Jarvis Raymond, and his friend and former uh banker and merchant George Jones embark on a new venture, new newspaper venture in this brave new landscape, and they publish the first edition on september eighteenth, eighteen fifty one, of the new New York Daily Times. All right, Rosenthal, you've made your point. It was a hyphen. Enough with the hyphens. So who who were these guys? So Jones.

9:50 as we said was a former banker. He had also, though, worked as a business manager at Horace Greeley's New York Tribune, which was than the sort of premier paper in New York. And that was where he had met Raymond. Uh Jones had family money and lots of connections. About town from his wife's

10:13 family. Uh Do you know his wife's father's name? Ben I you're not gonna get this, but I had to put it in here. His wife's father's No, I have no idea. Benjamin Gilbert, the well known New York socialist. Really? Really? Yeah, really. I saw that. We gotta we gotta include this here. So he puts up twenty five thousand dollars of his own family money to to finance this new venture. They want to get to a hundred thousand dollars. So he goes out and he raises the other seventy five thousand dollars. That's all this is a lot of money in eighteen fifty one. Um from just, you know, some like

10:50 casual family connections he has, like, you know Several members of the Morgan family end up financing this. Like like J J Pierpont Morgan. Yeah, exactly. Wow. As you do. This guy shows up in like all

11:03 All these old stories. Like I feel like everyone somehow was getting financed by JP Morgan in these days. Totally. So That's Jones. He's sort of the the business guy. He brings he brings the capital. Um, but it's really Raymond who's the real force behind this. So who is who was Henry Raymond? He was quite the interesting character. As we mentioned, he had worked at the Tribune uh with Jones, which is where they met. And that was the premier sort of respectable penny paper out there, as they were known for the one cent papers. Um He had also, though, been very involved in politics. And when I say very involved, I mean

11:42 Very Very involved. Ben, do you know what Other organization, Henry Raymond. is well known for co founding.

11:51 What would become the New York Times. Oh. Uh I feel like I should remember this from AP US history, but I do not. Uh a little organization called the Republican Party.

12:03 Of which he was a founder. One of five founding members. Uh kind of incredible. Like this is this just blew my mind doing the research. Literally, he's known as the godfather of the Republican Party. is also the founder of the New York Times. And all of this was happening concurrently. So was it like a mouthpiece for the Republican Party in the early days? Well, not quite. Okay, so Before he and Jones decide to start the times, Raymond had actually left the newspaper business and he was uh a politician. He was a member of the New York State legislature, um, where he was a member of the Whig party at the time, uh sort of the precursor to the Republican Party.

12:45 But he had stepped down and then he decides to start With Jones to start the times. Which they do. But then shortly after and so You know. Raymond is running the times. He is the managing editor, he's the publisher, like

12:59 Jones is the money, but Raymond is really running it. Um while he's still running it, he goes back into politics leading up to Abraham Lincoln's presidential campaign. And that's when he, along with Lincoln, and also along with Horace Greeley from the Tribune Uh they and a couple other people start

13:19 the Republican Party. And uh platform, of course, is abolitionism and the abolition of slavery in in the United States. That was the origin and the platform of the party. So Raymond, um

13:33 While this is going on, he becomes the second chair of the Republican National Committee. So he's like the chair of the RNC, while also publishing the New York Times. He helps push Lincoln into the presidency. And then actually after the civil war, he goes to Congress and he becomes a congressman. He's a member of the House of Representatives. All all still while publishing the Times and serving as the managing editor, like writing all the editorials. That is so insane. I mean t it's funny. I my on the one hand, I was like, wow, today this would not fly. And then I'm thinking to myself Today this is what's happening. Not not at the times, but yeah.

14:10 Yeah, it's uh it's crazy. So th this thread is gonna come back so often throughout this history. So That said, um You know, certainly the times. is the quite literally the the party mouthpiece of the Republican Party.

14:26 But Raymond is also a real journalist. Like he, you know, he worked at the Tribune, he highly values uh journalism. He doesn't want the times to be sensational. And in fact, in the very first edition that comes out that September in eighteen fifty one, he writes famously. We shall we, being the times, shall be conservative in all cases where we think conservatism essential to the public good, and we shall be radical in everything which may seem to us to require radical treatment and radical reform. We do not believe that everything in society is either exactly right or exactly wrong, or What is good we desire to preserve and improve, and what is evil we Want to exterminate

15:09 Or reform. Of course he's talking about. Slavery there. I love this. piece so much. Like I think it is just not only is it a a beautiful little piece of writing, but it is pithy. Like it it captures so much of

15:23 w what their intent is in creating this this what would become an enduring institution and sort of how they view it. in such a pragmatic way. I mean I I'm excited, uh uh listeners, we will link in the sources to to sort of where we found this, or if you're um listening to this more than a week after it comes out, you can check it out in the the transcript. But it's just like I want to have it framed and put on my wall. It's a uh sort of wonderful is a beautiful Statement I think. So It's probably worth pausing here for a minute before we go too much farther in the story and explaining

15:54 What exactly is it that happens at a newspaper? Like what are the various sort of departments here? There's really kind of Two and a half pieces of any news media organization. Deuce papers included. Cable news television networks, which we will talk about uh as we go along here, and of course internet media news networks as well.

16:15 There's the content side of the house, sometimes called editorial, which includes both news And opinion. And then there's the publishing side of the house, which is the business side of the house, the advertising, the circulation, the managing of the organization and the company.

16:32 So where does the publisher fit into this? Right. So then the publisher. So now back in Raymond's Day. Raymond is both sort of executive editor. He's managing all this. And publisher. So the publisher is the running of the business, managing subscription, circulation, advertising, the cost side.

16:52 And in the case of the New York Times today, it's actually pretty easy to separate this out because there's the media property, the New York Times. And then there's the company, which is the New York Times. Company. that publishes the New York Times. And so an an easy shorthand for this for people who are familiar with tech companies would be you have someone running product and someone, you know, a CRO, someone running revenue.

17:15 Exactly. Exactly. So sometimes throughout the history of the New York Times, there's been just a publisher that is essentially like CEO and CRO. Sometimes there's also a CEO who usually reports to the publisher, as is the case now. So today A G Salzberger is the fifth generation, Ox Salzberger, who is the publisher of the New York Times and chairman of the board, and Meredith Copet Levian is the recently appointed CEO who reports to him and the board. So they sort of even further bifurcate the duties where the

17:48 Publisher has a a little bit more of sort of like a figurehead and a sort of consistency throughout history voice, and the CEO is like actually running the the business. But again, neither of them are actually involved in overseeing the editorial product and oversee the newsroom. That has always been traditionally kept at arm's length. Yes. Yes. And Most of the CEOs in the New York Times company history have been COOs.

18:16 before becoming CEO. So Uh Meredith was COO until recently when she became CEO. So we're gonna cover today sort of the history of the New York Times from the business and publisher side. Of course, we'll talk about the newsroom as we go, but as always, this is a corporate history perspective that we're gonna cover. The New York Times from? Alright, so David, I teased

18:37 the Ox Sulsberger family in the intro and I heard you just mention That A G Selsberger's the fifth generation Publisher. These two people we're talking about here. Not Ochs or Salisburger. Exactly. Previous ownership. Yeah. Founding ownership. So what happened here? Okay. So back to

18:56 Raymond. He's wearing all these hats. Um Things go well for the first Yeah,

19:03 20 plus years of the New York Daily Times uh within two weeks of starting, they hit 10,000 copies in circulation, which is Pretty great. twenty six thousand in the first year. Then in September of eighteen fifty seven, so six years after they start, they dropped the daily and shortened the name to just the New York Times, still with the hyphen. It would be Ox who would remove the hyphen later.

19:28 But things are going well. circulation's up to forty thousand, and then by the time the civil war starts with the attack on Fort Sumter in eighteen sixty one, Circulation is at seventy five thousand. That's pretty good. Like that's I don't know what the population of New York was at that time. I think it was maybe about a million. Or so, maybe a little less. So They're ten percent plus of

19:50 The city is. Taking the times at this point. Totally. And at this point too, the New York Times was Oh a little bit highfalutin. Like it was a it was a newspaper for people who were tuned into business and politics, and particularly more sort of politics. So it wasn't necessarily for the every person.

20:08 Yep, and in particular in the North, the abolitionists and what would become the Republican Party. So okay, this moment. This is like maybe the craziest founder uh story that we've had uh on this show in our five years of doing this. So on July thirteenth. eighteen sixty three.

20:30 The civil war's been going on for two years since Fort Sumter, but there wasn't a draft uh for the army yet. And in July The union the the government declares a draft. And there are actually draft riots in New York City about this. People are

20:46 You know, really upset lots of people have family in the south. They may be sympathizers with the South. Uh this is um this is hugely, hugely controversial. And the mobs target the newspapers that are sort of the mouthpieces of Lincoln and the Republican Party through the war. So a mob Descends on the New York Times.

21:07 Headquarters building. And Raymond. Because he's buddies with Lincoln. He gets the war department To ship a bunch of rifles and two Gatling guns to scene. to the times'cause they the they know this is gonna happen.

21:23 And he like leads a defense of the building and the company. He hands out rifles to the whole staff. He's manning one of the Gatling guns himself, and he gives the order that if any of the mom tries to break into the building, you're to fire at will on these People. Uh it's Crazy. Uh nobody is no shots are actually fired, but they do successfully

21:45 defend the building, uh the mob instead ends up attacking the tribune and storming the tribune's building. Totally, totally crazy. Next time we hear about like uh a tech CEO doing something that seems uh bold, think of Henry Raymond back in the day. And for anyone who's seen Gangs of New York, I think this is sort of that scene toward the end of the movie where there that is the scene you can kind of picture where there's the freaking publisher of the New York Times strapping a Gatling gun to the front steps and protecting the paper. Like protect the completely nuts. Completely nuts. Um

22:21 After the Civil. Raymond passes away not long after in eighteen sixty nine. His partner George Jones then takes over as publisher. And you know, continues running it.

22:33 In a fine fashion. I wouldn't say it grows hugely, but he's a good store to the business. However, when he dies in eighteen ninety one There's a succession crisis. Like what's gonna happen to this company? So a group of staff, a group of reporters

22:50 end up putting together a buyout and raise about a million dollars to Bye. The times. from the estates of Jones and and Raymond. And uh

23:04 they start operating the company, but they're not they're all like editors. They're all from the news side. They're not business people. So they don't really know how to manage uh the publishing or the business of the newspaper. Um And In eighteen ninety three, there's a financial crisis and And

23:21 Kind of much like two thousand eight, which we'll get to later in the story. This is really bad for newspapers, for advertising, for circulation. And the paper ends up going. Bankrupt. Circulation had fallen all the way down below nine thousand. It was up at, you know, a hundred thousand plus during. Raymond and Jones day. So like

23:42 Basically the New York Times is gonna disappear unless somebody comes in and saves them. I mean even just think about all the machinery that they had and all the delivery trucks that they had in order to deliver the times and need it and how do you downsize that fixed cost infrastructure from Shipping out.

24:01 you know, a hundred thousand papers a day to nine thousand. It's very easy to understand how this business ends up upside down quickly. Totally. I mean, there's the rent on the space, there's the raw materials that you need to print the paper, the ink, the pulp, the uh the paper, there's the people, the laborers you need to employ, highly skilled laborers on the printing side and then the delivery infrastructure. You're not just scaling down your AWS usage. Yeah, totally.

24:28 If only Jeff Bezos were around back then. Mm-hmm. So This is on Affect.

24:35 Ox. Enters the story. And rescues the New York Times. And this is really a second founding of the business. And

24:44 It's just an amazing American story. Like I likewise I knew that the Salzburger family, you know, controlled the times. I I probably mostly only knew that'cause I used to be an investment media investment banker and worked uh worked at the Wall Street Journal. But I didn't know anything about this history. And I only knew about it, frankly, because

25:04 Uh when we saw all these tech CEOs starting to do this crazy dual class structure stuff, famously Zuckerberg and I think the Google founders did it and obviously Snapchat and freaking everyone since the New York Times is the one who's the triple class structure. Right. I forgot about that. Where if you own shares on the market, you get zero votes. Hardcore. But yeah, the the Times pioneered this uh when they went public in what nineteen sixty nine. Yeah. I mean It it sort of laid dormant there, um, undiscovered until tech CEOs uh decided to do it with all their companies. Yeah. So

25:40 Okay, so Adolf Ucks. was born in Cincinnati, Ohio in eighteen fifty eight, so seven years after the founding of the New York Times. To Jewish immigrants from Germany in like

25:55 Pretty poor. Like he was not A Rockefeller or a Morgan. And After the Civil War, the family moved to Tennessee, where he has to, you know, work as a Boy to help Vito support. The family. So he gets a paper route in Knoxville, Tennessee.

26:15 And He gets a paper route for the Knoxville Chronicle. And He ends up just Falling in love as a young child with the newspaper business.

26:25 At the age of eleven He gets taken off the streets, so to speak, and he goes to work in the office as a assistant to the editor of the Chronicle, uh William Rule, who kind of becomes a mentor for him. And then When he's a little older, his family sends him away to Rhode Island to go work in his uncle's grocery store up there. They thought he would make more money doing so, but he hates it. And at age he's a newspaper man that's in his blood. Uh so at age fourteen in eighteen seventy two, he

27:01 Drops out of school in Rhode Island, comes back to Tennessee. Restarts working at the Chronicle. This time in the printing operations, as what's called a printer's devil helping out around the factory. And then A bit over five years later, at age twenty, he decides to move to Chattanooga.

27:19 Which is becoming an iron mining Boom town in Tennessee. This is also crazy. Like we're imagine How far away we are from New York City and the New York Times here. And here's this kid of like Jewish immigrants who started as a newspaper boy. Moves to Chattanooga, Tennessee. And

27:39 in Chattanooga, he knows that there's an existing newspaper called the Chattanooga Times. But it's Not very well managed and he's got a hunch that he might be able, even as a twenty year old kid with no money to be able to take this thing over. It's he's so freaking enterprising because like he's keep in mind he's a dropout, he's trying to make money for his family to support them, and he's not doing the like traditional thing that you would like go earn a wage. He's trying to say, Well, like I wanna go and revive this

28:09 p you know newspaper business'cause I know a thing or two about papers. And he's doing it in a place, Chattanooga, that Is having a moment And it's Interesting. I was sort of trying to figure out why it it's not sort of like the dominant city in Tennessee today, because in this postbellum era We're here in the late eighteen seventies and

28:28 the country has started to sort of heal and rearrange itself, and Chattanooga's in this interesting middle between a northern territory in a southern territory. And I think it's in in this uh great book called The Trust, which chronicles the history of the times that I was reading to prepare, they call it a distinctly American city, neither northern nor southern. And it's it's really this You know, not only economically because of the iron mining, but culturally becoming a boom town. Yep. So young Adolf, uh man, this kid is like so enterprising.

29:01 So he negotiates with the guys who own the times in Chattanooga. to buy the paper for a down payment of two hundred and fifty dollars. And then effectively for those in you know like small cap private equity, they'll they'll know this term a seller's note. of five thousand five hundred dollars. So He gets them to agree.

29:27 For this tiny down payment. that he'll take over the business and he thinks he can turn it around and make it profitable enough that over, you know, the next set of years he can generate enough profits to pay The original owner is five thousand five hundred dollars. out of the profits that the incremental profits he'll Generate. So they this business is in dire condition, and these guys are saying we'll take two fifty

29:51 And believe you that you're gonna generate fifty five hundred worth of profits in the ensuing years to pay us. I mean, whether they believed it or not, they were willing to do the deal. They were willing to part with two fifty and the fifty five hundred was uh uh house money if they could get it. Yeah, exactly. And I mean, I'd say it was a good deal. They should have just like kept equity in the paper instead of debt. Uh'cause he they get the money'cause he does it. Within ten years. He's completely turned around.

30:17 the paper. It's the premier newspaper in Chattanooga. Chattanooga's been growing. And he's pull in He ox is pulling in twenty five thousand dollars in annual profit cash flow for himself and his family. out of the

30:34 This paper. Uh just amazing. He's by this point in time. Yep. He's moved his entire family to Chattanooga. He's got them all working in the business. His his father, his uncle, his siblings, uh, his wife, his wife's family. They're all working in the business. But fatefully he's so long on Chattanooga and he loves The city He loves Tennessee.

30:59 He decides to buy up a lot of land. around Chattanooga. I couldn't tell if it was for sort of housing speculation or for the mines. But he ends up losing a hundred thousand dollars on this real estate.

