The New York Times Company | Acquired

All right.

High energy.

Yeah.

Need some energy to get through 170 years.

It's literally 170 years.

It's crazy.

Welcome to Season 8, Episode 2 of Acquired, the podcast about great technology companies and the stories and playbooks behind them.

I'm Ben Gilbert and I'm the co-founder of Pioneer Square Labs, a startup studio and venture capital firm in Seattle.

And I'm David Rosenthal and I am an angel investor based in San Francisco.

And we are your hosts.

For over a hundred years you would have been hard-pressed to find a better business in the world than an American newspaper.

Each one had a local monopoly, an incredibly profitable advertising business, and it was one of the earliest examples of a reasonably low marginal cost business.

It's dirt cheap to just print another copy of the paper.

The newspaper business was, for a long time, Warren Buffett's canonical example of a franchise like the best type of business you can possibly own.

Indeed.

And this today, listeners, is the story of the paper that loomed large over all the others.

The New York Times.

Today we peer into what I think is the oldest company we've ever done on this show, founded over 170 years ago, before the Civil War.

The Times has seen the majority of American history and for the majority of its life it's been controlled by a single family.

And for many of you, a family you've probably never heard of.

This is a family whose paper shaped the American perception of current events through World War I, World War II, Vietnam.

I mean really their newspapers shaped your perception of America itself and your parents' perception and your grandparents' perception.

You get it.

It is probably safe to say that the five generations of the Ox-Sulzberger family has been the closest thing that America has ever seen to a dynasty.

After a century of near-continuous prosperity, the New York Times has seen an incredibly dramatic fall and then rise, just in the last 20 years.

The internet, and social media on top of it, brought ruin to the entire traditional journalism industry.

In the late 2000s, the New York Times got to such a low point that they even sold their office building to free up some cash, while they rented it back from the buyer.

Oof, indeed.

Can't wait to talk about that part of the history.

Yeah.

And yet, somehow today, they've been accused of being a monopoly in the journalism industry.

And they have more digital subscribers than they ever did in print.

And they employ the former editors-in-chief of BuzzFeed, Recode, and Vox as columnists.

So how did they turn it around?

Who is this mysterious family?

And what does the future hold for the New York Times?

Today, we dig in.

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All right, listeners, now is a great time to thank a new friend of the show, Koifin.

And it's funny, they're new, but actually I've been using their product for years.

My research project for every single new Acquired episode involves Koifin.

So when they reached out to sponsor the show, I thought, well, this is convenient.

Indeed.

So Coifin is a financial research tool loved by both individual investors and financial advisors.

Individuals use it for stock research, graphing financials and portfolio tracking, and financial advisors use it to build model portfolios and create client proposals.

They have live market data and powerful analytics tools.

So it's kind of like a Bloomberg terminal, except without the huge price tag, right?

Yes, essentially.

It's a web app, and it's totally self-serve.

I've actually not talked to anyone at the company for the first few years that I used it.

So Koifin is a product that the broader market, like all acquired listeners, would use, not just Wall Street investment bankers.

It's where I pull things like growth rate or gross margins or the PE ratio or revenue multiples for every company we study and you can compare these things over time with historical graphs or against other companies.

It's often what I use when we're studying private companies too, like Rolex or Mars or Ikea, to look at the comparables, to estimate what these companies would be worth if they were public.

They also have a screener that lets you filter across thousands of stocks, so you can quickly surface investment ideas.

Yep.

So the general idea is, if you're someone who's used to living in data, you should have that at your fingertips as you think about investing.

Exactly.

It's got these great graphs for data visualization wrapped around institutional grade data.

So if you want to understand what assumptions are baked into the stock price today, Coifin is for you.

I was about to say that acquired listeners have a great offer.

But Koifin's free product is actually already really robust.

Which is what I was using for years.

I know.

But indeed for Acquired listeners and also for you, Ben.

If you go to koifincom slash acquired and you end up upgrading to paid, you'll get 20 off your first year.

Our thanks to Koifin.

That's K-O-Y-F-I-N dot com slash acquired or click the link in the show notes.

Well, David, it's time to take us in.

And listeners, as always, this show is not investment advice.

David and I may have investments in the companies we discuss.

This show is for educational and I sure hope entertainment purposes only.

Oh boy.

Was this ever an entertaining one to research?

170 years.

This is crazy.

We're going to start with the founding of the company, and it's going to be the farthest back in history.

Other than Bitcoin, when we were talking about the banking system.

I think this is going to be the second farthest back in history we've ever started.

And I'm not even going back before the company.

You started with something older than this, I think with Uber, right?

Oh, actually, no.

I think that was like 1890s.

