Mar
01
1989

Corporate Profile: The New York Times

The New York Times is not only the newspaper of record for the Fortune 500, it is also a member in good standing of that elite group of corporate giants. Though a number of press critics have dissected the ideological biases, deadly prose and institutional arrogance of the Times, its business operations are less frequently studied. Doug Henwood, editor of Left Business Observer (from which this article is adapted), reports that today's Times is dancing to a marketing beat.

In 1878, Adolph Ochs bought a failing paper, the Chattanooga Times, for $5,570 in mostly borrowed money. Through a dedication to "objective" reporting, nepotism, upgraded typography, tight management and civic boosterism, he made his first Times profitable. Eighteen years later, with $75,000 of borrowed money and a letter of recommendation from President Grover Cleveland, Ochs repeated his trick with the New York Times.

Ochs made the New York Times a profitable operation, but, as legend goes, profit was never Job One; Wall Street analysts joke that the paper was run like a nonprofit enterprise for most of its life. That began to change in 1973, a year when only deft accounting allowed the company to report a profit. This brush with death converted the paper's management to the cult of Marketing. Zeal for the religion is now total: the title of the Times' 1987 Annual Report is "The Marketing of Excellence." In his introduction, Times executive editor Max Frankel boasted that "The News Department of the New York Times does not wince at the thought of 'marketing'...their many products."

True to the title's promise, the report is a homage to the fruitful marriage of advertising and editorial product. Frankel celebrates the new single-theme pages ("Keeping Fit," "Eating Well," "Consumer's World") and a new focus on "life-style patterns." The editorial environment of such pages is, of course, extremely attractive to specialized advertisers.

The report is especially proud of the new Sunday magazine product, "Good Health," a wonder of marketing. The paper sponsored health fairs around Manhattan where Times writers like Marian Burros and Jane Brady preached the same gospel of bodily vigilance they preach in the Times. This promotion of good health stimulated interest in "Good Health," to the cheer of advertisers. One of the happiest advertisers is Schering-Plough, manufacturers of Fibre Trim, who hadn't previously advertised in the Times. The nation's colons are deeply in debt to this miracle of synergy. As for the nation's hungry, well, they're bad news. And advertisers hate bad news.

But filling the pages is only half the marketing battle; you've also got to sell papers. And the Times is at the cutting edge here, too. As the Report says, "Making extensive use of demographic data, the Times targets its potential readers, sometimes by sites as specific as a single street--and then uses marketing tools to get people started on what can quickly become a life-long habit." This is a healthy habit, of course.

Communications Empire

The New York Times is the highly profitable flagship of a highly profitable media conglomerate, the New York Times Co. Besides the newspaper of record, the company publishes 26 daily and nine nondaily newspapers, mainly in the south-east and California. The company also owns five TV stations, two radio stations, and a number of consumer magazines (e.g., Family Circle, Golf Digest and Tennis). The Times Co. has a joint venture with Time Inc. to distribute both companies' magazines. The firm also has a 33 percent interest in the International Herald Tribune, an 80 percent interest in a Maine paper mill, and a 49 percent interest in three Canadian paper mills--which sheds fresh light on the Times editors' enthusiasm for the U.S./Canada trade pact that eases the cost of doing business with Canada.

On January 9, the Times Co. announced the sale of its cable TV unit in southern New Jersey to a group of investors including two larger cable operators and a group of black investors. The black group is led by J. Bruce Llewellyn, chair of two Coca-Cola bottling companies and a Buffalo TV station. The two cable operators will each own 40 percent of the new company; the minority partners will own 20 percent. This 20 percent is enough to earn the Times Co. $55 million in tax breaks under a law designed to encourage minority ownership in the broadcasting business.

Business Sags Since the Crash

Though the Times Co. earned $160 million in profits on $1.7 billion in sales in 1987, up 927 percent and 246 percent respectively from 1978, things are slowing down; profits for late 1988 and early 1989 are anemic. The magazine business is hobbled by startup costs for Child, Decorating Re-modeling, Southern Travel and Snow Country--new magazines whose names reflect the company's au courant dedication to upscale niche marketing. The Times Co.'s TN stations are feeling the pinch of cable competition for ad spending. And the newspaper business is caught between the Scylla of high capital expenses and the Charybdis of stagnating ad revenue.

The business slowdown in newspapers is being led by the "crown jewel," the New York Times. (The Times Co. doesn't disclose the Times profits; it lumps them together with the regionals in financial reports. But Wall Street analysts estimate the flagship produces 55-60 percent of total corporate profits.) Scylla here is the $400 million, million-square-foot printing plant in Edison, N.J., which should be completed in early 1990. Some of the Sunday paper's ad-rich sections-the Book Review, Travel, Real Estate, Arts & Leisure-will be printed here, in living color. (Color, of course, commands higher ad rates.) New black-and-white presses will enable the Times to print far more copies with no more workers than today. This will be good news for the paper's bottom line--assuming there are buyers for all the new copies and advertisers ready to pay higher rates for fresh acres of publicity.

For the moment, though, advertising is "soft," because of trouble in three crucial areas--financial services, real estate, and retailing. Financial services linger in their post-crash torpor, the New York real estate market has been slowing since mid-1987, and retailing is suffering a quiet mini-recession. Macy's and Bloomingdale's, both major Times advertisers, have been cutting back on ad spending because of heavy takeover-induced debt loads.

The next few years at the Times Co. should be interesting. On the death of 95-year old Iphigene Ochs Sulzberger, the family trust controlling the paper will dissolve, its stock holdings to be distributed among surviving family members. Though it's theoretically impossible for the shares to be sold to outsiders, unsentimental heirs can hire creative lawyers to challenge anything. And Times publisher A.O. "Punch" Sulzberger is soon likely to turn his job over to A.G. "Pinch" Sulzberger Jr., while retaining the chair of the Times Co.

According to a Manhattan, Inc. article (8/88) by P.D. Klein, former Times Magazine editor Pinch wants to turn the paper into even more of an "advertiser-driven medium." Klein also says that Times Co. president Walter Mattson wants to do away with the last vestiges of paternalism at the firm and turn it into a tightly managed operation. If advertising stays sluggish, the Times of the 1990s could evolve into a slicker and even more toothless product than today's.

SIDEBAR:

Puffing Merck

An article in the New York Times Magazine (1/8/89) sang the praises of Merck, a major pharmaceutical firm, which recently gave away an anti-parasitical drug to some 400,000 people in West Africa to prevent river blindness. Merck had sold about a billion dollars worth of this drug, which had originally been developed for cattle, not Africans.

Investigating the origins of this piece, New York Newsday media columnist D.D. Guttenplan (1/18/89) discovered that the idea for the article originated at an editorial lunch when senior editors of the Times heard the president of Merck talk about his company's activities in West Africa. Times Magazine's James Greenfield thought it was a great idea for a story. He later denied to Guttenplan that he knew Mary S. Heiskell (one of the Sulzbergers) is on the board of Merck. Heiskell told Guttenplan: "Oh, they all knew. I mentioned it myself if no one else had." This wasn't mentioned in the Times' puff piece on Merck.