31:15 Yeah, this was I think it was called like the over the river company or something like that. Cause it was land that was like over the river from everything else. It was wildly speculative. Yep, wildly speculative. And so famously he kinda like he learns his lesson from this. He's like, I am a newspaper man. This is in my blood. This is all I will ever do. I will never do anything else. And he I could imagine him like praying one night, being like, I'm sorry, God, you know, like for going into real estate I need I I will be the greatest newspaper man ever if I can bail out my debts. Not to mention

31:49 It worked well when he bought stuff sort of with other people's money and with leverage, and it really didn't go well when he decided to buy a bunch of land with his own personal capital. So he sort of gets this seed planted of Huh. I should use other people's money to buy stuff from now on. Exactly. So okay, he's pulling in twenty five thousand dollars of cash flow from the Chattanooga Times, but he needs a hundred K like faster than four years. He's that's not gonna cut it. He does know he can turn around newspapers, though, so he starts putting out some feelers and traveling around the country looking for another newspaper that he could buy and take over just like he did.

32:25 With the Chattanooga Times. And we should say a key component to the success of him turning around the Chattanooga times comes from the fact that Chattanooga was this sort of melting pot of North and South and Adolph really believed in that and he really believed in the Chattanooga Times as unbiased paper of the people representing a balanced view of the world. And Chattanooga was sort of the perfect place to pull that idea from. Totally. Very, very, very much his ethos.

32:53 So that's when he hears he gets wind of The bankruptcy proceedings going on in New York. For the New York Times. And at first he's like supposedly he's like Uh that's too big. Like I can't go. You know, I I'm Adolf Ox from Chattanooga, Tennessee. I can't go like take over the New York Times.

33:12 And at that point, even though it was in dire trouble, the brand of the New York Times, it was the best newspaper brand in the country. Still, it was definitely thought of as like the the paper. But Some mentors convince him that That he can do this. So in eighteen ninety six, he packs up his bags

33:31 Hops on the train. Goes up to New York. Uh, he leaves his family behind running the Chattanooga Times And he scrapes together so the The Times is in in bankruptcy proceedings. He scrapes together a plan

33:46 to the creditors and to the receivers uh in bankruptcy to take the paper out of bankruptcy and take it over. This is incredible. So he's like this, this, you know, I think he was late thirties at the time from Tennessee. Shows up in New York, kind of walks into the bankruptcy court and is like, believe me, I can do this. And Do you know the thing about the the interbake transfer? Ooh no I don't.

34:10 He convinced a Chattanooga bank to wire money to a New York bank. So that if In New York. People. check to see like are you wealthy? He had a bank account with money in his name.

34:22 And to the Chattanooga Bank, who he knew well, he wrote them a personal check and said, Look, I'm I'm good for it, I promise. Uh just wire the money. I I don't I don't intend to use it. That's amazing. It's like there's some incredible huckster stuff going on. That he he sort of pull strings to he's got the entrepreneurial hustle. So did you find did you read about the other thing he did to convince The creditors of his legitimacy. Ooh, I don't know. This is amazing. So President Grover Cleveland, at the time, like United States president.

34:54 had come through Chattanooga, I think, on his while he was campaigning. And as the leading, you know, newspaper been publisher of the Chattanooga Times. So he got to meet Like while he was campaigning. And uh you know, he he he kept his address at uh sixteen hundred Pennsylvania Avenue. He knew where to find him.

35:15 So he writes. To the president while he's going up to New York and he says he writes to Cleveland, he says I am negotiating for a controlling interest in the New York Times and have fair prospects of success. I write to respectfully ask that you address by return mail a letter to mister Spencer Trask, chairman of the New York Times Publishing Company, giving your opinion of my qualifications as a newspaper publisher, general personal character. My views on public questions judged by, of course, the Chattanooga Times. In other words, say what you can of me as an honest, industrious, and capable newspaper publisher. This is incredible. And he needed that support because at the time until this, I I apparently I did find this the

36:01 Trask and the rest of the committee that was dealing with the bankruptcy of the Times was in favor of a different plan to merge it. Like to basically unload the assets, merge it in with a different paper, wipe their hands clean and say, look, we got something for it. And instead, Adolf's walking in here with like a whole different plan of like

36:21 I am going to figure out how to revive this thing and make it great. And of course, there is some wicked financial engineering that he promises and that he really has to make the case of like you don't just uh it's not a cash buy here. Like you're gonna have to believe in me and my plan in order to make this work. Yep. Mm. So Cleveland writes him back with like a letter of endorsement. And he walks in there with a letter of endorsement from the president of the United States. Incredible. So the bankruptcy, you know, committee.

36:51 Accepts his plan. He pays seventy five thousand dollars up front. to the creditors, which he also had scraped together with borrowed money, because remember, he owes a hundred thousand dollars. Right. This is the craziest thing. This guy buys the New York Times. He will eventually have a controlling interest in it. And as it says in the trust, this is my favorite passage. The Yokel from Tennessee had accomplished the impossible. He had bought the New York Times using none of his own money. Amazing. This is like the minnow swallows whale from when uh

37:21 Capsidies bought ABC. Hundred percent. So how does it work exactly? There's like seventy five K that he in quotes puts up but actually he goes and like gets people in Tennessee to put it up, right? Yeah, he like rounded up the money from some people in New York, some people in Tennessee. I think he waved around the letter from Grover Cleveland to a bunch of people. Uh so that was A small part of the consideration, um the other part is he uses You know, sellers notes again of um

37:50 Six hundred thousand dollars in debt. to owed back to the creditors that they will pay off over, you know, some number of the coming years from you know, profits he'll generate by running this paper that has nine thousand subscribers and is bleeding, I think on the order of about half a million dollars a year at this point in losses. You can see why you're if you're Trask or the existing bankruptcy committee, you're like, uh I think we'll take the merger. Like this doesn't sound like any kind of guarantee. It is this guy that no one's ever heard of, he's coming in from Tennessee Like

38:25 You gotta sympathize with the the original plan. Yeah. Totally. But Somehow he gets it done. So

38:33 He emerges with The New York Times. And he has just like one problem, which is okay, how are you gonna how are you gonna turn this thing around? Okay, so what's the grand plan? What what's the plan? What's the plan? Well, so the plan is basically to be really boring and really cheap. So At the time.

38:55 People may be familiar with, you know, William Randolph Hurst and uh I think it was Joseph Pulitzer. Uh Hurst, of course, ran the journal in New York among many papers uh all over the country, and Pulitzer ran the world. Uh, those were the two heavy hitter publications in New York at the time. They each had about half a million circulation. But what they were were what was called, uh I remember studying about in school, yellow journalism. So they were super sensationalist. This was right at the time of the Spanish American War. Like these guys were like the I don't know if they were like the National Inquirer, but like

39:32 They were fast and loose with the facts and basically trying to like sell copies with any sensationalism that they could come up with. Do you know why it is called yellow journalism? Ooh. I feel like I did, but I don't remember.

39:47 So both of these papers published a comic called The Yellow Kid. And this cartoon was like You know, trashy. Like it was like a low brow cartoon and that coupled with it, both of them were obviously doing tons of sensational headlines. It was the sort of original clickbait. And so

40:07 y you sort of couldn't trust what was in the newspaper because it was always sort of trumpeted up and You know, famously around the Spanish American War, they were sort of making up headlines to make the war sound even more interesting than it is. And I I always like knew that yellow journalism was sort of tied in with these papers, tied in with the original clickbait, with sort of untrustworthy headlines. Uh, but I did not know until doing this research that it is because they shared the yellow kid comic. Ah, interesting. If I did know that I had totally forgotten it. But yeah, these guys are like the

40:38 I don't know, maybe may Buzzfeed is probably doing a disservice to Buzzfeed, but they're like the I don't know, like gawker of the Buzzfeed and Gawker, both of whose editors in chief now work at the New York Times as columnists. I know. Amazing. Amazing. So Ox lays out his plan for positioning. Which is that

40:57 They're gonna provide journalistic integrity and something that is quote, not going to soil the breakfast linen. Which sounds really exciting. 'Cause it means his plan, like the thing he knows how to do from Chattanooga, like that's kinda the playbook that needs to be run again. Just on a much bigger scale. Yep. So he decides he needs to come up with a motto to like express this new positioning to the New York public. And he comes up with the phrase, all the news that's fit to print. And

41:25 He's not too sure about it though. I mean, this is how the story goes. I think probably he he's maybe more like Pulitzer and Hurst than he lets on and he wanted to run a marketing stunt. So he Runs. A prize competition. for anybody in New York who can come up with a

41:44 Better slogan. Offering a hundred dollar prize for The winner. And they run it, they get lots of entries. They end up uh the winner is chosen and the the official motto of the New York Times is going to be

41:56 All the world's news. But not A school for scandal. Really rolls off the tongue, doesn't it? Funny, I like oxes a lot better. Yeah, he did too. So he's like that's nice, I'll pay you a hundred bucks, but I'm keeping my motto. So all the news that's fit to print. Still shows up in the upper corner of the New York Times print edition today, right?

42:16 And on the website. Which we will get to later. So he also comes up with sort of an informal credo for the company. and for the newsroom, which is to give the news impartially without fear or favor. And this is gonna come up later when we get to the trust. But that really is the the credo of

42:37 The organization in a very fundamental way. Yeah, and and it follows with so it is to give the news impartially without fear or favor, regardless of any party, sect, or interest involved. And that was a deliberate call out, particularly around party, uh, for the high, highly politically leaning papers of the time. Interesting, interesting. That uh I didn't see that because the um Well, where I got the quote from is gonna come back in a sec. Uh

43:06 That must have gotten dropped at some point. Yeah, he he specifically did that because the times which is hilarious, uh in a one eighty at this point was considered an organ of the democratic party. So funny. So it's like a little bit of like a

43:20 Hey, I'm gonna run this a different way, but I'm gonna say it kinda softly here, and I'm not gonna piss anybody off too much,'cause it's gonna sound reasonable the way that I'm putting it here. Yeah. Okay, so he's got the positioning down. We're gonna report the news impartially, without fear, without favor, with no preference for party

43:37 What about the price, though? So remember there were the penny papers back in the day that the new printing technology had enabled, and that was what the New York Daily Times sold for. By this time, probably because of the financial difficulties, they jacked the price of the paper up three hundred X to three cents and the world. There's inflation going on,'cause you know, this is what, forty, fifty years has gone by. Yeah, exactly. The World and The Journal were also selling at three cents, and And uh this is before the antitrust regulation. Pulitzer and Hearst were were colluding. They wanted to raise the price to five cents. And so they're they're like doing the sensationalism with the yellow journalism. It's only helping themselves, helping each other. They're like, Yeah, we're gonna raise the price. This is gonna be great.

44:23 And Do you know why Ox was so financially motivated? To sell more copies. Uh Well, I assume I was gonna talk in a sec about the

44:34 business model of newspaper. More as your circulation goes up, not only do you get the circulation rev the subscription revenues, you also get to sell a lot more advertising too. Yeah, there is definitely the like classic business model dynamic going on. There's one term in particular that uh was a part of the newspaper purchase that he cares deeply about personally. Oh, I didn't find this. This was if the newspaper is profitable for a certain number of years, don't quote me on this, but I think it was three years.

45:03 And he runs it profitably for three years. then he is able to unlock a new piece of ownership. It is it is shares that are held in escrow that are then transferred to him and he becomes the controlling owner right now he's just a minority owner. He gets to run the business, but he doesn't have control And so he desperately is trying to figure out a way, how can I make this thing profitable and keep it for thirty six months straight, which there was actually a funny misunderstanding where the previous owners of the Tim were trying to insist that it was three calendar years. Ochs was able to get it profitable for a thirty six month straight stint. And uh I think they ended up actually bringing in lawyers to arbitrate this. But yes, this is an attempt by Ox to say

45:46 I need to pull some crazy lever and I'm gonna drop the price in order to try and get circulation to the point where I can actually get this thing profitable enough to control it. I love it. To pull for it. playbook theme here. I mean, like, this is such an entrepreneurial story. Like when your back is against the wall and like you have to make something work and you have no resources and you're running out of money, like

46:09 That's when Genius happens, you know, and you're forced to be a Yeah. So You know, probably even more than the

46:18 This is what really makes the times. He cuts the price from three cents down to one cent. Which would seem crazy, like you're trying to make more money. Why would you cut the price? Uh

46:30 This Is Huge. Circulation goes, subscriptions go. through the roof. Because remember, the journal and the world they're Now three cents, they're trying to go to five cents. Like this is getting out of reach for your average person in New York.

46:46 Every day. And there was some interesting criticism going on at the time of sort of w that it wouldn't work. That you know, these uh ex there were papers that sold for one cent. But they were tabloids, you know, they were kind of trashy. And people were saying, Ox, you know, you're you're trying to this crazy move you're doing, the people who are reading those tabloids, the one cent things, they're not interested in your content. This business stuff, this political stuff. Yeah. And so what Ox did was he basically made the bet that I can steal share from my competitors. There's Plenty of people that want to read three cent news, but they will totally go to whoever's offering the three cent news at the one cent price. And he was right, and he stole a bunch of share and and the growth exploded when he dropped the price.

47:26 Totally. So grows three X in his first year back up to thirty thousand circulation by eighteen ninety nine it's at seventy six thousand so back above the seventy five thousand that it had been. Crosses a hundred thousand in nineteen oh one, two hundred thousand in nineteen twelve. And by the nineteen twenties, after World War One, he's up at over three quarters of a million circulation and is has become the dominant um not just paper in New York, but like

47:56 The Probably most prestigious, most respected, most widely known American journalistic. Organization. out there that's not a

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49:58 That Ben and David sent you. So we alluded to the business model a little bit and why circulation's so important. This dual revenue stream.

50:09 Nature of pa newspapers and the media business. It's just beautiful. It's like all the incentives are for you to

50:18 Make great content that gets more readers because obviously they pay for the newspaper being delivered to them. Which is a nice business, you know, it's like relatively lower margin uh compared to other media business parts of the business because

50:33 You gotta m print it and you gotta deliver it. Right. It's not all margin dollars the way that advertising is. Right, but advertising You know, you can have an ad sales department and as your circulation goes up and in particular Lee, as your circulation goes up amongst attractive demographics for

50:52 advertisers, I guess you might say like a growing, expanding middle class with lots of new disposable income. You're gonna do very, very well with No marginal costs on the advertising side. Yeah. The other crazy thing about the physical paper business is

51:06 Today we kind of think about like, well, you can be a free website that has ads, or you can be a paid website that has no ads. And obviously it's oversimplifying and there's lots of ways to do both. Um but There's nobody that's reading the paper for free. Everyone is either buying it on a newsstand or paying to have it delivered to their home or business. So It is an era of having your cake and eating it too, where you both have every single person who's reading paying, shy maybe some people who were reading it in a restaurant or something, and You're able to sell ads in every single one. And on top of that, here's sort of the like magic thing that Ox figured out that would later be sort of taken by the Wall Street Journal was it became the business newspaper of record.

51:45 Ox made a really big bet on we should be producing more business content and people will be willing to pay more for it because it is a you know either actually a business expense or it inspires them that they could sort of do more with their business. And so they were the first um big American newspaper to target businessmen, you know, at the time of business people now as uh as the demographic, which is just fascinating. sort of reading that and being like, Wait, that's that's the journal strategy. Totally. I mean when I was working at the journal This was before the Times implemented there.

52:17 Now very, very successful paywall. But we were the only You know. A news organization.

52:25 in the US that had a paywall digital content. And it was all because Most of the paid subscriptions were on expense accounts. Yeah. So

52:36 This was a super cool gem that I got from the research. So it's actually you know the the famous John Wanamaker quote about fifty percent of the money I spend on advertising is wasted. I just don't know which fifty percent. Yeah. That was actually stolen from Ox. No way So yeah, Watamaker, I don't know if they were friends or something, but um It was originally an ox quote in uh in nineteen sixteen, Ox said. I affirm that more than fifty percent, so more than fifty percent of money spent on advertising is squandered and is a sheer waste of printers ink. Wanamaker got a hold of that. He was an advertiser. He was a retailer in Philadelphia and uh and he turned it around to, you know, I know half the money I spend on advertising is wasted. I just can never find out which half. So

53:24 Super cool. But yeah, Ox becomes the premier newspaper man in uh New York, if not America, and if not the world. Before we pull too far forward from this time, there's one interesting sort of fun anecdote that Are you gonna talk about the headquarters? Yes. Yes, go for it.

53:40 So this is the beginning, you have more details on this than I do, I'm sure, but this is the beginning of the New York Times company's obsession with real estate. of sort of obsession of I want a really fancy headquarters, I want it in a really interesting place. Um, I mean, they've got these big printers. So like a big part of their business is actually a physical thing with distribution, which at some point they would move to other parts of New York and start to sort of have a separate newsroom from their but that's not the way it started. And In nineteen oh four, the newspaper f moved its headquarters to a building called the Times Tower at fourteen seventy five Broadway in what was then called Long Acre Square. Later renamed. Time Square Square. Half the New York Times. After the New York Times. So awesome.

54:25 Well do you know the other part of the story? No, keep it going. Okay, so when Ox moved the building to Long Acre Square in his new building. He uh of course wanted to make a show of this, you know, and never waste a marketing opportunity ever the entrepreneur. So he had pyrotechnicists Illuminate.

