The New York Times earnings report parallels recorded music trends: digital revenues not nearly enough to offset steep decline in traditional business

Via Inquisitr: The New York Times (see my story on their Times Select efforts, here) just just published their 3rd quarterly report, and things are not looking good:  "The company reported 3rd quarter net income of $6.5 million, compared to $13.4 million for the same period last year. Advertising declined 16% in the quarter after reporting an 11% fall for the first half of the year. Print advertising took the biggest hit with an 18.3% fall for the quarter, with classified advertising down 28%. Online advertising was up 10.2% off an increase of 16% at about.com, but the online gains were not enough to offset the decline in print, with online advertising making up 12.4% of advertising revenue for the company, but up from 10.6% for the same time last year"

Traditional revenues are seriously down; digital revenues are up but clearly not enough to get even close to anything resembling growth. No surprise here: the very same thing has happened in the recorded music sector: CD sales are nose-diving (or shall we say grave-diving?) but download sales are not anywhere close to making up for that loss.

So here, unsolicited, is my take on why this is happening, and what I think could be done to change this. Why is this happening? The bottom line: much too little & way too late. Even though the NYT has recently really stepped up their efforts (see below), it took both the newspaper / print publishing and the recorded music industries years (or shall I say, a decade, in the case of the major record labels) to even start thinking about how they could embrace & then monetize the irreversible changes brought on by the digitally networked kids and young adults that will be the readers / listeners / viewers - the people formerly known as consumers - of tomorrow.

Years ago, the NYT put their admittedly great content  (and their archives) behind the Times Select subscription wall, and very few people (257.000 I think - a really disappointing number considering the global leadership status of the NYT).

Meanwhile, the major record labels - severely disconnected from reality in their corporate suites and limousines, and not to be outdone by a bunch of kids armed with p2p software - secured their precious digital music with a bunch of messy and utterly disruptive software locks (the very epitome of snake-oil fka DRM), and then cleverly hid it behind the pay-per-track wall of iTunes, Napster and Rhapsody, as well. The result: very few people buying. iTunes?  Nope, while it's a nice-to-have for the labels, and an even greater trojan horse for iPods, the approx. 6 Billion songs purchased via iTunes (which owns ~75% of the market) in the past 3 years is not a major achievement for the record labels - it's a nicely dressed-up failure since it ignores about 95% of the market, i.e. the average user who will simply not buy music on a per-unit basis, at this price-point. This indeed seems to be the music industry's specialty: pyrrhic victories.

In other words, the failure of the NYT (until about 18 months ago) and the Record Industry (well... mostly the major labels) to really jump in all-the-way and give the users what they actually want (what a concept!), has led them to this point where - as large incumbents - they are much worse off even most cash-crunched startups, for they have infinitely higher costs (staff, overhead, salaries, executive compensation plans etc etc) and a closet full of smelly skeletons that severely restrict them from pursuing the much needed innovation they need at this time. This list includes items such as content provider & artist contracts that are 10+ years old and don't provide for any wiggling room on digital distribution, legacy businesses such as special products and record clubs that they want to maintain but that are not sustainable in a digital environment, CEOs and executives that are still utterly clueless about where things are really going. While the NYT may actually be an exception as far as utter cluelessness is concerned, the music industry still wins the grand-prize with UMG's Doug Morris who does not miss any opportunity to show the world how little he gets and how much he intends to remain in control no matter what the price - he'll take Control over Money, any day! 

One thing is for sure: if  I were to put money into the future of newspapers and publishing, I would rather put it into SixApart or Twitter than the NYT (or ask them to buy both, first!) and if I were to - foolishly - put money into music I would rather put it into Terry McBride's Nettwerk Music Group, Denmark's Spotify, or Holland's Sellaband. Anything that disrupts and creates a new logic will probably be better than most traditional players who will almost always try to reinsert friction into an already liquid digital ecosystem, forever chasing bygone illusions.