Wow.

Yeah.

There were no cars when the New York Times was started.

Crazy uh, crazy.

Okay, we go back to 1851 and the founding of the well-known, world-renowned new hyphen york daily times which, of course, doesn't quite have the ring, doesn't quite have the same ring.

No new new hyphen york daily times, new york daily times okay, So what was going on in 1851?

It was a media boom time in the U.S.

There was a growing population in the country, increasing literacy rates, vastly increasing literacy rates, urbanization, and of course, war on the somewhat near-term horizon in the coming civil war, U.S. uh and so there was hugely hugely growing demand for news uh new newspapers were sprouting up all over the country in the year 1800 there were 200 newspapers in the u.s and in the year 1860 there were 3 000 newspapers in the u.s isn't that crazy so did printing presses get way cheaper too yes huh Yeah.

So it got a lot cheaper to print newspapers must have been various forms of machinery, rudimentary automation and just the demand, like the growing population, the demand for news literacy.

It was like the sub stacks of 1851.

Everybody was starting a newspaper.

Yeah.

And also because of the advances in production technology.

Not only could you make more newspapers and people could start them, but you could sell them cheaper.

So before this time, newspapers were selling, I think, around like five, six cents a copy.

But starting in the 1850s, and in particular, new newspapers, dropped in price to one cent per copy.

This is going to come back later.

So you could reach a whole new mass market.

So here we are.

In September of that year of 1851, the well-known New York journalist and politician Henry Jarvis Raymond and his friend and former banker and merchant George Jones embark on a new venture, new newspaper venture in this brave new landscape, and they publish the first edition, on september 18th 1851, of the new hyphen york new york daily times.

All right rosenthal, you've made your point.

All right enough with the hyphens.

So who were these guys?

So Jones, as we said, was a former banker.

He had also though, worked as a business manager at Horace Greeley's New York Tribune, which was then the sort of premier paper in New York.

And that was where he had met Raymond.

Jones had family money and lots of connections about town from his wife's family.

Do you know his wife's father's name?

Ben, you're not going to get this, but I had to put it in here.

His wife's father's.

No, I have no idea.

Benjamin Gilbert, the well-known New York socialite.

No way.

Really?

Really.

Yeah, really.

I saw that.

I was like, we got to include this here.

I got to do some research and see if we're related.

So he puts up $25,000 of his own family money to finance this new venture.

They want to get to $100,000.

So he goes out and he raises the... other $75,000.

This is a lot of money in 1851.

From just some casual family connections.

He has several members of the Morgan family end up financing this.

Like J. Pierpont Morgan?

Yeah, exactly.

Wow.

As you do.

This guy shows up in all these old stories.

I feel like everyone somehow was getting financed by J.P.

Morgan in these days, totally so, that's jones.

He's sort of the, the business guy he brings, he brings the capital um, but it's really raymond who's the real force behind this.

So who is?

Who was henry raymond?

He was quite the interesting character.

As we mentioned, he had worked at the tribune uh, with jones, which is where they met, and that was the premier sort of respectable penny paper out there, as they were known for the one cent papers, um.

He had also though, been very involved in politics.

And when I say very involved, I mean very, very involved.

Ben, do you know what other organization Henry Raymond is well known for co-founding, besides what would become The New York Times?

Ooh, I feel like I should remember this from AP US History, but I do not.

A little organization called the Republican Party, of which he was a founder one of five founding members.

Kind of incredible.

This just blew my mind doing the research.

Literally he's known as the godfather of the Republican Party, is also the founder of the New York Times.

And all of this was happening concurrently.

So was it like a mouthpiece for the Republican Party in the early days?

Well, not quite.

Okay.

So before he and Jones decided to start the Times, Raymond had actually left the newspaper business and he was a politician.

He was a member of the New York State Legislature, where he was a member of the Whig Party at the time, sort of the precursor to the Republican Party.

But he had stepped down, and then he decides to start with Jones to start The Times, which they do.

But then shortly after, and so Raymond is running The Times.

He is the managing editor.

He's the publisher.

Jones is the money, but Raymond is really running it.

While he's still running it, he goes back into politics leading up to Abraham Lincoln's presidential campaign.

And that's when he, along with Lincoln, and also along with Horace Greeley from the Tribune, they and a couple other people start the Republican Party.

And the platform, of course, is abolitionism and the abolition of slavery in the United States.

That was the origin and the platform of the party.

So Raymond, while this is going on, he becomes the second chair of the Republican National Committee.

So he's like the chair of the RNC while also publishing the New York Times.

He helps push Lincoln into the presidency.

And then actually after the Civil War, he goes to Congress and he becomes a congressman.