54:44 The new building with a fireworks show. Right around the holidays. When he moved there. Oh, is this the ball dropping? Yeah. And so That kind of becomes a thing. He does it for a couple of years and then and New Year's From nineteen oh seven to nineteen oh eight.

55:01 He has a big electric ball installed on top of the building. Oh, it's amazing. Boom, dropping the ball. It's the New York Times. Times Square, New York Times. Dropping the ball on New Year's Eve, it's all Hate off axe. Wow. Wow.

55:17 I didn't really reel like I should have known Times Square like duh, but I I I I maybe I knew that at some point in my past. It's like it's like uh it's like air. You're like, Oh yeah, I don't know, I don't know if it's called Times Square'cause it's called Tim Square. Like The the stock the stock tickers too were originally the New York Times that that implemented that on the outside of their building before I wanna say Dow Jones took a Just an incredible You know, entrepreneurial story. We're gonna move on to the next chapters here. Okay. So Two years after

55:47 That press release, Ox does pass away. In nineteen thirty five. But There's A problem though, which is Ox only had one child and

55:59 And his child Which he viewed as a problem for succession. was a daughter. Yeah, I mean this is some hardcore sexism. hard hardcore. So

56:12 Iphigen, his daughter Was An incredible woman. And if she had been born Probably thirty years later, which is when Catherine Graham was born, she would have been

56:24 Catherine Graham at the Washington Post. Before Catherine Graham. But There was just kinda no Countenancing by Adolph or anyone else involved in the company.

56:35 Yeah. She should take it over. Well Adolf also basically just shirked responsibility on this and didn't want to be the person to explicitly say, I do not give it to my daughter. So he just like this is a a New York magazine quote from a a great article on the family says ultimately

56:51 Ox punted on the decision. When he died in nineteen thirty five, his will essentially left it to, and I'm sure you'll explain these people, Arthur, Julius, and Iphigen to work it out amongst themselves. Yeah. Yeah, they each had a vote. on who would become the next publisher. So Arthur Salzberger was Iphigen's uh husband.

57:11 Uh who would become the next publisher. And Julius was I believe Ox's nephew, who was also working in the business, had sort of a legitimate claim to the throne, so to speak.

57:26 And I believe the story is that Ox set it up this way. that each of the three of them had a vote because he wanted Ifijine He wanted to essentially Make sure that Arthur was a good husband to her because she

57:43 had the deciding Though between him and her cousin to be the publisher. Uh which is both like really weird and sexist and kind of strange, but also like super craft, you know, and uh style. building up of ox we've done. This is not the only time throughout history, but it will be the first sort of part of

58:05 the New York Times' history where you sort of have to look at it with a squinty eye and go, Ooh, that's a little bit of a black mark. Yeah. So if you like so she went to Barnard and was college educated, she double majored in economics and history. She was super, super smart, as you would expect of like the only child of Adolf Ox. And it's hard to tell exactly what she wanted, but some accounts say she did want to. Yeah. Publisher.

58:33 Unfortunately that wasn't in the cards. But she remained on the bank. board of the company for Pretty much her whole life. She lived to be ninety eight years old. She didn't die until nineteen ninety. And there's some debate on this. You know, people might know

58:48 uh our audience may know the sort of nickname of the times is the gray lady And there's multiple sort of origin stories of the Grey Lady nickname. Did it be did it later become the good grey lady, or where does good come in? Oh maybe that's part of it. Uh so I think the origin is the Bank of England was called the Good lady or something like that. And so it sort of borrowed from that.

59:12 Some people say the grey came from like looking at the paper. It's a bunch of gray newsprint. It's a grey paper. It's what it became the great lady. Uh alternatively though. Ivy Jean is the Grey Lady. Uh she was a presence on the board and sort of the um you know, the link to ox and the uh

59:30 uh moral fiber, if you will, of the company for You know, ninety Years until nineteen ninety. Crazy. And this is really the introducing the very first of many Uh not necessarily outwardly contentious, but inwardly contentious decisions that happen. Yes. The New York magazine quote continues from earlier Iphigene being the deciding vote supported her husband, thus cleaving a fault line in the family that was never repaired.

1:00:00 And That Y you can imagine generations go by, this thing really starts to compound because there starts to be you know, massive numbers of cousins who are, you know, the same way related to Adolph that the people who end up sort of succeeding Adolf and you know five generations later, they're sort of by blood the same amount related, but

1:00:22 theirs was not sort of the chosen bloodline to pass down the paper through. Yeah. And It has always been a Male air.

1:00:31 That has become the publisher now through five generations, even though there are plenty of daughters in the family. So You know, oxcrafty like he is. He sort of His um So Gay Talis, the great writer from the

1:00:47 fifties, sixties, seventies, uh, who actually worked as a reporter at the New York Times for a while. He wrote sort of the definitive um book about the New York Times in in uh I think it came out in nineteen sixty nine called The Kingdom and the Power. Which I don't think the family loved. Like this one I was reading the The Trust from about right around year two thousand refers to the Kingdom of the Power. And I think he was always after he released that kept it a little bit of an arm's length. Yeah. So he writes about this. He says how long the times would survive would depend largely on how well Ox's heirs got along in the decades ahead. He knows this. Nothing would crumble his foundation faster than family squabbles, selfish ambition, or short sighted goals. His successors would have to make money, but not be enticed by it.

1:01:31 have to keep up with the trends but not be carried away by them. We'd have to hire talented people, but not People so talented or egocentric that they could become too special as writers or indispensable as editors. Or or else they'll go start a sub stack. Yeah. Exactly. Thank God Substack didn't exist in uh in those days or what would Adolf have done?

1:01:51 Um The times would go on indefinitely, he hoped, towering over all individuals and groups in its employee, and his family would work together, repressing any personal animosity for the greater good, and if possible, choose mates in marriage who would also be wed. Yeah. So how does he set this up? He creates this trust.

1:02:13 that goes to Ify Jean and Arthur and their descendants. So we don't have the details of the the legal documents of the original trust. But it was recast a few times as generational transfers happen. And I was able to get a hold of from the uh proxy statement, I think from the nineteen ninety, maybe 10K of the New York Times. The proxy statement. The

1:02:37 Some of the language in the nineteen eighty six trusts. There were then several trusts amongst branches of the family, but they were all linked together. This is what it says in the organizing documents of the trust. The trustees of each nineteen eighty six trust, subject to limited exceptions described below, are directed to retain The class B common stock. Held in the trust. And not to sell

1:03:02 distribute or convert such shares into class A common stock. And To vote. such class B common stock against any merger. sale of assets or other transaction pursuant to which control of the New York Times passes from the trustees

1:03:19 Unless they unanimously determine That the primary objective of the trust, which is to maintain the editorial independence and integrity of the New York Times, and to continue it as an independent newspaper entirely here it is, entirely fearless. free of ulterior influence and unselfishly devoted to the public welfare. Can be better achieved by a sale distribution, blah blah blah blah blah. Wait, so it's it its primary purpose. The primary purpose of the family trust is to ensure

1:03:50 Yes. To ensure one, that the family continues to own the New York Times. And two that the mission of the New York Times to

1:04:02 continue as an independent newspaper, entirely fearless, free of ulterior influence, and unselfishly devoted to public welfare. That is the purpose of the show. So he sets this up so that all of his descendants In perpetuity. The only way they can maintain The wealth. associated with the times and their ownership of the times and all of the, you know

1:04:24 uh dividends at the time, but you know, uh wealth that comes with it. is by not selling it and by supporting this mission and so like anything that goes against that would violate that. Oh, that's so fascinating. It's crazy that you can't r I mean, maybe they can and we just don't know, but like that y he can do that and it it survives him. Like that, you know, he can decide

1:04:49 that my wealth and the wealth created by this thing that I started or bought and sort of restarted. Can only be inherited under these circumstances. Yeah. Pretty crazy. And you know, the family must, I think. support it because the trust have been redone a few times, but they

1:05:05 Dove. Yeah, I think there's there's like eight family members who comprise a board right now, and th that they sort of make the decisions for the, you know, dozens and dozens and dozens of numbers of cousins that there are now. Yeah. Crazy. So okay. So Salzberger takes over in nineteen thirty five. Uh he remains publisher until nineteen sixty one. He does many things. He's kind of a you know, he's a great publisher and stored at the times, sort of transitional from the Ox period to more modern uh New York Times. He adds he makes it a little more readable, the paper. Uh he adds a style section and the crossword puzzle. He expands distribution.

1:05:43 But it's really during World War Two, uh, which is during his time as uh as publisher that I would say Probably is both like the Best. Of

1:05:53 The times history. And also the worst all in in World War Two that um We should talk about it. So you know, the best is that Plenty the so the raw materials for

1:06:05 newspaper production were rationed during the war, you know, ink and Paper and you know, material and uh et cetera. Um So there was only limited space that newspapers could publish. Most newspapers decided to Cut back on reporting and

1:06:19 Keep their advertising load. The times. vastly cut back on advertising and Upt the war reporting. And really became like

1:06:28 the foremost kind of chronicler of World War Two. Which this is definitely a playbook thing for them that I don't know if they have intentionally done this in modern eras because they learned from this time when it sort of went well for them, but the Times now has a pattern of sort of Buying low when others are are sort of selling. And um, in particular, investing in high quality journalism when the industry is going through, you know, terrible financial times. Totally, totally. And famously as we'll get to, they did not lay off any reporting staff uh in two thousand eight, two thousand nine.

1:07:04 Uh when every other paper did. So this culminates in this is amazing. Um Science reporter for the Times, William Lawrence, is the only journalist given access to the Manhattan Project, uh, as it's going on during the war. And he ultimately writes In the times and then I belief books afterwards, the the sort of the official history of the Manhattan Project. Uh, and he's the only journalist uh that witnesses the dropping of the bomb in in Nagasaki.

1:07:31 When he witnesses it like he was on a plane, I don't know. I guess he must have been in the plane, I don't know for sure, but um pretty incredible. Totally incredible. So that's sort of like the best of the times during this period. Unfortunately. You know, re reporting on us and our

1:07:52 You know. uh uh neither of us are actual historians and and neither of us are passing judgment on on obviously dropping the atomic bomb, but like Gosh. the just the absolute last thing that any powerful nation wants to sort of have to do and for the times to be the people there with literally the front row seat is just

1:08:12 It's heavy. Yeah. Seriously. Speaking of Heavy.

1:08:18 The times. Yeah, and they would say well I'll quote from their own reporting here on their 150th anniversary in two thousand one. The Holocaust. Was

1:08:28 In contrast to Yeah. in America during World War Two. The Times basically ignored the Holocaust. And

1:08:38 The reason that they did As we You do discuss. Doc's family and the Salzberger family were Jewish families that is a Jewish family that controls the paper. They were paranoid, particularly Arthur Selsberger, about being known as a

1:08:55 Jewish newspaper, Jewish family inviting, you know. Prejudice bias discrimination against the paper. And so they were rabid about not wanting to seem too parochial or um bias towards Jews and so they Even though

1:09:11 You know, reporters knew, editors knew what was happening in the Holocaust. They Didn't report on it. And in fact, you know, they famously Talk about four hundred thousand. I believe they say Europeans killed by the Nazis. Those are four hundred thousand Jews that they changed. Oh they reported and used the word Europeans.

1:09:29 Instead of G's. Yeah. I mean, how many lives could have been saved if the Times had had done that sooner? I mean, it's a it's a really striking example of fear of anti Semitic backlash. preventing speaking out about anti Semitism. Uh and obviously it doesn't just have to be anti semitism, it's gonna be applied to all injustice, but Yeah, the the idea that both

1:09:51 the Sulzberger family would come under fire, but also that the newspaper would lose credibility, the the sort of fear of that loss of credibility leading to Yeah, turning a blind eye at some of the most horrific events in human history. Totally. So um

1:10:07 in two thousand one and the hundred fiftieth anniversary issue. Former executive editor at the time, Max Frankel wrote. Sort of the title article on that and uh And he says.

1:10:18 Then there was failure none greater than the staggering, staining failure of the New York Times to depict Hitler's methodical extermination of the Jews of Europe. has a horror beyond all other horrors in World War Two. A Nazi war within the war crying out for illumination. That Obviously the times did not chose not to illuminate.

1:10:39 So Yeah, heavy stuff. Yeah, and listeners, I will say like This is something that David and I both sort of realized in the research and my initial reaction was like Ooh, do we really want to talk about this on this episode? It's it's heavy, you know, it's different than us talking about tech multiples. And

1:10:56 It is commendable that the times albeit fifty years later Like did self reflect on this. And like realize that hey, w we gotta own up to this.

1:11:08 And maybe they they did in earlier times as well, but frankly, it reflects positively on an organization, especially one that was owned by the same family and the same people and all those people were still alive to be self critical. And for us, frankly, to not have to go out on a limb on this episode and and criticize the times, but to be able to just quote them being critical of themselves, um Yeah, it's meaningful. Yeah.

1:11:32 And you know While we're on the subject of criticism of the times too. You know, I think it's obvious that we also need to say here. We've talked a little bit about Discrimination against. Women within the company.

1:11:43 also against people of color. Um so it was not only If you didn't who who was obviously qualified to become the publisher that, you know, it was her husband that she was passed over for her husband. the first woman reporter joined the Times in nineteen twelve, Jane Grant, to report on society. Um She had to fight her way into the city staff.

1:12:05 And then like the management made it clear to her, like you will never be an editor here. Like that's just not gonna happen. She ended up Leaving the organization started New York magazine. And then became a leader in the women's rights movement. So um you know, screw you guys. And then women for you know decades were relegated to basically just the society and style sections. Um

1:12:27 The New York Times wouldn't hire its first black reporter until nineteen forty five. That person wouldn't even last. That long. Then in seventy four women reporters filed a class action lawsuit against the Times for discrimination and wage bias.

1:12:42 In nineteen seventy seven, Minardi reporters sued for the same thing, the time settled on both of those cases. But Today of course. Dean Becket is a black man, the executive editor, the CEO of the Times is a woman. Last year they won the Pulitzer for the sixteen nineteen project. You know, things are different now, but you know, we have to point out that uh and I think the Times would point out too that

1:13:03 It was not always a rosy picture. Yeah. Okay, back to Salisburger. He presides through all of this. In nineteen sixty one, he becomes infirmed and he is succeeded again, his oldest child, uh his and if you're child is a daughter, by her husband, Orville Dreyfus. This guy, Orville Dreyfus, is the Timothy Dalton of the New York Times family succession. Like he is definitely, for any James Bond fans out there, like he's the one that was kind of like

1:13:36 in one or two movies and you're like, Wait, that guy played James Bond and then quickly you're on to the next one. Like Gillimio. Yeah. No he's the Gilamilio. That's a that's an even better comparison. Yeah. Dryfus lasted two years. Two years, unfortunately,'cause he died unexpectedly. But so h his wife, you know, Marion, um Salisbury Nefitine's daughter, like she came up with the idea for People magazine. So like all of these women involved at the time are like total ballers. Maybe here's an idea. Keep them. Yeah, exactly. So when Dreyfus dies in sixty three

1:14:10 Then The youngest Arthur and Effie Jean's youngest child, who is their only son. Arthur Ox. A nicknamed Punch.

1:14:19 Salzburger. succeeds him as publisher. And because they're all a something Solzberger, we're just gonna call Punch the rest of the episode. He's punching. Like Arthur.

1:14:30 Or we've got eight off ox. Then we've got Arthur Salzburg. Then we've got Punch. Well, I mean we had dry fist, but Timothy Dalton, Gil Emilios got punch. Then we'll have

1:14:41 Punch's son who we'll call Junior, who is a Arthur. Arthur Salzberger Junior. Yeah. Right? After after him. So we'll just call him Junior. And then there's A G, who's the publisher today. Yes, exactly. All A something Solomon. For everyone keeping score at home. Uh so

1:14:59 Punch. ends up being publisher sort of like his father for um almost thirty years. He would remain publisher until nineteen ninety two. And He really

1:15:11 Led the times through. A lot of change, but it was sixty three when he took over and of course like what is a huge, huge change besides all the change that's happening in the sixties in America. Television is out there. So like Not only does the Times have a competitor, like the whole medium has a

1:15:30 Competitor now. Right. And They Realized and I I I think as best as I can tell, a lot of this was was

1:15:39 Punch. T V news was that They needed Not just to sort of report the facts anymore, like what

1:15:48 The differentiation that newspapers had was they could go deeper. They were like the acquired of news reporting. They could interpret the facts and the meaning behind the facts and uh tell people why this is important and why this is happening and That was really A big

1:16:05 Sort of. change, I think, for the Times newsroom because, you know, if you think back to To ox. Uh it was all about like Just the facts. Impartial, you know, no Uh, no judgment and

1:16:18 You know, here you can't help but introduce some judgment, but like There's a service of like explaining meaning as well. Right. And and not just on the opinion page, but choosing w what context to put around a story in just reporting. In in reporting the story, you know, you're you're introducing your own

1:16:36 bias your own judgment in choosing what context to include around the facts. Yep. So Punch. develops a saying that I actually

1:16:45 Uh A G, the current publisher, you know, uh I I read a quote from him uh that he still references uh of you that People don't come to the times for news. They come for judgment. So in the Kingdom and the Power, Gay Talis writes of course the trick

1:17:01 was to do this without editorializing. While there was a difference between interpreting and editorializing, then executive editor uh Cat Lidge Turner. New that the line between the two was

1:17:14 Sometimes thin. And if the times was to achieve the new goal and yet avoid making a mockery of Ox's motto about objectivity, it had to have a more vigilant copy desk, more unchallenged authority in New York, and here again rose the problem of power. Who was to decide? What? Okay. Where?

