You may not think your business has a lot in common with the New York Times. But the newspaper is a perfect example of how businesses struggle to balance a declining legacy business that still makes up the bulk of its revenue with investment in the new digital business areas that will drive its future.
New York Times CEO Mark Thompson spoke last week at the Guardian Activate event, and I was surprised to learn that the venerable publication still has the same staffing levels it had 10 years ago and nearly the same print circulation. But Thompson is no fool. While he recognizes the needs to adhere to tradition, he also has an eye to an increasingly mobile future.
As Thompson talked about the value proposition of his newspaper -- delivering quality news in an era where fewer and fewer papers are doing that -- it occurred to me that Thompson and his newspaper are facing a classic innovator's dilemma. On one hand, he needs to keep delivering a quality product and maintain staffing levels to facilitate that. At the same time, the print operation is facing steadily shrinking ad revenues, and people haven't shown a great willingness to pay for news online. Something has to give.
In fact, the business is already changing -- if you look at the New York Times mobile products today, you'll see a set of products designed across platforms. Most of these deliver the news to a variety of devices. But it gets really interesting if you scroll to the bottom of that page. There, you'll notice several specialized mobile apps, including the crossword puzzles and a real estate app.
Moving forward, Thompson explained, all new products will be mobile first. He believes the Times can broaden its portfolio of offerings and make it easier to discover different aspects of the its coverage areas. "Our thesis is that the news will still be main offering, but there is room to channelize and offer different packages to different groups," Thompson told the audience at Activate audience.
For instance, he envisions an opinion product that incorporates the popular New York Times opinion pieces with aggregated opinions from other sources. But he recognizes he's walking a fine a line by doing this. "You have to think about subtle judgments about optimizing one way or optimizing the other. You need to model and think carefully about how you offer it and to test the metering within in a given territory or a portion of users," Thompson said.
He wants to create multiple revenue streams where he has paying online and mobile subscribers along with advertising. When the newspaper put up a paywall last year, it was widely criticized. But because of the paper's scale, even when only one percent of readers became subscribers, that translated into a significant revenue stream. In its last earnings report, the Times said it collected $37.7 million from digital-only subscriptions and similar products in the third quarter of 2013, an increase of 26% from the previous year, and made up more than 10% of the company's total quarterly revenue (which was $362 million).
The paper sees print as surviving perhaps another decade at the most. That means if the newspaper is to survive, it will need to find more diverse ways to generate revenue in an increasingly online and mobile world. That requires willingness to experiment and take risks that may not pay off.
That's a lesson every company with a strong legacy business could afford to learn.