The New York Times Case

Essay Question 1:

As many other newspaper families have abandoned the business, the Sulzbergers have remained steadfast in their belief that they were put on this earth to preserve and protect The New York Times. . . . As a red-blooded capitalist, I understand why dual classes of stock are frowned upon. . . . If you buy New York stock, you are buying into the notion that you'll let the family run the show, and it will put the Times's journalism ahead of all else.

* Joe Nocera, How Punch Protected The Times, The New York Times, Tuesday, Oct. 2, 2012

Considering our study of creative destruction, dual classes of stock and the life cycle of both the newspaper industry and a company such as The Times, how would you respond to op-ed columnist Joe Nocera's comments. All things considered, would you agree or disagree with his assessment that the dual class of stocks has protected The Times and will remain viable in the digital age? Why or why not?

It is obvious in many ways why dual classes of stock are frowned upon. The main reason being that they keep ordinary shareholders from contributing to how the company is run and who sits on the board. The supporters of the system believe it allows their leadership to focus on the long-term growth and interests of the company instead of the short-term financial situations; the opposition believes it gives this small group of privileged shareholders unfair control while the rest of the shareholders provide the majority of the company's capital. The dual class structure of The New York Times was put in place to "protect" the journalistic standards and highly respected brand of the company. The family is supposed to be focused on the company as a whole, the level of news they report, the money they make, and how the public and shareholders view them. Those who oppose the dual classes of stock have had little reason to not trust the family and the way to company has been run in the past. Recently poor choices like acquiring About.com have led shareholders to question their leadership. I ask myself, would the dual class structure of the New York Time be questioned if newspapers in general were not declining?

The problem lies in the fact that we are now living in a complete digital age where news and The New York Times is protecting a failing industry. The price of a company's stock is affected by three components in roughly these increments: the state of the economy 50%, the industry segment 30-40%, and the management skill of the individual company 10-20%. These percentages prove that the economy and the industry segment have more of an effect on a company's stock than individual management; but it should be noted that the Sulzberger family has not made good choices in their investments. The Sulzberer family is having a more difficult time in trying to keep up with the rapid developing technological world. Because of these poor leadership decisions, I do not support their continuing to act as a dual stock company. Newspaper conglomerates that do not have dual stock have enjoyed considerably more growth; Ganett has gone up $5.11 since February 28th, 2012 whereas the New York Times stock has only gone up $2.99. According to MarketWatch, Gannett's overall digital revenues have increased 19% from 2011. The New York Times is facing a cyclone; a downward spiral. While the economy has gone up and down, The New York Times has only gone down. Institutional investors play an active role in a company's management, the right to exercise voting rights, and have the freedom to buy and sell shares of stock. These investors play a large role in keeping the company in the money because their role is to provide the companies with capital, which in turn also benefits them. I believe The New York Times would benefit from more institutional investors and completely ditching the dual class system based on their leadership performance and superior competitor's performances.

Essay Question 2:

The content ramp-up by Big Tech poses a serious threat. Tech giants aren't always aiming to profit from the content alone; rather they are using it to keep consumers hooked on their primary business, be it hardware, retail, search or software. As a result, the likes of Netflix, Pandora and Yelp may face competitors that are better financed, have huge existing user bases and are able to operate their content offerings at break-even or even a loss. Take Amazon's video-streaming service. If it never garners the exclusive content deals that made Netflix a household name, it is likely to offer enough to satisfy some users.

*Miriam Gottfried, The Wall Street Journal, Monday, September 24, 2012

Consider our study of loyalty, pricing, the theory of relative constancy as it applies to consumer spending and the value of content vs. distribution in a disaggregated age. What are the major strategic issues facing Netflix, Pandora and other content aggregators over the next five years? How does that differ from the issues facing such Big Tech giants as Apple and Amazon?

Content is no longer king. The Internet has created a monster that has disaggregated all content distribution for media. Advertisers do not pay for content, they pay to reach a target audience with their content; Media companies have to appeal to that target audience. The theory of relative constancy says that a relatively proportional amount of GDP (national wealth) is spent on media every year. The only way for a single company to capture more revenue is to capitalize on more of the particular market you are in proportional to the expanding economy. How to actually capture more of the market are what strategy teams of media companies should be focused on.

The strategic issues and challenges facing Netflix, Pandora, and other aggregators over the next five years will be how to compete with TV offerings geographically and the different mediums or packages offered. These companies are offer the freemium business model which offers a product or service (typically digital software, media, games or web services) free of charge, but a premium is charged for advanced features, functionality, or virtual goods. They must take "free" off the table and offer some differentiation value that customers will consider worth buying; they cannot continue to operate at a break-even or loss forever. To gain this differentiation value they will most likely have to buy exclusive content to make their package unique compared to competition. Companies will spend their money on these exclusive offers and then match the price accordingly and hope to still be able to engage their customers, convincing them to buy past the freemium offer and purchase