1:17:31 So the Times invests a lot more in copy editing editors. This is when they introduce the op ed page opposite the editorial page. Uh to bring in outside views. Into the times. As well. We we should also say classically the

1:17:47 person leading the newsroom at the New York Times has traditionally not been a member of the family to intentionally sort of create that distance between the publisher, you know, the the the people responsible for the Times as a business, and of course stewarding its mission are not actually the people making the calls on You know what? stories run on our paper and which ones don't. Now, of course, in practice, like the publisher family does actually own the paper and so they can sort of make a final call, but that arm's length uh is intentionally created.

1:18:17 Yep. So that was great. I think what was less great You know, it's sort of like okay. Give like a maybe a C grade to punch during his uh tenure. With

1:18:29 From a capital allocation perspective. You know, what you really want to do here is like differentiate versus this new medium. But you also want to invest in the new medium. And so they realize this and they along with many other newspaper families in the sixties, seventies, eighties start Buying.

1:18:47 Television stations. So the company actually back in nineteen forty four had bought New York. But Punch realizes

1:18:56 probably with the help of an encouragement of some bankers on Wall Street, that they should go buy Some televisions and some Television news properties. Plus like this is conglomerate times, like let's diversify. Go, go, go. So this is when the company goes public in nineteen sixty nine.

1:19:14 on the American Stock Exchange. With the dual class chair structure where the family still retains voting control, then I think the right to elect seventy percent of the board, but exponentially larger voting control but their shares. But the reason they went public, I had thought It was like a

1:19:31 Family six. Yeah, yeah. So I had thought the reason they went public was probably just as there were more generations, you needed to divide the wealth and ownership. No, the reason they went public was to get a liquid public stock to make acquisitions with. Oh no way. Yeah. Yeah, I would have figured the same thing, but but you're right, it's always been a dividend stock and so they were always able to pay out to all the errors. just with dividends. So they wouldn't have needed to go public just for liquidity. Yep. So this is why they go public. So they buy a bunch of

1:20:03 T V stations, um bunch of affiliates in Alabama, Arkansas, Iowa, Pennsylvania, Oklahoma, and Virginia. They collectively name this the broadcast media group within the company. Unfortunately, this is like that's fine. Like they end up selling the broadcast media group to um I think Oakill maybe private equity firm in uh two thousand seven for about six hundred million dollars. So like yeah, you know. Fine. Um

1:20:29 The huge mistake they make is they don't get into cable, though. And as we've chronicled Many times on this show. Yeah, man. Cable was the internet before the internet. That's where the money was. So Punch. Steps down as publisher in nineteen ninety two after a almost thirty year run. And as we said, his son

1:20:49 Junior succeeds him. Which by the way, what a time to step down. Like nineteen ninety two, the internet is starting to like transition out from ARPANET to become like a little bit of a consumer thing. Yep. Like It would be nice. to have a transition to someone here who's not gonna get completely blindsided by what's coming. That is not what they did. They got completely blindsided by what's coming. Not to mention they were heavied up on some crazy assets like the David, you you mentioned

1:21:17 T V stations but like all these newspapers, uh there's maybe like twenty different local newspapers that they had picked up and then they would continue to pick up in the nineties. There's magazines some crazy stuff. Okay. All right. Cause like the the they this diversification goes way too far. Totally. So I mean I think it It's maybe unfair. It probably I think it's unfair to say they were blindsided by the internet.

1:21:43 They definitely knew it was coming. Junior knew it was coming. And they developed a whole strategy around it. And so in nine June nineteen ninety four, they partner with AOL. And launch At times.

1:21:57 the at times channel on on AOL. Yeah. Which is garbage. Um But in nineteen ninety five, they hire this guy named Martin Niesenholz to come in and run a whole new electronic media division within the company. Martin had started the Ad Agency Ogee and Mathers interactive marketing group. And actually Brian McCullough over at the Internet History Podcast did a great episode with uh with Martin that we'll link to in the sources that you should go check out. Great interview with him.

1:22:27 Wait, let me defend my my blindsided thing. So here's yeah, go for it. Like a couple couple of things to know. In nineteen eighty three The Times decided that it was not important to have electronic rights. to their content. So they sold it to Lexus Nexus. The New York Times didn't own the own rights to their content. So Like

1:22:47 I it's okay, in nineteen eighty three you couldn't see the internet coming fine. And even in the early nineties, you weren't sure if you're gonna make a bet on the World Wide Web or if you should make a bet on CopyServe or AOL. It was specifically the archive the rights to the archives. So Uh they were able with some negotiation To put breaking not breaking but like

1:23:06 News current site. And they did in in ninety four ultimately get the rights back. And then I think in nineteen ninety six that's when NYTimes.com went up for the first time. Yep, totally. So when Niesenholz comes in, he's like, Holy crap, we gotta work through all these rights issues. So that was part of it. They also had to decide on the business model. So the plan, this is this is fascinating. The original plan was to charge for NY Times dot com.

1:23:38 uh charge digital subscriptions. And Easenholz said We can't charge. Because this product sucks. And like who's gonna pay for this? So when they do launch the site in January. Ninety six, the the real site, not the AOL site. Um

1:23:54 So there's no CMS, there's no content management system. What they do they literally every day they create an image, like a like a like a Jeff. And and Wait, wait, wait, wait, wait. I'm sorry, we have to stop the episode.

1:24:07 You're a Jif person? You don't say gif? Oh yeah, I do say give. Oh. All right. Okay. Well like we we can uh we'll still keep doing the pot, I guess. Okay, okay, okay. Sorry, sorry, I just got so carried away. I got carried away by the fact that they literally make a gif.

1:24:25 That they like create in the art department. And then put the like if you go to new MY Times dot com, it loads A gift. Just as like the and it's like yeah, that's that's the first version. And I imagine like if you're using

1:24:40 Like I don't it's not page maker, but whatever they're sort of like they probably r d ha use robust software to do the page layout of the physical paper. And so Like You know, you're not necessarily gonna be super HTML savvy and figure out how to render in a web appropriate way. So you're like, Well, look, we put all this energy into laying out the type and laying out the articles and the columns and the column width and all this stuff. Like, let's just export from that and we'll put that on the web. Yep. And um

1:25:09 So he's like we can't charge for this. It's crap. Uh but also like the other point was like he's like we we gotta build an audience. Like we gotta train people to come to NYTimes.com. Like otherwise Why would anybody come here, especially if they got a Pay us money. So They go free.

1:25:27 And of course all sorts of long term consequences of that. Would the internet have been a different place if they had decided to go paid? Right off the bat.'Cause for a whole decade and a half after that, no one could do anything paid on the internet. Like no there was no such thing as paid content. Yeah, yeah, good point. Um and they still have a hardcore paywall. But the uh But again it was all'cause of B to B. Like that was you know, we would always pat ourselves on the back, but it's like hey, the reality is these are all corporates that are paying for this stuff on expensive. These aren't consumers who are browsing the web and deciding, oh, I should start paying because of this paywall. it wasn't till uh we'll get there, but twenty eleven that the New York Times sort of introduced their their sort of concept of their metered paywall. But I I just can't help but think that

1:26:10 If the Times and a few other early content websites had made a different decision, it could have been culturally acceptable for existing media outlets to charge. on the web in a way that it just it just wasn't. Yeah. It could have been very different. So w why do I argue that um

1:26:28 It's not totally right to say they were blindsided by this. So A, they they did all this work, but the bigger reason I think is that Look, this was still so early in the internet's lifetime, even with the you know, the internet boom in nineteen eighty nine, like everything that was going on here kinda didn't matter. They missed the boat. Big time on cable news. Uh uh that I was referring to kinda at the end of

1:26:52 Punches tenure. So While they're All this is going on just a couple blocks away over at twelve eleven Avenue of the Americas. Ruper Murdoch. He knows news.

1:27:07 And He's looking out at everything going on this way in the mid nineties. And he's like, holy crap, like I see ESPN. I see how valuable that is. I see how valuable CNN is. And I see a bunch of problems with it and a bunch of opportunities to do Better and different.

1:27:25 I'm gonna build and launch Fox News. And uh So In Uh nineteen eighty five Newscorp had bought

1:27:33 Twentieth Century Fox, the studio. They also own and run Sky in the UK. And so they had a twenty four hour news network, Sky News in the UK. So we can bring this to America. So in nineteen eighty six

1:27:46 They announce That They're gonna start a new twenty four hour cable news network, Fox News. And Rupert says is quoted, The appetite for news, particularly news that explains to people how it affects them, is growing enormously on

1:28:01 Yeah. And so he sees this opportunity. And then certainly the other part of what he sees, which the Times, you know, would never do given the Oc's uh mission of the company as we talked about, is but Murdoch brilliantly sees is there's an opportunity to create a news organization targeted for conservatives. out there. And uh like CNN, the media as a whole, certainly New York Times People believed were

1:28:27 left leaning and liberal leaning. And he thought, Man, there's this whole market out there. So he hires Roger Ailes from C N B C to come over and be the first CO of a long time. I didn't know Ayles was CNBC before. Yeah, he was at C N B C, but before he was at C N B C This is crazy. I didn't know this until I looked it up. I used to work in the building. Ails. was a Republican Party media strategist. So part of Murdoch's plan is like I'm gonna target Republicans, uh and conservatives to watch my network. Um

1:28:57 Ailes wasn't just any media strategist for the Republicans. He was the guy who Nixon tapped. to help Nixon with his television presence. for the second time when he successfully ran for president. Cause Nixon when he ran against Kennedy got destroyed in the T V debate. He was like sweaty and like he's obviously not as handsome as J F So he brought in Roger Ailes as his like fixer for the second go around to like Do well on TV.

1:29:28 So that's who Murdoch goes and taps to start. Fox News. Small world. And then he does something even more bold. He he's like the anti Adolph Ox. He goes to the cable systems, you know.

1:29:42 Usually as we've chronicled on acquired. The beauty of the cable. network model was You got paid a subscriber fee by the cable systems to carry you and you sold advertising kinda just like newspapers. Murdoch goes out to all the big cable systems and he's like, Hey, I'll tell you what

1:29:59 I'll pay you. To carry Fox to give me like prime placement in your channel lineup. That's like the opposite of the SPN's amazing cash cow business model. Well The idea is that over time as it becomes, you know, people get You know

1:30:14 become loyal to Fox News that he'll be able to flip this. And of course he does. So to say like this works is I understand. So brilliant. Pay for the distribution to start and then once people are more loyal to you than the cable company, then you can flip it. And start you know.

1:30:33 Uh all the carriage debates and whatnot, and you know, hey, we're gonna pull Fox News from, you know, Comcast if you don't write in and tell them, you know, how upset you're gonna be. Right. Et cetera. So This is incredible. I I I knew this from working at Newscorp like that

1:30:49 Fox News was a great business. It is an incredible business. So By two thousand two, so that's eight years after launch, Fox News is the number one newswork network on TV becomes number one past the CNN. It remains number one every single week from then for literally nineteen straight years. Until January of this year, after the Capitol riots. Wedding uh

1:31:15 It lost a lot of viewers. Like literally nineteen straight years, it is the most watched news network On American television. That is unbelievable. Yeah. So whatever you think of Fox News as an organization, and like w we're not here to judge one way or the other

1:31:32 It brings in so this is Fox's total cable network segment, of which Fox News is by far the lion's share. Uh in twenty nineteen generated five point four billion dollars in revenue and two and a half billion dollars of EBITDA. So that's like a fifty percent Oh my God. Ebata margin. That's that's Facebook good. Yeah. I just found this so interesting, like

1:31:55 'Cause in so many ways now, you know, people think of the New York Times on one end and Fox News on the other end. Like Even though the New York Times would absolutely assert we are in the center and we are in in it on no end. Totally. But this is like an ESPN level business that the times would have built something different, but I think, you know, look, they got into

1:32:16 Broadcast television, they were getting into the internet, missing the boat on the opportunity for cable news, uh, was huge here. Yeah, it's interesting. Like I never if you would if you uh hadn't told me about all the diversification that the New York Times had done. And I you knew of it today, just the way they are sort of single brand, single pseudo single product company and said, Should the New York Times go into cable or should they have gone into cable? I'd be like, No, like that's not what they do. It's not their core competency. Like they barely do video on their website. and their mobile app well, like I they definitely shouldn't do that. But

1:32:52 Clearly. They were trying stuff and they were willing to do stuff like this and just missed it. Yep. Yeah. They frankly just missed it. And d did they miss it? Like

1:33:03 One question I have is the times Doesn't have it in um To do something outwardly and intentionally partisan. And so

1:33:13 Maybe they saw the opportunity but didn't believe that it was there for a centrist That could be a Uh you know. Existed and Does very well. Um

1:33:26 So I think that it it could have been different and it would I think be very unlikely that the Times would have said Oh, okay, great. We're gonna make a cable network, but we're gonna target Liberals, you know, specifically. Right. So It's certainly complicated, but I just like I wanted to go dive into the research of Fox News because I was like, all right, well like let's

1:33:48 People compare these two organizations so often. I want to find out the history. And what just like hit me over the head was again, whatever you think of it. Whether you watch it or don't watch it, it is an unbelievable business. So it has a fifty percent EBITDA margin. How much revenue did you say it does? Uh close to six billion. So that's

1:34:08 Over three X the times his revenue today. Yep. Now that does include like Fox Business and some of the other spin-offs. Some Fox Sports, I think that they didn't spin off is still in there, but like the vast majority of that is Fox News. I don't think if you would have a I I this shows what a bubble I'm in, but like I don't think if you would have asked me what's a bigger business that I would have told you Fox News. Yeah. Yeah, it's a bigger business. Crazy. So meanwhile, the other side of the coin here for the New York Times company missing the cable news opportunity. They made some.

1:34:43 Ben you alluded to this. Shall we say poor capital allocation decisions during the nineties and two thousands. So in nineteen ninety three. They purchased the Boston Globe for one point one billion Billion dollars. For the globe.

1:34:59 And I think they got a couple small regional papers as well with that. Um In nineteen ninety four they did This is the other crazy thing. They did get into the cable network. industry. By buying a forty percent interest

1:35:13 in the popcorn channel. Have you ever heard of the Popcorn Channel Ben? We all made some mistakes in the nineties. Oh my God. Do you know what it was? No. This is so movie I well, that's what I thought like popcorn channel, maybe it's like a HBO knockoff or something. This is a cable network. It's so

1:35:31 Reason for existence was it showed previews. Like movie previews. And displayed local, you know, movie times. Oh my God. Why the New York Times invest in this is beyond me. Then in two thousand one They team up with John Henry

1:35:46 In Boston to buy A seventeen point seven five percent stake in the Boston Red Sox. So the New York Times And Close to twenty percent of the Red Sox. Red Sox. Yeah, that's a good idea. I think didn't they also take a minority interest in Fenway Park itself? Yeah, that was also part of the the madness. Oh madness. I think that and there was like uh some kind of NASCAR team that they owned half of

1:36:14 Like this is when they really went ham. They they um They bought golf digest, golf world, like a bunch of magazines, like Family Circle, Snow Country. I mean, it was like Yeah. What this is like a what were they thinking? And and really like fifteen to twenty local papers. Yeah. Like the Santa Barbara news press, the press democrat. Gainesville's paper, like it I

1:36:40 It's like Cap City's gone wrong. The amount of fees that investment bankers must have been making off the Salisburger family at that point in time, like Woof. Um In March. But it was it was juicing the stock. And it was juicing revenue, to be to be totally fair. Like the Times today has less revenue than it had during this go go era.

1:37:02 A hundred percent. They also acquire about.com for four hundred and ten million in uh March two thousand five. Uh Famed tech company at about.com. Yeah. So I mean all of this, it's easy to dunk on these things. But probably the worst Offensive. I'm gonna have it modelled out exactly.

1:37:23 the financial impact of this, but uh It kinda blew my mind. Throughout the nineties and two thousands. They bought back almost three billion dollars of stock that they financed with debt. So they load up the company with debt.

1:37:39 And buy back three billion dollars of stock over the course of a decade. I didn't know you could buy back stock with debt. Like I I mean I guess. So mechanically what you're what you're sort of asserting if you're doing that is that my company is so undervalued right now and we are going to be so profitable in the near future that I think it's actually less dilutive for my shareholders. If I Take on a bunch of debt.