Now, having said all that I must admit that I love most of the good stuff that the NYT has done during the last 18 months - and they are certainly miles ahead of the record industry (not that this is a tough mission, really;). Blogrunner (they now call it 'the annotated Times' - nice!) is a great idea, taking down Times Select is a great idea, bringing in top level bloggers is a good move, adding more videos is a good move, and adding value with things like the Times Machine is cool, too.

The bottom line is that unlike the major record labels - which have utterly destroyed any trust across the board, both from the music fans as well as from the artists, and therefore are pretty much doomed - I think the NYT has a good chance of coming out the other end, but it needs to act now. So, here are a few "turbo-charge the NYT" ideas that come to mind:

• Buy Twitter or at least get very cozy with them. Micro-blogging is here to stay - it's the next ubiquitous global communication tool after SMS.
• Offer the entire NYT's daily edition via all kinds of mobile apps (iPhone, widsets, Android etc) and widgets. Take a page from the new mobile gmail app - and start selling targeted and personalized advertising right within these apps.
• Get a lot deeper into video - this is a multimedia, watch-this world now. This should include downloadable feeds and video-casts, rich-mediaRSS and streaming apps for mobile devices - you've got the brains so why not offer something for the eyes, too?
• Build or white-label a social network for NYT readers, writers, contributors, and base it around the great content you have.
• Get a lot more into conversations and ditch the monologs. The READERS are the new content, too. And... the new testing ground for next-generation advertising.
• Get into next-generation advertising, and become a leader in this turf: how about widgets, mobile ads, branded content, video advertising...?
• Widgetize and decentralize everything. People should be able to read (and watch) NYT content everywhere, no matter where they are.
• Bring a lot more good bloggers aboard: they have the goods, they are very cost efficient, and they need your audience, now more than ever!
• Get seriously into eBooks and eReading. Watch what people are already doing with all the cool reading apps for the iPhone (such as Instapaper), and where Amazon's Kindle is going: the electronic book business is about to take off - in another 12-18 months this will be a huge opportunity (imagine: rather than spending all that cash on printing and shipping of newspapers and books you could spend it on the actual content production)

My 2 cents. Please comment!

Comments

[todd Krieger]

Gerd - Check out Times People which is their move towards a social network. And twitter - yes - they need to get into that stream to survive. Very interesting list of fixit items.

[Thomas]

Great post Gerd.
One more suggestion:
What about a recommendation system for Newspapers. Something like a "smart" Newspaper.
The NYTimes "Content" & Last.Fm "recommendation system" sounds great to me.

[Gerd Leonhard (Media Futurist)]

Totally, Thomas --- good point. maybe www.thefilter.com could help? or do you have any ideas? Todd: Thanks for the comment, too!

[Thomas]

Just one more comment:
I don`t agree on the "Twitter" thing.
Why should NYT buy Twitter? Everbody could, maybe should, buy Twitter. But there is more value for other companies than for the NYT. Microblogging is a social network thing and not so much a "news" thing. But anyway, working with it, using it, is a must have for them.

[Thomas]

Gerd, yes Filter.com is maybe another good example, but anyway the recommendation system has to be adapted to the needs of "text" and "news content" tagging.
There is for example a big "add on" chance for a recommendation system in the news area:
It could be very valueable for readers to get different recommendations of news on different devices and of course to different times. So obviously is "a breaking news" a thing for the "twitter channel", and a 3 pages long portrait of a new rising movie star including a 10 minute video a thing for the ereader device or oc at home...
This is maybe a very useful and new dimension of recommendation systems to filter content not just for interests but also for your "living context"... just a thought...

[Gerd Leonhard]

Thomas, as to the NYT + Twitter - obviously just a brain-fart, really, but do consider that news is CONVERSATION -- and if the NYT would be better at Conversation, by offering a platform such as Twitter, maybe it would have some interesting ripple effects. To me, blogs and social media is really a lot like broadcasting (or shall we say narrowcasting) which I would propose is what the NYT does, as well. My 2 cents....