Why The New York Times Company Will Never Be Great Again

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The New York TimesYou're reading this online. Remember that.

Shares of New York Times (NYT) have been floundering in the single digits since early March. The publisher hasn't dished out a dividend in three years. Revenue has been falling every year since 2006.

New York Times is a survivor, but it's bleeding internally.

It's in fire-sale mode, unloading 16 of its smaller regional newspapers last week for a mere $143 million payday. It may seem like welcome money for a company that can use the focus and breathing room, but this is the same company that's shelling out more than $15 million in severance, consulting fees, and accrued pension benefits after CEO Janet Robinson unceremoniously stepped down last week.

Isn't that a whole lot of money for a company that saw its stock shed roughly 80% of its value during her seven years at the helm? Then again, I guess it's true: The last of the well-paying jobs in traditional journalism is to fail at the top of New York Times.

All the Bad News That's Fit to Print

Streaming the documentary Page One: Inside the New York Times earlier this month helped me put faces and personalities to the bylines that have helped distinguish the namesake newspaper from the regional reads that have literally stopped the lesser presses. The documentary details the modern struggles of the daily as it faces layoffs, fading circulation rates, and a world where WikiLeaks can scoop the pros and cyberspace can level the playing field.

It can take weeks for an investigative reporter to file a single important story. It then takes minutes for a hobbyist blogger -- or seconds for a Twitter user -- to break it down and benefit from the initial research.

Newspapers have obviously embraced the immediate nature of the Internet to get their stories across quickly and distributed widely. However, websites aren't made to support massive newsrooms and layers of overhead.

My hometown paper -- McClatchy's (MNI) Miami Herald -- recently sold its huge waterfront digs to an Asian casino operator. The arrangement calls for McClatchy to be paid a tidy sum and operate rent-free for the next two years. The building will then be replaced by a giant resort, with whatever is left of the publication setting up camp elsewhere.

A Groupon deal last week offered a yearlong subscription to the digital edition of The Miami Herald for a mere $9. Nine bucks for an entire year? Can the Internet really be a sustainable model for traditional publishers?

In an embarrassing gaffe last week, The New York Times accidentally sent out an email to subscribers who had recently cancelled, offering them a deal to come back at a 50% discount for the next 16 weeks. Unfortunately, a promotional missive intended for 300 people was circulated to 8.6 million people on its email list. Forget the nature of the blunder. Now everyone knows that cancelling the paper is the best way to get a marked-down offer -- and that's even if they will still want it.

Burying the Lead -- and the Publishers

Newspaper companies are trying.

Rupert Murdoch made a bold move in launching the iPad-centric magazine The Daily early last year. Murdoch proclaimed that it would only take a modest circulation of 500,000 readers paying $40 a year for access to the original digital publication.

Well? A few months ago, an ad executive told Bloomberg that Murdoch's ambitious foray into digital had only corralled 120,000 premium readers.

The New York Times resorted to a paywall last year. After consuming 20 ad-supported articles for free in any given month, folks hoping to access more New York Times articles will have to shell out between $15 and $35 a month.

No one should be surprised if these efforts flop. The tastemakers on Facebook and Twitter will just link to similar stories elsewhere, and others will be the ones benefiting from the viral traffic.

Ink About It

The Internet is the ultimate frenemy for newspaper publishers, though it's really more of an enemy than a friend at this point.

Let's think about the newspaper model, in which subscriptions and print advertising have historically provided the lion's share of a publisher's revenue.

The Internet has plenty of sources of free news, naturally available well ahead of a daily print edition that was haphazardly tossed into your rosebushes. Why subscribe? Local newspapers will obviously break a lot of material news, but that gets disseminated and regurgitated quickly as it happens.

Now we get to advertisers. Who is still paying up for print ads? Google (GOOG) offers marketers the ability to pinpoint specific users and pay only for generated leads in an immediately accountable platform. Can a regional newspaper do that? The same automakers and travel companies that used to buy ad blocks in morning dailies are now finding it more effective to get their messages across through their own websites.

It doesn't get any better when we turn to individuals with something to advertise. Craigslist killed classifieds. Free dating sites including OK Cupid and Plenty of Fish killed personals. Monster Worldwide's (MWW) Monster.com and HotJobs are doing a better job of matching the hiring with the unemployed than papers ever will.

The one thing working in New York Times' favor right now is that it is still profitable. Analysts see a profit of $0.62 a share in 2011, though that's well short of the $0.82 a share it generated in earnings a year earlier. McClatchy and USA Today parent Gannett (GCI) are also eyeing lower net income in 2011.

New York Times may be good enough to be the last publisher left standing after the next few years of logical evolution, but it doesn't mean that its knees won't be shaking.

There will always be a need for eye-opening investigative reporting and journalism that easily surpasses what I'm doing in this slightly mean-spirited column. The means of delivery will evolve, making it possible to continue once the industry shakes its doomed and bulky infrastructure. However, for mainstream audiences, this is good enough.

After all, you're reading this online, right?

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Google.




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