1:38:08 to buy back shares stock to to sort of like undilute uh shareholders are reverse dilution anti dilute. lunacy about this is um You know, A all of that. And the company was, of course massively cash flow positive,'cause you know, it's like this is not a this a longstanding business. And so the idea was you could use the cash flow to pay down debt over time.

1:38:32 I'd finance these transactions. I mean it's just a private equity play. But because of the way the trust is set up. The family can't sell Share. So the way the family monetizes the business is through dividends. So Even if like you can't even make the argument that they were just doing this out of self interest for the family because the family wasn't seeing any

1:38:51 Of the benefit of the stock. buybacks. Like it's just mass. You know, like you're you're they're cutting into the amount of cash flow that they could use for dividends. Oh, that's interesting. Well, they're they're benefiting they're benefiting in an illiquid way'cause the value of their stock is going up because of the buybacks. Yes, but they can't. Right, right, right. But the yeah, but the but ostensibly the dividend per share could go up. Uh but you're right, but you're using money. It actually isn't gonna go up because you're

1:39:21 Yeah. I mean I guess they could Personally, borrow against the value of their stock. But anyway, it's just Uh, somebody was smoking something around the New York Times uh boardroom.

1:39:33 At this point in time. So when does Carlos Slim come into the picture? So This keeps going until the mid two thousands and even around like two thousand six or so, everybody's like This is fine, you know, the company's spitting off three, three and a half billion dollars of revenue

1:39:49 couple hundred million dollars of operating cash flow, we're plowing that into debt service. Fine. And keep in mind two thousand five through two thousand eight, they're making over three billion dollars a year in revenue. Like today they do one point eight. So like Lots of revenue coming in.

1:40:06 Lots of revenue coming in. And then we talked about the headquarters building, you know, pride always comes before the fall. Anytime you see a company build a flashy new headquarters Immediately your radar should go off. Uh in two thousand seven they move into a brand new eight hundred and fifty million dollar Headquarters building uh just off Times Square by the Port Authority. Called the New York Times building.

1:40:29 Uh designed by Renzo Piano, who designed the Pompidou in Paris and the Shard in London. Okay. They move in in two thousand seven. Real great time, guys. Uh,'cause then the financial crisis hits the next year, which of course also becomes a newspaper crisis because A Advertising revenue completely dries up. And B, people are like losing their homes and canceling their newspaper subscriptions.

1:40:55 So It's Brutal out there over the course of the next two years. Yeah, they would lose twenty five percent of their revenue in two years.

1:41:05 Yeah. The rise before the fall. Yeah. So compound this macroeconomic crisis going on with The smartphone launching exactly one year before the financial crisis, the app store coming the same year of the financial crisis, massive acceleration not only of internet adoption, but of smartphone adoption. And

1:41:24 The New York Times. not only has their they they've they've to give him credit, they've started a digital newsroom. Um, it is in a different building. Than the actual newsroom. It is it is that it's not. Correct. And the newsroom is so separate from sort of thinking with a business mindset that they refer to anyone who is not a journalist at the times

1:41:49 As the business side. So they've they've like think about digital product people, digital like designers, product designers who are building the mobile website business side, like programmers, business side. Everything is like if you're not a a journalist, you're on the business side. And here you are suddenly thrust into this new era where you're in the worst financial shape you've ever been in as a company. You own all these things. The technology landscapes is changing out from underneath you, and you have basically built an internal. I I I don't know what the right phrase is, but you've got a massive chasm between what you perceive as the core competency of business producing

1:42:25 print journalism and everything else over on the business side and not thinking about any distribution And I'm sure they're thinking about it, but not in a serious way as the the sort of crisis of the business, other than how do we sell more papers? Yeah. And you've now just missed not one but two technology waves with cable and The internet, you know, arguably.

1:42:47 So In two thousand nine. is when the shoe drops. So January two thousand nine. They announce a two hundred and fifty million dollar

1:42:57 debt deal with Carlos Slim. Uh the billionaire, the Mexican billionaire, one of the wealthiest uh people in the world. And his primary business is telecom, right? Telecom, yep. So he interestingly, I didn't realize this, he already owned seven percent of the company that he had just been Buying in the public markets.

1:43:15 Uh They do this two hundred fifty million dollar debt deal at a Fourteen percent interest rate. on the debt. Plus warrants for another ten percent of the company. So 14% interest rate debt.

1:43:31 Ten percent equity of the company and Slim exercises those warrants over the years. Let let's unpack that a little bit. So contextualize fourteen percent for us. Like what would if you were gonna go borrow and get some debt for your company now? What would you think? You would pay like One percent. Like I mean, we are in a zero interest rate environment. Yeah. But I mean, I remember even back then, so I was an immediate investment banker at the time and I remember doing junk bond deals.

1:43:58 for like failing movie studios at like, I don't know, call it Six, seven percent. You know, shark interest rates like um You know, fourteen percent. Now, granted, this was the throes of the financial crisis, but like That's bad.

1:44:14 And so then mechanically, how does the ten percent uh warrants to buy another ten percent of the company work? So I don't know what the strike price of those warrants were, whether they were penny warrants, which is effectively like free equity, like stock options to employees, or whether they were at the then current uh stock price of the company or some discount. But they're effectively like free. Call options.

1:44:37 At whatever the strike price is. uh on the company for The future. And so how long does he wait before then deciding I am gonna go pick up another ten percent of the time that this attracting? I think he waits until the expiry dates, which is a few Years later, but he he does. He exercises them and um And he

1:44:55 becomes the largest individual shareholder in the New York Times. Owning about seventeen percent. He's since trimmed his stake a little bit. I think he still owns thirteen, fourteen percent. Yeah, he's right around there. So kinda like it's like a Warren Buffett type deal that that he does. Uh, although I would say unlike, you know, at this time when Buffett was investing in Goldman and uh uh like Harley Davidson and the like like Those were Solid.

1:45:20 companies like you there were some real question marks around the times, um at this point in time. February the next month, they eliminate the dividend altogether. So man, family members must have been Pissed that like doing buybac for the last few years and now you just eliminated the dividend to save money. Um

1:45:40 In March they announce a two hundred and twenty five billion dollar sale and lease back of a portion of the headquarters building. So they just built this damn headquarters building and They sold it to WP Carry. And agreed to lease it back for fifteen years. With an option to

1:45:59 buy back the portion they sold in twenty nineteen for two hundred and fifty million dollars, which they exercise, so they now own the building again. Which we should say, this is actually like one of the savviest investments of all time by the times. Like if you think about this. Think about how much New York real estate, especially Class A real estate, appreciated between 2009 and 2019. And the New York Times. Sold These floors for only two hundred and twenty five million.

1:46:27 And they said a decade later in twenty nineteen, we have the right to buy it back. for two hundred and fifty million. Like that's really not much appreciation. I think I'm I I I I I think I found a source that said that they essentially bought seven hundred and fifty thousand square feet of prime New York office space at three hundred and thirty three a foot. Nothing in the market is trading around their building under fifteen hundred a foot. Wow.

1:46:54 Yeah, they quintupled the value of their holdings. So that's an unbelievable like For the times, this is like a win. It's effectively for people who are trying to make sense of a sale lease back here. What they basically said was uh they kind of like owned their house, but then they took out a mortgage on it, where they said, like, I'm gonna keep living here, you're gonna own it, I'm gonna pay you every month. And like It's a bummer thing to have to do, especially when you have so much of your identity tied up in this great building that you you needed, but you needed the two hundred and twenty five million. You needed the cash. But holy smokes to be able to get it back a decade later for you

1:47:26 Close to the same price. Yeah. So savvy. Well this is what's interesting to say you're hitting on The point here. So well, I'll run through a couple other things they do and then we can discuss. They in July they sell the radio stations they own to Disney for forty five million dollars. Then in twenty eleven they sell off their regional media group, uh, which is the re all those crazy regional newspapers that they bought.

1:47:46 For 143 million dollars. in twenty eleven and twenty twelve. They sell off finally the Red Sox stake. For two hundred and Twenty five million dollars, the Red Stocks and Fenway stake.

1:47:59 August of twenty twelve, they sell about com to IAC for three hundred million. And then in twenty thirteen they still They took a little loss on that then? Uh yep. So they took uh about a hundred and in twenty thirteen they sell the Boston Globe. and the other New England papers to John Henry.

1:48:19 I don't know remember what the price was. It was a lot less than a billion though. Yeah, and amidst all this, I think by twenty thirteen that three and a quarter billion of revenue that I previously referenced was down to one point four billion. Like all these divestitures, not to mention all these, you know, people who are no longer paying for newspaper subscriptions really starting to dry up that revenue. Yep. Yep. Yep. Yep. So This is when you know the um

1:48:46 Narrative of like the Times is Fed. Uh is at its strongest, uh, you know, the quote unquote failing New York Times. But You know, they these all these transactions that they do They're freeing up tons of cash and they're paying off this debt.

1:49:05 And so the end of these transactions They've generated about a billion in asset sales that have all gone to Pay down the debt. that they had taken out primarily to do share buybacks. Do share buybacks, yeah. Uh

1:49:20 And um They're down to just the core. New York Times you know, property, but digital and print. And they're kinda in an interesting position again that not a lot of people realize.

1:49:33 So then the other thing that they do During this time. is they finally get their act together and introduce a paywall. uh a metered paywall for

1:49:43 MY Times dot com. Now here's what's interesting. So they announced in twenty ten That they're gonna do this. Uh, they give a whole year's notice to The world.

1:49:52 And then they implemented in twenty eleven. And people are like Pretty outrage. People are like, You're gonna charge for content on the internet? Like F U. Yep.

1:50:01 Yep. And uh It's very controversial. But they say you get twenty articles a month for free before you have to describe. Pretty generous.

1:50:10 And the top news section on the Smartphone and tablet apps will always be free. But people are skeptical and So in the first year it goes like Okay. Uh they get

1:50:22 Four hundred thousand. Paid digital subscribers in the first year. By year two, they're up to about six hundred and sixty thousand Year three they only add a hundred thousand, they get to seven hundred and sixty. Uh year four they're at nine hundred thousand. So it's going like

1:50:39 And I think in in in year three they chop the free articles in half from twenty to ten that you would get. Yeah. So they're starting to like realize ooh we we gotta pull some levers here to make more people subscribe. Yeah. More alarmingly, though, as they're implementing this metered paywall, People are going elsewhere for news, so the traffic to the site

1:50:58 drops by over half uh during this time. This is crazy. And this so this is we'll talk about the innovation report in a moment, but this is pulled from the the s very f sort of like famous or infamous inov innovation report. In twenty eleven they had I think mid twenty eleven they had a hundred and sixty million visitors a month to their website and by twenty thirteen, eighty million. Like

1:51:21 The this paywall thing is Working ish for revenue, but boy is it destroying your traffic. Destroying the traffic. So Man, things seem bad, right? Then

1:51:36 And they are bad. Enter twenty fourteen. And A G Air apparent.

1:51:43 Fifth. Generation. Solzburger. He is tapped by the family. To

1:51:50 Figure out what's going on. And he writes What becomes known as the Innovation Report. I think it's titled the Innovation Report. And it's internal, but it gets leaked out publicly. It's pretty amazing.

1:52:02 Yeah, so check this thing out. So first of all Just to wind back a bit, the paywall was launched by David Purpich. He was sort of the person who was heading up the um the metered paywall. He's a family member, so he's a potential person who could take over as publisher um of The Times Next. And it's going like pretty well. So people are thinking pretty highly of him in the organization. Um A G at this point.

1:52:28 I'm not sure if people already knew that he was gonna be the next publisher, but publishing the innovation report definitely catapulted him sort of past and and made people realize, oh, this is the leader that we need to bring us through this era. So He was originally tasked and it was a team of I think ten, twelve people, to really start sort of dreaming up products that could uh You know, fix up the New York Times bottom line.

1:52:51 And they thought they were gonna do this. The New York Times had released an app called NYT Now. So they they sort of I mentioned that uh um digital was sort of in a different building. They had by this time brought them into one one single newsroom. But the folks on the business side were sort of in charge of uh of figuring out, hey, like how how are we gonna save the times and Sulzberger sort of took it upon himself and the team

1:53:15 To treat this innovation report like a piece of investigative journalism. And so as they sort of met with all the like hundreds of people inside the Times in the newsroom, on the business side, uh hundreds of people outside the organization, they sort of realized Oh my gosh, I think it was super cool too. They interviewed people At every other news organization. Yep. You know,'cause like CEOs of Tech companies

1:53:39 Really interesting. Yeah. What they sort of realized about I don't know. It is not a new product that we need to launch. We need to completely change the way the New York Times works. And that needs to happen from the place that has the most power in the organization outward. So it needs to come from within the newsroom.

1:54:01 And a a good example is like I think it's in the report, they say something like Traditionally our journalists have thought about their job ending when they click publish and then someone takes over after that on distribution. We need to be thinking about that that's when the job begins. And that's when you need to you need to always be authoring with distribution in mind. You need to always be thinking in what properties is this going to get released in and in the newsroom there needs to be an understanding of what content gets federated to what properties at what times is consumed by who, and they completely sort of Changed and um Uh frankly, I don't think this could have happened without a family member leading the charge here, but really like reinventing the organization with

1:54:43 Pretty damning. finding this in this report from the inside out. Well it's kinda like a throwback to Adolph Ox, right? Like you can't You gotta be a journalist, but you also gotta be a marketer and a publisher. And like you gotta get the positioning of what you're doing right, but you also gotta get the distribution right.

1:55:03 Absolutely. I mean there's the there's even quotes in there where they say Um, the New York Times is winning at journalism. At the same time, we are falling behind in a second critical area, the art and science of getting our journalism to readers. And they they they talk a lot about how We don't think that we need to sacrifice our core values to get this done. And there's a lot of people out there, our competitors who have way more traffic and they're referring to BuzzFeed and Vox and all these people by name who are getting unbelievable amounts of traffic and the assertion, which is like At this point you're kinda head scratching because you're like, How are you gonna do this?

1:55:36 They basically Have a throwback to the yellow journalism era. And to be clear, I'd like some of the Things they reference like could be. But we then

1:55:45 Others, you know, ox offing your post. A lot of the traffic that they're getting is they're just taking New York Times and other articles and rewriting the headlines and posting them on their own sites in the New York Times. It's like that seems fine. Right. And what they do here is uh there's this interesting allegory to the yellow journalism era, where what Sulzberger and the 10, 12 person team sort of assert is if we are willing to step up internally and make big change and bring the right leaders into the newsroom, tech and product and distribution and marketing and growth leaders into the newsroom and adopt them as our own. We think that we can hold our values And

1:56:20 grow our subscription business and grow our reach. And it is this like pretty bold assertion to say like we're not gonna sink to the clickbait level of everyone else. We are going to continue to produce great journalism with an intense focus on integrity. And also Fix our business.

1:56:38 And it's a little bit you're reading it like if if If we didn't know that it worked. You would be reading this thing being like Mm. Good luck. Good luck, man. Yeah. Well, and I think the the other thing that they do I don't know how much this was.

1:56:52 I didn't read that. report as closely as as I know you did, but um So I don't know how much of this was in the report versus just They do it. They also kind of like learned the lesson of not missing technology waves. So they launch apps. So in twenty fourteen, they launched the New York Times Cooking app, which has become hugely successful. Hugely successful. In twenty sixteen they launched the Crossword app, which has become hugely successful.

1:57:17 Yeah, the the crossword app on its own is like a thirty million dollar a year business with like zero marginal costs because they're just running like historical crosswords from years and years and years, and I think some new ones, but like the the the apps business that they have, they call it like other digital. is growing at sixty percent year over year and it's crazy high margin revenue. The the cooking, the cross, all that stuff. And then the other thing Of course, that they launch, which will lead into the Next big tailwind that's helped the times.

1:57:47 Is the daily. So They launched The daily in February I think it's February first, twenty seventeen. And it gets a hundred million downloads in the first year.

1:57:59 In twenty nineteen, it passes a billion downloads. And I think Ben, you may know m more of this than me. And the right way to judge, but I think it's the biggest podcast in the world. Yeah. Every single day receives four million downloads of its most recent episode. Yeah.

1:58:15 That is Crazy town. crazy. Like they're reaching people that the um print reporting could never reach to it's a completely different audience. So it's something like seventy five percent of people who listen to the daily are under forty years old, which is a much younger demographic, frankly a much more attractive one for advertisers. Their podcasting business today is is a thirty six million dollar revenue business just in podcast advertising, which grew seven million off of last year. So You know, it's not their

1:58:46 biggest by any stretch business line, but it is where a lot of their uh sort of new reach is coming from. Yeah, well, and it's super high margin, all of these businesses. Like all this money is dropping straight to the bottom line. Yeah. Although they do have like a twenty something person team producing the daily. So it's like there there's material cost

1:59:08 to producing that podcast'cause there's real reporting and I I'm looking at you over Z what our cost structure is Well I I I'm used to running uh acquired type margins on things, right? That's right. If the labor is zero, then it's nice and uh high margin. Do all our all our own reporting here at acquired. Well i if you're gonna catch us up to twenty sixteen, then there are some other things to say about the times in twenty sixteen. Oh yeah. Nate around subscribers. So like like let's let's contextualize some of the the subscriber number so far because I made a little timeline here. So you're right, year one, they did like four hundred thousand um new subscribers, like

1:59:48 twenty eleven not necessarily great. By twenty three twelve, that's when they reduced it to ten free articles. In twenty thirteen. the Times announced that uh for the first time in decades, they made more revenue through subscriptions than advertising. So that's print

2:00:05 Plus online combined, but like that says a lot about both the decline of the uh advertising business and the famous line as trading. Print dollars for digital dimes. And it says quite a bit about um the fact that they're growing material revenue. I think they're hundreds of millions of dollars in revenue at this point. um in twenty thirteen coming from um subscriptions, but still not at a million subscribers. So in twenty sixteen, uh, it had taken the New York Times four and a half years to get to their first million subscribers.

2:00:35 And then it only took them a year and a half to get to their second million subscribers. Just before the election. Of President Donald J. Trump. Yeah, so this, you know, when we were referring to the

2:00:48 Failing New York Times narrative. that you know, like it was failing and was So prevalent. Of course, that got taken up by uh a certain presidential candidate in the twenty sixteen election and then president thereafter. The reality is that was the best thing I think that ever happened to the New York Times. Ultimate irony.

2:01:08 The ultimate irony. The the endless New cycles of insane What's the best way to describe it? the New York Times, while being berated by this man as being failing, is skyrocketing in popularity and becoming a better business than ever.

2:01:25 Of him like it is the the the paintbrush to paint the canvas of the story. is so rich and dripping with iron. I know.

2:01:36 It's incredible. So y you may have these stats too, but They grow digital subscribers forty seven percent in twenty sixteen. These are like tech company growth numbers in The first quarter of twenty seventeen when uh Trump takes office. They add three hundred thousand subscribers that quarter. They finished twenty seventeen at two point two million.

2:02:02 By twenty Nineteen they're at three point four million sub digital subscribers. Uh, this is the core news product, not including the crossword and the cooking app. And then last year, twenty twenty.

2:02:17 They grow 48% again. They pass five million digital news subscribers plus another 1.6 million to the standalone products. Digital revenue surpasses print revenue for the first time ever. They've retired all the debt. They buy back their headquarters. They have no debt on their balance sheet. Yeah, twenty nineteen, completely debt free. completely debt free. They have all of this incredibly high margin uh uh subscription, digital subscription revenue that no other news organization in the world has. You know, they have multiples more subscribers than the Wall Street Journal, which is the when you say that no other organization in the world has, so then the New York Times, I think to today, I think it's seven and a half million did news subscribers.

2:03:04 The closest one is the Washington Post was somewhere like two. And then after that it drops real far. The LA Times has like a half million or less, and like it goes on and on down from there. And when you look at the number of subscribers that they ever had in print, like ever In two thousand two, they had I think one point one million, the New York Times was the the number one print circulation newspaper at least in America. Only a million.

2:03:31 subscribers to the print edition. So like They figured it out and just at the right time and then had this friggin' unbelievable tailwind happen with uh with the Trump presidency. Yeah. And in the meantime, like you alluded to in the Yeah.

2:03:47 They're hiring Like All the best journalistic talent in the world to come right At the times. And they're paying them more than anyone else'cause they can afford to,'cause they've got

2:03:59 Essentially a Netflix like business model at this point. Did you know the New York Times average salary for a journalist is over twice that of the industry average? Yeah. It's it's crazy. I think the I think the average starting salary is over a hundred thousand dollars. Which like who would have thought in you know ten years ago that a news

2:04:20 Media organization, a newspaper. would be paying over a hundred thousand dollars starting salaries to journalists. Yeah, it's definitely be to be congratulated. All right listeners. Now is a great time to thank our longtime friend of the show, ServiceNow.

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2:06:31 of the Times and frankly makes an amazing bull case that I think we'll cover as we go into bull and bear narratives. Um, but definitely wanted to give a shout out, uh if if you've read the Mind Safety deck, you will recognize a lot of that thinking coming through here um as we talk about the Tim today. Fun fact, Ben. Do you know It's a great blog. Both a blog and Mind Safety has Great visualization tools for thirteen Fs for hedge funds and

2:06:56 uh various positions that uh vet Famous fund managers hold uh do you know where the name Mind Safety Disclosures come from? You asked me this before the show. I do not know. So Apparently.

2:07:09 Reddit or somewhere, maybe it was on the site. that I think this was part of the Dodd Frank legislation. Every Company. Now every publicly reporting company has to include a section in their regular reporting about their mine safety. Like mine like like a like a gold mine or like an iron mine like in the ground. Like whether you have a mine or not. So if you go read like the ten K for Google or what like Alphabet or Apple or whatever, they're like uh like

2:07:37 They have a section on mine safety. They don't have any minds. But they have to have this section. That's so good. I wonder if Coinbase is gonna have uh Bitcoin mine safety discovery. That would be amazing. Yeah.

2:07:51 All right, so let's talk a little bit about the times today. So we we talked a lot about this uh subscriber run up. We're at seven and a half million subscribers today. They've stated a goal that in twenty twenty five they want to hit ten million. Um management has since said they're gonna blow by that and and then and set a new goal. Um You know, this has been a heck of a year for journalism. They had two quarters Q two of twenty twenty with the coronavirus and Q four of twenty twenty, both of them unbelievable record um subscriber bumps, something like six hundred and fifty thousand new subscribers in a single quarter over these two quarters. It it was the biggest n year for news.

2:08:28 in history. I mean or in at least in modern history. And the New York Times was really well positioned to sort of m feel that acceleration. So on on top of Uh that they added two point three million digital only subscribers this year. I mean, just thinking back to twenty eleven, right, when they launched and they got three hundred and thirty eight, thousand in one year and it took them four and a half years to get to a million. This year they got two and a half million. So you're really starting to see like They're building a scale business here. And I I think they you know They're seizing the moment a little bit to do it.

2:08:57 Uh it's not all roses and sunshine. Ad sales were massively down this year in a pandemic related way. I think ad revenue fell twenty six percent year over year. Well and also just fundamentally like the ad business for content. Uh for Text content on the internet is nowhere near as good a business as it is in print, but

2:09:18 Because most of the value of ads on the internet. accrue to aggregators like Facebook and Google. Right. Yeah, the New York Times subscription business is actually now three times larger than the advertising business. And it used to be the opposite.

2:09:33 Right, right. Like it's an unbelievable transition from this sort of early two thousands that was just completely flipped. So that that's interesting to know about the business today. It wasn't even um Just the early two thousands. I mean even reading the Gay Tele book, uh, it was in the nineteen fifties and sixties. It was

2:09:53 Advertising was three X subscription, like That was always how it works. Right. That that was the newspaper business. This this comes on the back of I I think the years were twenty twelve to twenty fifteen when they really started to get serious about this. they went to the advertising department and they they basically rehired everybody. They they decided that the entire team needed to go, new people needed to come in. They turned over eighty five percent of the four hundred person staff with people with digital skills. Which is like to have that big of a turnover like that and say, actually this aver like the ads that we're gonna be doing in the future have nothing to do with the ads that we've sold in the past. So we need completely new people to do that. It's just interesting that like

2:10:31 you would do that even w when the business is declining so heavily, frankly, because it's still just a big business for the times. And as they make this transition, that needs to stay a strength. Like they need to be a major player in internet advertising, even though their primary business model is now subscription. Yeah. Um Other fast facts on the company today, it is four thousand three hundred employees. Seventeen hundred of those are journalists.

2:10:58 And interestingly, the seventeen hundred number represents about five percent of the total journalists in the United States. The total professionally employed journalists. So it's not just Ezra Klein and Kara Swisher and those folks going to the Times like they are just vacuuming up the best journalism talent and frankly paying them very well for it.

2:11:19 The times did uh we mentioned that one point eight billion number. That stayed fairly flat. over the last several years and in their top line revenue. They're seeing of that uh two hundred and fifty million in operating profit. Again, also kind of flat right now, probably related to the the pandemic. But the composition of that has vastly, vastly changed. Like

2:11:41 It's deceptive to look at the top line'cause it's flat, while part of it is vastly declining and part of it is hugely growing. Yes. So we should t hold hold that for one moment and I'll just put a a pin in sort of I guess articulating the scale of the times today. Their subscriber base. So we talked about how they're killing it and it's not even close. They have more digital subscribers than the Wall Street Journal, the Washington Post, and the two hundred and fifty local Gannette papers combined.

2:12:10 Wow. And to like add another layer of icing on that stat. That stat comes from an article written by Ben Smith. A columnist for the New York Times The former editor in chief of BuzzFeed.

2:12:23 Wild, right? Totally wild. I mean that makes BuzzFeed, Gawker, Recode, Quartz, and Vox.

2:12:34 on the list of publications whose editors now work at the Times. Like they have just uh they uh it has just become so clear in only six, seven years that to the extent that there's sort of a I don't want to call it a monopoly because I don't think that's the right word, but a scale player at the top. Uh and sort of no one in the middle and then a bunch of

2:12:54 successful sort of indies and low cost structure businesses on the in the long tail, like they are pretty much the only one at the top. And you've got a couple of other modestly successful publications right now toughen it through the the Washington Post under you know Bezos' funding Um and and and

2:13:11 There's just really not that many more Yeah. Well it's such a um Well we'll save this for playbook, but like The nature of the internet economy.

2:13:24 Winner take all businesses. Yeah, winner take all. And yet globally addressable niches for low cost structure businesses on the other side. Yep. So

2:13:36 Th I think this is a good place to transition into narratives. And The narratives for this company It's not as clearly bifurcated as it would be on an IPO episode where we're saying, Here's the reasons to be bullish, here's the reasons to be bearish. There's sort of an interesting spectrum that we're gonna go across here.

2:13:53 On w why would you be bullish on the times and why would you be bearish? So the first bull case. Meredith Copit Levian, the new CEO, articulates this regularly on their earnings calls, which is hey, not only is our seven point five million person subscriber base. growing. And of course that includes news subscribers. It includes the digital only non news, you know, it includes the the print subscribers.

2:14:17 We think that there's a hundred million English speaking people Who are willing to pay for news. So we think our TAM is like You know. fifteen X or something like that. Thirteen X what what uh what we're at today. So

2:14:30 It's fast growing and it's large. And That sort of like ipso facto must be the TAM because you wouldn't be growing that fast at these large numbers if the market wasn't that big. Like if you were starting to run out of the market, you wouldn't be adding customers that fast. Right. Right.

2:14:48 Yeah. And uh The second one, this is where we start to get into the sort of like, is it a bear case, it is a bull case, uh we should have the discussion of is the New York Times a tech company? And I I was reading a medium post by their outgoing former CTO who said things like, I think a hundred and fifty Times went through the reforge growth series.

2:15:10 Like not a thing that you would expect to hear uh from within the New York Times organization. Like they're taking it very seriously. Tim. think like a tech business, act like a tech business, nail distribution on the internet, understand where they fit in there. And from a cost structure perspective, this we owe wholly to mine safety disclosures. Uh

2:15:29 they make the point that with newspapers, the New York Times costs were largely variable. That is, they increased in proportion with the number of papers produced and sold. But with digital subscriptions, most of their costs are fixed. That is, they don't increase as the New York Times adds more subscribers. So you think about this, sure, their revenue's flat. But they're switching out their cost structure from one that's delivery trucks, that's a physical paper, that's printing presses, to This one that actually looks a lot more like Netflix.

2:16:01 where you know you acquire the content and then the whole base that you have that you can sort of amortize your content costs across. It's all gravy. Like you you have these you've content costs, you have fixed costs, you have your variable costs on top, but your revenue is not actually connected to any of those. Your revenue is actually connected to your audience. And the reason to be really excited right now is that the Times is in a place where they're just about to sort of like outrun all those sort of fix costs and be in this super high margin territory where the audience is like so large that they really don't need to grow their costs at the same rate that they're growing their expenses. Oh it's just like uh

2:16:42 We'll discuss this in powers, but it's just like Netflix. Like why can the Times pay a hundred thousand dollar plus starting salaries for journalists and no other organization can afford to It's because they have the scale economies of, you know, millions of subscribers. So like something just like Netflix can pay a hundred million dollars for a piece of content, amortize it across their, you know, many, many, many times more subscribers than Peacock. Same deal, same dynamics here. Yep.

2:17:10 And it's almost like that's like someone's been holding up a sheet in front of the business while it's been like completely reorganizing itself on behind and you're like, What do you mean the sheet's still the same size? And it's like, Yeah, but you don't know what's ready to run through it. Now, when we're comparing it to Netflix, I think there's one more interesting thing to say about the Tim here, and that's the sort of the bull case, is they don't have to go acquire content. Like they're not in the business of going and and bargaining with someone who owns the content who's then gonna say, Gosh, you got a lot of subscribers, you really have to pay a lot. They create the content. So they have I mean, I know Netflix switched to this with uh original content too, but they're massively advantaged in that way where they really do create and own all the content that they're they're creating. And while they're paying high salaries

2:17:57 those salaries don't scale with audience and can't get negotiated in a way that scales with audience. Yep. Yep, that's that's such a good point. Like Nobody

2:18:08 Probably. Uh A G and say Hey You just added two million subscribers this year. I need some percentage of that.

2:18:22 Right. No one's got a revenue share deal with the Times as in their employment contract. But I mentioned this was sort of both y a bear case, bull case. My verdict is still no, that the New York Times is not a tech company. And even though the business profile and the the sort of uh dynamics that we just described definitely make it Look that way. The organization with power inside this company is still in the newsroom.

2:18:46 Much like Facebook has sort of product Apple has designers, Microsoft has PMs, Google has engineers. The New York Times has journalists at its core with all the power. And they've sort of brought in lots of people to sort of be a part of the newsroom. But like When we talked earlier about sort of the business side being all non journalists, there's still something to The fact that like

2:19:09 the most important thing to the times is their brand, their objectivity, their ability to sort of like be discerning in this world. And so where you have things where a tech company would be being like whoa, we have the number one podcast. Let's launch thirty podcasts. Or like, whoa, like a lot of people like our cooking app. Let's launch like ten other experimental apps. Or like, huh, the game the the crossword's going well. For games, I guess like let let's try and be zinga. Like let's try and like do a ton of crazy data science and launch a bunch of games and It's like

2:19:43 It's happening over the course of years instead of months, and they're not like running hard into these opportunities that I think you would sort of see for a tech company in the startup world if they were falling into the success that the New York Times is. And I think the thing holding them back is the very thing that made them sort of successful. Which is the sort of like trust in their brand that they need to maintain with this level of journalistic integrity. Totally. I mean I think it gets back To

2:20:12 The um literally, as we told in the history, baked into the Immutable mission of the trust and the company. Which is to continue to serve as an independent newspaper entirely fearless, free of ulterior influence, and unselfishly devoted to the public welfare as a news organization. Like

2:20:34 That is what they are. That that is Undeniable. Right. Right. So that's sort of the bear case side of

2:20:44 them being a tech company. Like sure they've adapted well and they certainly have uh sort of tech internet mobile growth forward than any other news organization and they've undergone I hate to use this phrase, but it literally applies here, digital transformation. Um

2:20:59 They're not a tech company and they they they have systematic things holding them back from behaving like a startup. Another bare case to make is that while subscribers are up, we've talked a lot about their subscriber numbers, we haven't been talking about or nearly as much about their subscriber revenue because it is not growing as fast. In fact, their revenue per subscriber is going down. And if you hear them talk on earnings calls, they assert things like it'll be, you know, we'll we'll actually start in increasing it again by the second half of twenty twenty one. They'll say things like Um, those are promotional discounts that we use to get people in and then once they turn into second, third, fourth year, you know, paying um time subscribers, you'll see that that start to meaningfully change. We just don't know if that's true yet. It's it's very plausible, but right now

2:21:44 Revenue definitely is not tracking subscriber growth. It's interesting, right? That's a Tried and true. old school newspaper tactic, right? Of like Yeah, subscribe to The local newspaper for X price for first year and then yeah, then we'll raise it. Get the Tim for only a dollar a week. Yep, exactly. Um

2:22:06 But the jury is still out about will this work in a digital environment where It's Not while as we've discussed there are some monopoly like factors here in that like nobody else has a journalistic organization like the Times or the number of journalists or the reach or the content that they're producing.

2:22:27 There are it's not like a geographic monopoly like the old school newspaper business where You're either getting the times or you're getting no news. There are Other places everyone can go on the internet. Yep. For sure.

2:22:41 Another bear case to make because in my bull case I started painting of why this is an even better business than Netflix. The Times has seven and a half million paying subscribers. Netflix has two hundred million paying subscribers. The Times estimates that they're Total addressable market is half of Netflix's current subscriber base.

2:23:01 Like just to contextualize that. I I I think the New York Times is current average revenue per subscriber is right around in the same ballpark, this 15 to 17 dollars a month of Netflix. So it's an interesting comp because from a revenue perspective, they're or from a subscription price perspective, they're they're very comparable. But The times

2:23:21 Yeah, estimates that it's addressable market as half of Netflix's current market. So when you're thinking on the scale of sort of The fang type companies. The New York Times is never gonna be that. Not that they aspire to be that, but That is in no way the scale that we're talking about here, even though they have these sort of tech company cost structure dynamics that they're that they're shifting to.

2:23:42 Spare case, I think that's a reasonable one to paint is uh this is sort of the classic Ben Thompson point is There's kind of a conflict here between their business model and their stated mission. Where If you're really gonna be the paper of record and you're really gonna be the paper for everyone, the authoritative source,

2:24:04 Your business model actually should not be to get a small number of people to subscribe to you. It should be to Get your content to the largest number of people. in America, in the world And not

2:24:17 limit your reach at all by your business model. Uh I mean the the the argument that if you were a bear you would make here is Subscriptions are for niche providers. Like you you should be figuring out how to run a successful advertising based open Publication. for the internet. If if what you really want to do is be the neutral

2:24:38 sort of paper of record. Cause what you're doing creates an incentive for you to create strong affinity with a certain group. And whether that group is liberal subscribers or people who don't like the president or whoever you think they've attracted over the last few years, the New York Times, without a doubt, in this business model has every incentive in the world to identify a sort of large niche and create high affinity among that niche. And that may not necessarily align exactly with pure journalistic neutrality.

2:25:10 Super interesting aside I I forgot to include in the history and facts. The paper of Record the New York Times as the paper of record. That saying and quote. actually comes from a very specific

2:25:24 Business strategy. From the times. They added The index to the Times that they published, I believe, quarterly, I think in the nineteen teens. The index was

2:25:36 Literally an index of every topic and person and institution that appeared in the Times over the past quarter. And the reason they started doing that and they invested in doing it was so that librarians and researchers around the world would start using the Times as their main news source because it had this index and that then they would get into schools and then they would get and uh, you know and so that's where the paper of record idea

2:26:03 But to your point, it's uh Well, actually it may be sort of counter. Like they were sort of specifically trying to target a niche group of like we're gonna get into the elites and like of researchers and academics and schools and But yeah, it's interesting. Yeah, David, it's interesting. Like this this really raises the point of

2:26:22 To be subscriber only. really your motivation is to create really strong affinity from someone such that they're willing to pay for your content. And You could do this by being really niche.

2:26:36 But the question is, is there room for sort of one subscription in everybody's media diet. Where the way that you're creating that really strong affinity is by saying we are just the highest quality n most neutral journalism that you could find. Does that stimulate a buy decision in the same way to that going to someone and saying, I'm going to appeal

2:26:58 Two all of the biases that you have and say like I'm gonna keep giving you more of what you love. Like can you actually build Just as big a business. If you are the one scale player to really have the subscription for everyone.

2:27:14 Ah, it's interesting. I don't know. I mean I I my mind goes back to the Fox News discussion, right? Like I don't think anybody would argue. Maybe maybe some people will. Maybe we'll get emails and comments in the Slack. But I don't think anybody would argue that Fox News has a Target niche demographic.

2:27:34 of political conservatives. Right. It depends on your definition of niche. It's a huge freaking niche. Well, right. That's the thing. It's a huge frickin' niche and um, you know Even with that business strategy. They built a five. billion dollar, fifty percent EBIT uh margin business. Right. And I guess the question I'm I'm really driving at here is can you similarly get people to fork over their money for neutrality and as driving them away that they're willing to and again that people aren't I don't think they're subscribing to Fox News. Well I guess they're subscribing through their cable bundle, but they don't know that. Yeah, they don't well they're paying for it, whether they know it or not. Yeah. Yeah.

2:28:11 So It's a good question. Certainly I think the Times would probably argue and

2:28:21 maybe believe certainly some people there I think would believe that that is what they're trying to do of like Be the neutral. You know, highest quality news source across lots and lots of topics and then That's worth paying for. You know, I don't

2:28:34 No, but I suspect certainly a large portion of the Gosh, what five million subscribers they've added since Donald Trump was elected president, uh have uh chosen to subscribe uh More for the uh niche reason than for the

2:28:54 Uh neutral reason. Yeah, or at least fe I think the If I had to sum up and try and like em embody the way that a lot of people feel who have subscribed in the last few years, I think I would say I feel like there's so much untrustworthy misinformation out in the world. I am totally willing to fork over money for something that I know I can trust.

2:29:14 Yeah. And There are the the class of people who are saying that have their own bias. So when they say that I know I can trust like It is inherently loaded language because you are more likely to trust Something that sort of

2:29:29 represents the point of view that you want. Like it is impossible to be completely unbiased in reporting anything, because you get to choose what to report. And not like at the very core, that's that is true. But yeah, I just it is it is a really fascinating thing to try and understand all of the incentives of a subscription based model. And figure out if that jives with the mission. Yeah. Okay, so that's sort of Baron Bull. I I uh I wanna paint this spectrum as we come out of narratives,'cause I think there's this interesting sort of like uh

2:29:59 So the first thing you realize when you look at the the times is Whoa, this is a killer subscription business that is growing 40% year over year in their number of of paying digital subscribers, or I guess paying subscribers broadly, mostly from the digital category. Like That is awesome. Like that is like a late stage startup good. Oh.

2:30:20 But it's only growing like ten percent year over year in revenue. Like I really wish that was tracking the subscriber growth. And then Three, you sort of realize, huh, well total revenue has actually been flat the last few years, and it's fell over fifty percent from their glory days in the early two thousands. So in some ways it's like a high growth company by looking at just subscribers, certainly not though on total revenue and

2:30:44 Geez, their revenue glory days may have been behind them. So like if you're only looking at the surface level like this. you're gonna get really disappointed. In less you're sort of believing the narrative that I mentioned earlier about you're holding up the sheet and they're fully reshuffling their cost structure underneath of it and they're sort of ready to explode in profitability. coming out of this full rearrangement of the business.

2:31:08 Yeah. And it's totally a compelling narrative, but it is wild realizing like I I was someone who started paying attention to the New York Times' business in the last five years. And like I I have been all on board in this subscriber growth story, and it is just crazy to like zoom out with a little bit longer lens and be like they used to make way more money. Yeah. Yeah.

2:31:29 Yeah, I think this is Great. Transition to power. Um For

2:31:36 Anyone who's a new listener, old listeners will know this by heart by now. But we are huge fans of Hamilton Helmer and his work. Seven Powers. Which describes seven Strategies by which companies can earn long term differential profit.

2:31:53 margins higher than their competitors. So basically Ben, as you like to say, why do you strategically deserve to be a defensible winner relative to your competitors. And the seven are counter positioning, scale economies, switching costs, network economies, process power, branding, and cornered resources. This is a super interesting one for the time. Totally. This is one like I I uh David, I'm gonna let you take scale economies because I know you're just like dripping to talk about that. And I'm gonna talk about branding because rarely do I think that a business actually has brand power. Ooh, I like it. I like it.

2:32:31 Like most of the time. Because it takes so long to build up brand power and so much trust and so much repeatable. you years and years and years of convincing customers like, hey, I keep delivering on what I say I'm delivering on. that rarely if you hold out, you know the bottle of Advil versus the the generic. Like Advil has invested a ton of money and time into winning that battle.

2:32:56 But like most companies, especially tech companies that we cover on this show just don't actually have brand power. The New York Times has incredible brand power. They can. Print things that I wouldn't even believe if some blogger printed it. But it's literally the exact same story in the Times. One hundred percent I will take that as truth.

2:33:16 Yeah. Well, and it's um you know, the canonical test is the same product if it had a different name on the masthead in this case. Would you value it differently? Yeah, a hundred percent. There could be the exact same word for word article.

2:33:30 Uh in different places and it would be valued. Differently. Yeah, this is this might be the Clearest, I think, example of brand power that we've had on the show thus far? Right. Like I pay for the New York Times. If it was a different masthead and it was all the same articles Like I probably wouldn't be paying for it.

2:33:46 Yep. Totally. Okay, scale economies. Interestingly, I I think the business has Probably both iterations of the business had scale economies. Certainly the old school print newspaper business did because

2:34:03 You needed a printing press and a distribution network to get your paper out there. Uh no uh no scale to support that, you know, good luck printing a paper and sustaining it. And then as we've talked about in the New school business. Um You know this We keep harping on it, but the salaries that they pay reporters and the number of reporters and journalists they employ

2:34:24 Uh by being able to amortize that across a much larger subscriber base. can certainly outgun any other organization out there. Yep, total classic example. Is there any el anything else in here?

2:34:38 This is uh Going out on a limb and maybe tenuous as so often with this power, but I'm just Wondering if maybe we might Finally be able to make an argument for process power. And my

2:34:51 thought on this is that there's literally a hundred and seventy year tradition and institutional knowledge of how to do high quality journalism in this organization. Stewarded by a family, by like a single sort of, you know? shared value set of people. Yep. And

2:35:12 Could you say That that is so wrapped up in the organization that it can't be Transfer it out. I I think maybe. I mean, even if a say a group of editors were to leave the Times and It'll either start individual sub stacks or a competing organization.

2:35:29 I still don't think it would be the times. Now some of that is maybe branding, but even just like The Process of Creating The

2:35:39 Continuously updated digital masthead every day. Or as they would call it the Daily Report. Yep. Um, I think there may be some process power here. Interesting. Hard to know without looking under the hood, but I think it's a reasonable reasonable guess. I mean I can certainly say from you know when I worked at the journal and I worked on the quote unquote business side, not on the not on the edit side.

2:36:04 But I I will tell you there was absolutely a machine that had like it was a miracle that And and I think anybody who works in the news business will tell you this, Gay Talis writes about it in the book. Like it's a miracle that the paper happens every day and that the website updates every day. And nobody who's part of it can kinda fully explain it, but like somehow Everybody comes to work every day and like stories get published and edited and like it happens.

2:36:31 I felt that way about when I was at Microsoft's shipping office every three years. Like there was such an unbelievable process to get ha what three thousand people to all lock their code in uh uh a a bug free way and get it out the door once every three years. I I completely see how it's possible for someone not to n understand how the entire system works themselves. Yep. Okay, cool. I don't think there are any others.

2:36:56 No, I think this is pretty clear cut. All right, into playbook. Well, th the very top one for me is something we've talked about already in this episode, but is uh is just This is the ultimate articulation of it, and that is the the barbell media landscape that exists on the internet. Where

2:37:14 you have this distribution with a very, very small amount of scale players and a very long tail of niche players with incredibly low cost structures and nothing in the middle worked anymore. And the New York Times went from Being at the they they were at the sort of head of the distribution, but sort of behaved like a lost middle person until they sort of decided that what their strategy was was to be the one scale player and and sort of if you're gonna publish on the internet, you need to escape to one side or the other. You need to either have a dramatically, dramatically lower cost structure or Or you need to be the big guy. And there's just not that much room in the middle.

2:37:53 It's really reminiscent of The Bob Iker Disney strategy, I think, right? Like in a world where YouTube exists. You need to like the winning strategy for Disney was go hard into Hyper

2:38:08 high quality, expensive produced content. Yep. And the New York Times has their own version of the Bob Iger three point plan of what was it, original content, internationalization, and then embracing the digital strategy. Yeah. And I I you know you could make an argument that the Times is kind of doing the same thing. It's the best original content in the news world. Um it's you know, it's the highest quality journalism.

2:38:31 They have a very real international they're opening more international bureaus than anyone else. They are frequently having dual English and Chinese bylines. Yeah. You know, I think that right now they're constraining their TAM to the English speaking market, but they have a clear eye on international, uh, and and they certainly have reoriented around being digital first and embracing technology to not only distribute the news, but report the news. Uh starting with snowfall in twenty fourteen. You know, the the Times produces some just um amazing visualizations along with their pieces.

2:39:05 Totally. That's really interesting. I think particularly the international geography. Point. You know, the times Like

2:39:14 Many Papers have s had bureaus all around the country and around the world. Uh for all of its existence. But Uh I would have certainly noticed

2:39:25 That You know, in the past. Five years or so. As local news has uh decline to like

2:39:33 You see the Times out there reporting in you know, all around the country in the US, all around the world. Yeah, certainly here in San Francisco and Silicon Valley. I mean in Seattle, right? We we know there are plenty of Tim reporters who work in Seattle, who work in San Francisco and who report on tech. Even though it's the New York Times, like That's I think different than in a pre internet world.

2:39:59 Absolutely. What do you have next? You know, the one that I wanted to really highlight, uh That I did at the beginning of the episode. It's just all the way back like the entrepreneurial

2:40:11 Journey of um Both the Raymond and Jones and and Ox, right? Like And particularly The moments where like It's back against the wall.

2:40:24 And You have to make something happen with no resources. Uh and that has happened so many times at uh at the New York Times, but particularly with Ox. You know, that's just when the entrepreneurial magic happens. And for An institution like this, like we all think of it as

2:40:42 The great lady, the venerable New York Times. It's been around for a hundred and seventy years. But like It too started in the same way that So many great startups start. Yeah. Yeah, I love that point.

2:40:56 There's a thing that we build as a con earlier that I think uh there's an interesting playbook of it being a pro. And that I that is a conservatism and a lack of uh radical change as a benefit. And especially under family stewardship. Where

2:41:15 If the New York Times was more of a startup and in twenty ten to twenty fourteen decided to do the stuff that BuzzFeed was doing, or any of these sort of new media companies that were all the rage and they decided not to put such an intense focus on the quality of the journalism in the Daily Report. Look at where all those companies are today. Like none of them worked. And like V Vox uh is sort of the closest in in sort of having a successful set of of um media brands underneath it. But

2:41:48 for the most part, they got washed out. And AG and the family's sort of insistence on the core values that endured for a hundred and sixty years before and now have endured another ten. I mean they almost got destroyed it in not tr you know, adapting for digital, but in sticking to it's kind of like a government. The government is intentionally supposed to not be able to adapt quickly because it's supposed to be enduring.

2:42:15 And the times is very much like that where like They did come out of this as number one. Because they didn't compromise on their values. Yep.

2:42:27 That also makes me think of um Two other Playbook themes. That are classic media themes. That this

2:42:35 story reflects too, I think, which is one Content is king. Uh It remains true today. Like I think related to what you're saying is that

2:42:48 Unlike uh BuzzFeed or you know, many of these other types of um new media. BuzzFeed is actually doing well. So we keep it. Not to pick on them, but as a as an example of this uh genre of rewriting headlines uh and creating clickbait. It's not actually content. Like if you're not actually producing the content You're gonna get arbitrage away. Whereas producing the content is if it's good quality content, it's gonna be valuable.

2:43:14 The other one it reminds me of is You know. Dual revenue streams, man. Like that was the magic of the media business was subscription and advertising revenue and all the great media businesses Have that. Whether it's cable, whether it's news.

2:43:32 And now whether it's Streaming video as well. So Um we have it and acquired, like podcasts have it. I was gonna I was wondering if it was too cheeky to be like, Yeah, all the great business bus media businesses acquired. Yep.

2:43:47 Greatest of all media businesses. Well, I mean in uh to that point of revenue diversification, there's definitely something here about them not quickly, but getting into this non news digital revenue, they did grow the cooking and crossword apps by 60% last year to a 1.6 million subscribers. They also nestled in here, a thing we didn't talk about in one of my very favorite companies, which is now one of my very favorite New York Times media properties, is the wire cutter. Like if if this were the acquired podcast in twenty sixteen, we would be doing an episode about how amazing it is that the New York Times managed to buy the wire cutter for only thirty million dollars and now gets fifty million dollars a year of high margin revenue out of it, out of the affiliate lakes. Crap.

2:44:28 It's a great freaking acquisition. And the New York Times a million dollars a year in affiliate revenue? Yes. Wow. I mean th they took it from an electronics thing called the wire cutter plus the sweet home, which was for home gear, and they said we're dumping the sweet home brand and the wire cutter is now the wire cutter for everything. And I think they're gonna try and like m you know make it sort of the new consumer reports, including something they foreshadowed on the earnings call. a digital subscription. And I don't know what the heck that's gonna look like yet,'cause I don't know like h exactly how that would work, but that's an interesting business for them to be getting into too. So they they've I would I would say the last five to eight years, their investments and acquisitions have been much, much smarter.

2:45:09 than in the previous decade. Yeah, the wire cutter is about dot com done right. Well, it's doing capital allocation now is uh Much better than Yeah, well the the internet's a mature place. Like we understand business models on the internet better now.

2:45:27 Yeah. Uh one that I wanted to point out that we didn't point out in the history at all is this really interesting one where The print business is only declining at like five percent per year. And it's gonna eventually go to zero, but for the people who are willing to continue to get the New York Times every day.

2:45:45 uh the print edition, they are increasingly willing to pay for it. So the Times is like sure, we'll keep printing your paper, but uh the average annual subscription is like seven hundred bucks. And for the like eight hundred thousand people that are still getting the times delivered, that's what they're paying. And so the revenue from paper subscriptions has stayed like relatively flat because the willingness to pay among the core group that's holding on keeps going up. And I think that's just a great strategy by the times to like just Get the most that they possibly can out of a very large continuing revenue segment while they shift their business. That's interesting. And I um I haven't looked recently, but several times over the past couple of years.

2:46:24 I've looked at him wanted to At a Sunday. Physical paper. Yep. It's wildly expensive. Yeah, I got it for a while, but I definitely after the year I was like, Okay, yeah. Pro probably not. I'm probably not one of these people that's willing to pay crazy amounts for a paper.

2:46:40 But like I could totally see like if that were a habit. I would probably pay. Huge amount of money for it. Yep. Well, the last one, at least from me, is that uh I think you made this point a different way, but

2:46:54 the internet created globally addressable markets. And It just never seems to surprise me. I I I think if I had been born ten, twenty years earlier, I think I would be

2:47:06 You know, my default assumption would be more that your markets are geographically constrained, but being someone that grew up in the nineties, my assumption in my head space is always like, Well, you put something on the internet and then the whole world will have access to it. What do you mean, like what market are you launching in? You just launch on the internet. And I'm sure like generations below me, Gen Z and and onward are gonna be even more like that. But it it just always It's just always fascinating to me that Like

2:47:34 before your total addressable audience market, whatever, was confined to some Gio, and now it is Whoever loves you know, your thing anywhere in the world. And it's just a magical, magical thing. Man, then it must have been so easy to make money in the nineties. I mean I guess you could argue it's so easy to make money now, but like literally everything was working in the nineties. Old school businesses were working, internet businesses were working. Like you couldn't go wrong. I mean yeah, like if I

2:48:07 I if everything seemed to be working, uh, I would be willing to pay the prices people were willing to pay for stocks in ninety nine also. Yeah. You can totally see how that happened. What does that say about today? Yeah. No kidding. All right. Should we move on to value creation, value capture?

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2:49:16 So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. All right, value creation and value capture, David. Two components to this. The first one, uh, how are they capturing value compared to the value that they create in the world? The second one Mm. How does the value they create for the world not just shareholders compared any value destruction. The second one's a little bit of like an altruism question.

2:49:47 This first one. Hm. I if you would have asked me about this in twenty fourteen, You know, I this is like an F. Right. They're creating so much value for the world. They're doing all this high quality reporting and like the the the dollars are falling like water through their fingers. You know, everyone else is managing to capture it. Facebook's capturing it and BuzzFeed's capturing it and

2:50:07 They they're just uh you know, they're they're like not sure what to do about it and paralyzed. Today it's a very different story. It's still not an A plus. but they sort of laid the foundation for you to believe how they could be very profitable in the future. Yep.

2:50:22 Hundred percent. Hundred percent. Now this this final one Like how much value have they created for the world.

2:50:30 Like This is a company When we compare it to like Airbnb. Where There there was a lot of value created, a lot of value destroyed in that company and many of the other companies that we've we've sort of um covered in

2:50:44 How they were able to achieve the business outcome that they did. And you then you look at their market cap and you're like, wow, this company managed to be like a hundred billion dollar company or whatever it is, creating and destroying a mixed amount of value along the way. The New York Times is the opposite of that. They are uh they're capturing in their market cap, what is it, four or five billion dollars.

2:51:03 And the amount of value they've created for the world over their hundred and seventy years is Unbelievable. They have been a pillar of a functioning society. Like the the work that they've done has been I I don't think it's crazy to overstate it. Like Certainly.

2:51:18 Influenced. the way that our society developed and without institutions like them, we probably wouldn't sort of have the functional society like we have. I get no matter what you think of uh their editorial uh uh stance. Now or in the past. Th the two things I would point out. One

2:51:37 They've won a hundred and thirty Pulitzer prizes, which I believe is more than two X the number of any other organization in the world. And Two. You know, we didn't talk about things like the Pentagon Papers. Right.

2:51:50 This organization and journalists within it. Throughout history have Literally put there. health, safety, livelihood, lives on the line to report on

2:52:05 Important things that are happening in the world and to call out abuses. Around the world. Pencon paper situation was crazy. Like in ended up in in conjunction with Watergate in a sitting president resigning. You know, we talked a little bit about World War Two and there was World War One and can't underscore enough what you said, Ben, that has been Created.

2:52:25 for the world by this organization existing is immense. Yeah. Yep. Alright, should we get into grading? Let's do it.

2:52:35 Well I think that we agree this one. is forward looking, what's an A plus And and this of course is a a a business outcome. What's a what's an F and then what's kind of the C scenario.

2:52:48 To me the A plus is that they are literally at the inflection point where they don't need to hire many more journalists, many more engineers, many more designers. I know they they are still hiring aggressively for these roles, but where they they start to kind of taper in the fixed costs required to produce what they produce. And they're able to just turn on a machine to continue acquiring subscribers. Which is a little bit of a risk to me because while we're still in a fast news cycle environment, we no longer have the Trump presidency. Hopefully we won't have the coronavirus soon. Like God willing, twenty twenty two is a uh a week can go by and I'll forget to check the news and it'll be awesome.

2:53:29 Um that will be great for the times. Like it's worth calling out that is counter to their interests. I've been thinking about that though. I don't think that's likely to happen anytime soon. Look at how crazy twenty twenty one's been. Yeah. I've been literally just like thinking about this for like my own life and sanity. I think we just gotta accept that We live in a world of accelerating change

2:53:53 Which means Lots of Frequent. disruptions of all types. All of which is probably good for the news business. Yeah.

2:54:03 Yeah, and this turns into kinda like a B. If they're not able to on this fixed cost base. able to just continue the subscriber tear that they've been on, but just sort of like modestly linearly continue to to acquire subscribers. I think the There's like an absolute A plus case if

2:54:21 they do keep making investments and really turn into more of like a tech company of an experiment learn rapidly iterate. Um, the New York Times has revenue opportunities lying around all over the place that they're not taking advantage of. Literally the place Yeah, like if they can figure out a way to monetize those in a way that feels authentic to the times, but is also like a you know, a really good uh uh uh business strategy, which I feel I I'd give them a a uh C on so far, or maybe a a B minus. Then there's like

2:54:51 then I don't care about, Hey, let's taper off the hiring. Like go hire, you know Google levels of people and go build more and more stuff than double down on what's working. even just sticking on the media side, you know, they've done some experimenting with video and streaming content. Uh, and they've done deals with Netflix, with Prime, with Hulu, uh, with FX. Um you know, that's all it's been underwhelming. It's been very underwhelming and like, you know.

2:55:20 We probably beat the drum enough on this episode about the times completely whiffing on video, but like An A plus would be They don't whiff on video this time around because Obviously the opportunity is enormous.

2:55:34 Yeah. Um, so then you know, the C case I think is is very much this like new subscriber taken off. I think there's one more um One more piece to the A A plus case, which is uh They have to increase our poo. For subscribers. Certainly.

2:55:49 Yeah. Yeah. They they need to prove that people year two and three are willing to make a and it's a big jump too. It's not a little you th this introductory pricing is way cheaper than year two and three pricing. So What do you F case is? How do they how how does this Not work.

2:56:08 They rebuy the Red Sox? Okay. And what what is a what is a reasonable way that this could go super south? Let's see.

2:56:18 I mean I'm tempted to say Yeah. They Get their value. aggregated, arbitrage, whatever you want to say by

2:56:29 aggregators and social networks, but I feel like everybody's learned that lesson. Like that's Unlikely to happen. Very unlikely to happen. Facebook's even paying them for content now. They do have a deal. Yeah. I guess an

2:56:44 F scenario for the future for the times. Could be that like the hyper Partisan. environment that we've been in that this is just the beginning and it gets worse and worse and worse and worse and worse and there literally is

2:57:03 You know. No room for anything in the middle, even whether you think the New York Times is the middle or the not, it wants to be the middle. Right. And That is just an untenable position. It's so funny. Like even today, I always thought it was a widely held belief that the New York Times, at least during the Trump presidency, was moderately that a common perception is that it's left leaning and this person who is left leaning was like, What do you mean?

2:57:27 Like They published that. Terrible op ed with that uh The cotton Tom Cotton. The Tom Cotton op-ed, and they did all the stuff with Hillary's emails. They got Trump elected. Like they're not literal. Are you kidding me? And so like I think there might be more and more, David, exactly of what you're talking about. What if the uh you got a pick.

2:57:45 And and there is sort of less room to be uh Or at least have a large addressable market as sort of a someone who's trying to be a centrist. Yeah. I hope that's not the case. Yeah, me too, for all of our sake.

2:57:58 Yeah. One thing I do want to point out that I thought was pretty interesting because I I got pretty deep down a Netflix rabbit hole on what do you have to believe to believe this kind of looks like Netflix. Netflix trades around ten times their trailing twelve month revenue. And the New York Times is only trading at about Four point eight X. Trailing 12 months. And certainly if you look at revenue growth, the New York Times doesn't deserve to be anywhere close to Netflix. But if you're looking at digital subscriber growth,

2:58:27 and a very similar business model, albeit probably smaller TAM. It is interesting to see that the New York Times is on a on a sort of relative basis definitely undervalued compared to Netflix. I would assume the subscriber growth rate is higher than Netflix. Good question. I think if I remember right, Netflix tries to grow revenue thirty percent year over year. And so that probably charts exactly to subscribers. And the times

2:58:55 Creo que This past year they were subs like forty eight percent. Yeah. So if if you really believe that like you just ignore the rest of the business and you believe that revenue will catch up It's a much faster growing business than than Netflix. With a very similar cost structure.

2:59:11 Yeah. Interesting. So just just thought that was an interesting one to point out. All right. Yeah.

2:59:19 Carve outs. We haven't done carve outs in a while. We had we we were worried, you know, we do have these such super long episodes now. Like, God, people don't want to listen to carve outs at the end. But uh we've been surprised. People have pushed back. Yeah. Yeah. And uh I mean I guess it makes sense if you make it this far. Why not have some fun? Now we're all just like whatever. Um So my carve out is a really great Fantasy series, uh book series that I read recently. Uh Saba to hear's Ember in the Ashes series.

2:59:51 It's Really cool. It starts out the first book, Ember in the Ashes. Uh, I thought it was a little slow and felt a little hung Hunger Games knockoff y, but uh my wife Jenny had read the series and she was like no no no like stick with it and um by the end of the first book and then into the second and beyond it gets gets really good. I thought really good world building very cool sort of like uh

3:00:13 It was um Kind of like Game of Thrones meets Lord of the Rings meets like the Middle East. Like uh it was uh That was good.

3:00:24 Highly recommend. All right. Man, I haven't it's funny, I haven't read fantasy in so long. Oh, I find it like a really good way. Fantasy and sci-fi just last couple of years I found like the best way to unwind at night and on the weekends. 'Cause like

3:00:40 Yeah. Just get away. All right, well my my first carve out is gonna be the opposite of a way to unwind. Uh it is the book Titan by Ron Chernobyl. Um It actually felt a lot like researching this episode. It is the history, uh sort of the the most recent, I think, biography of John D. Rockefeller and the entire story behind Standard Oil.

3:01:05 The book was nothing like I expected it to be. I I heard it recommended uh by Dax Shepherd on an episode of the Tim Ferris show. And uh Rockefeller is such a fascinating human because he is both The most important thing. egregious penny pinching capitalist of all time.

3:01:23 And also probably the biggest philanthropist in global history, maybe except for Bill Gates. And he was able to square The And not in two chapters of his life, simultaneously during his entire life.

3:01:37 Being just ruthless in the business practices. And being puritanical in his religious beliefs and and absolute devotion to God and to He he somehow thought it was his God given right.

3:01:53 And something that he needed to do to make the most money possible. And then give it away in the way that he saw fit. And he did. Like the the we modern medicine, no chance that it would be where he is today absent the absolute monopoly and absolute anti uh anti competitive practices of standard oil and the railroads. It's just so interesting. He started uh Rockefeller University, right? Which is uh Yep. research institution in Manhattan that has uh

3:02:21 Develop many. I think it's all PhDs and postdocs, right? Sounds right. He also is the founder of the University of Chicago and left his name completely off of it. Yeah. I didn't know that. And he put it there specifically because he was like I Don't

3:02:36 want this to be intermixed with my business practices and everyone You know, if I if I put it in Manhattan or Cleveland, people will think I'm using it for influence. Oh, interesting. Yeah, it's totally, totally fascinating. That's wild. It it's a long book. It's really good. Ron Chernobyl, for folks who don't know, also wrote the book that uh Hamilton, the musical, is based on. And uh actually when I referenced JP Morgan earlier and I say he shows up in all these stories, I was just reading about him showing up in in Titan as well. So

3:03:06 Can't can't recommend it, uh Strongly enough. I also have one more carve out that I wanna throw in with you. Carvo out alert. great company that uh we invested in from PSL Ventures called Iteratively. launched and announced their funding and everything this week. And uh it's a product that I'm like so pumped about because I wanted it so bad when I was at Microsoft. And if you're a a data team um you know a PM, an engineer, or um sort of an analyst who's ever had to work with analytics and had an analytics outage or had like

3:03:37 Hey, I swear we created an analytics event in the spreadsheet that was supposed to be tracked in the code here and like it's not firing or it's like sending us like one character different. Uh it's an uppercase U and user logged in instead of a lowercase U. So it didn't come up in my query. Their product uh solves all of that. And the cool sort of philosophy behind it is we take software testing really seriously. Like you can't ship a bug. You can't you can't check in something to the um the code repository that has a that basically that won't build. So why should you be able to check in a bug in your analytics? And if we can sort of enforce that, then let's take our analytics as seriously as we take, you know Bugs.

3:04:15 And it leads to all types of cool stuff like Well, I I'm I can go on forever. Super excited about this company. Check it out, iterative dot L Y. Awesome. Super cool. I know you've been uh

3:04:27 You've been pumped about this investment for a while. Jomping at the bit to be able to talk about it publicly. So Yep. A year a year and a half under my hat. Yeah, man. Well let's see. Uh listeners. I think that brings us to a close of

3:04:42 Uh definitely. Should we do another hour just to be sure? The longest uh number of years we've ever covered. I mean, I think i if you wanna keep talking about this, I think w we're getting increasingly interested in the sort of like Rockefeller era and uh New York Times, you know, early history. If you wanna talk about this kind of stuff, um, you should come join us in the acquired slack. It's where we talk about you know the most recent episode, future episodes we want to do, um, and and a place to just talk to great smart folks about everything going on in tech, uh that's at acquired.fm slash slack. And as a bonus when you sign up, you'll also receive the written playbook. from each episode where we codify the takeaways in some bullet points that you can uh you can share with friends or that you can sort of search your email for to to reference for easy findability if you want to remember something that we pointed out in an episode. Um, if you love acquired and you want to be a deeper part of what David and I do here, you should become an acquired limited partner.

3:05:39 You'll get access to our library of over fifty interviews and deep dives on company building topics, our monthly Zoom calls, which was great to do a few weeks ago, so so fun to see so many of you. Um, and you'll get live access to listen in when we record big events like emergency pods and our book club discussions with authors. Most importantly, though. This is like my favorite thing about what this show has become. You'll become part of the acquired community. We've been amazed by the caliber of the people and the insights on our LP calls, and it's just so clear to David and I that we have the greatest audience in the world from young people just starting their careers to CEOs and top executives who are running hundred billion dollar companies, general partners at venture investment firms of every size around the world. People have made friendships, gotten jobs, raised capital, launched new careers, even met co-founders through the acquired community.

3:06:30 So if you are not already an LP Click the link in the show notes. Go to acquired dot fm slash LP. Can't wait to see you.

3:06:38 It's pretty cool. We've got uh we've got some like mafias forming of acquired L Ps and community members at different uh Pretty hot startups around uh How I was gonna say around.

3:06:50 the Bay Area and Seattle, but really around the world. Yeah, around the internet. Absolutely. Absolutely. Well if if you aren't subscribed This is y maybe your first episode and you like what you hear.

3:06:59 You should? If this is Yeah, you know. something that you've liked for a long time and you've been waiting for that right episode to share with someone. For example, I'm sharing this episode with my grandma. She expressed interest in uh in listening. Anybody who cares about journalism, the Times, uh, you know, the media landscape, please share.

3:07:16 And uh you know, of course of course one to one is great. Of course sharing on the internet is great. You can tag us at acquired FM on Twitter if you do so. Um and we appreciate anything you do to uh bring new folks to the show. With that. We'll see you next time. See you next time.

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