He's a member of the House of Representatives, all still while publishing the Times and serving as the managing editor.

Like writing all the editorials.

That is so insane.

I mean, it's funny.

On the one hand, I was like, wow, today this would not fly.

And then I'm thinking to myself, today this is what's happening.

Not at the Times, but yeah.

Yeah.

Yeah, it's crazy.

So this thread is going to come back so often throughout this history.

So that said, certainly the Times is quite literally the party mouthpiece of the Republican Party.

But Raymond is also a real journalist.

He worked at the Tribune.

He highly values journalism.

He doesn't want the Times to be sensational.

And in fact in the very first edition that comes out that September in 1851, he writes famously We, being the Times, shall be conservative in all cases where we think conservatism essential to the public good, and we shall be radical in everything which may seem to us to require radical treatment and radical reform.

We do not believe that everything in society is either exactly right or exactly wrong.

What is good we desire to preserve and improve, and what is evil we want to exterminate or reform.

Of course, he's talking about slavery there.

I love this piece so much, like i think it is just.

Not only is it a beautiful little piece of writing, but it is pithy like it.

It captures so much of what their intent is in creating this this, what would become an enduring institution, and sort of how they view it in such a pragmatic way.

I mean i, i'm excited.

Uh listeners, we will link in the sources to to sort of where we found this, or if you're um, listening to this more than a week after it comes out, you can check it out in the the transcript, but it's just like i want to have it framed and put on my wall.

That's a Yeah, it really is a beautiful statement, I think.

So it's probably worth pausing here for a minute before we go too much farther in the story and explaining what exactly is it that happens at a newspaper.

Like, what are the various sort of departments here?

There's really kind of two and a half pieces of any news media organization, newspapers included, cable news, television networks, which we will talk about as we go along here and, of course, internet media news networks as well.

There's the content side of the house, sometimes called editorial, which includes both news and opinion.

And then there's the publishing side of the house, which is the business side of the house the advertising, the circulation, the managing of the organization and the company.

So where does the publisher fit into this?

Right.

So then the publisher.

So now back in Raymond's day, Raymond is both sort of executive editor.

He's managing all this and publisher.

So the publisher is the running of the business managing subscription circulation, advertising the cost side.

And in the case of the New York Times today, it's actually pretty easy to separate this out, because there's the media property, the New York Times, and then there's the company, which is the New York Times company that publishes the New York Times.

And so an easy shorthand for this, for people who are familiar with tech companies, would be you have someone running product and someone you know a CRO, someone running revenue.

Exactly.

So sometimes throughout the history of the New York Times there has been just a publisher that is essentially like CEO and CRO.

Sometimes there's also a CEO who usually reports to the publisher, as is the case now.

So today, A.G.

Sulzberger is the fifth generation Ox Sulzberger, who is the publisher of the New York Times and chairman of the board.

And Meredith Coppett-Levian is the recently appointed CEO who reports to him and the board.

So they sort of even further bifurcate the duties, where the publisher has a little bit more of sort of like a figurehead and a sort of consistency throughout history voice and the CEO is like actually running the business, but again neither of them are actually involved in overseeing the editorial product and overseeing the newsroom That has always been traditionally kept at arm's length.

Yes, yes.

And most of the CEOs in the New York Times company history have been COOs before becoming CEO.

So Meredith was COO until recently when she became CEO.

So we're going to cover today sort of the history of the New York Times from the business and publisher side.

Of course, we'll talk about the newsroom as we go.

But, as always, this is a corporate history perspective that we're going to cover the New York Times from.

All right.

So, David, I teased the Ox-Sulzberger family in the intro, and I heard you just mention that A.G.

Sulzberger is the fifth generation publisher.

These two people we're talking about here, not Ox or Sulzberger.

This is previous ownership, like founding ownership.

Yeah.

So what happened here?

Okay, so back to Raymond.

He's wearing all these hats.

Things go well for the first, you know, 20 plus years of the New York Daily Times.

Within two weeks of starting, they hit 10,000 copies in circulation, which is crazy. pretty great.

26,000 in the first year.

Then, in September of 1857 so six years after they start they drop the daily and shorten the name to just the New York Times.

Still with the hyphen, it would be Ox who would remove the hyphen later.

But things are going well.

By 1858, circulation's up to 40,000.

And then by the time the Civil War starts with the attack on Fort Sumter in 1861...

Circulation is at 75,000.

That's pretty good.

I don't know what the population of New York was at that time.

I think it was maybe about a million or so, maybe a little less.

So they're 10% plus of the city is taking the times at this point.

Totally.

And at this point, too, the New York Times was a little bit highfalutin.

It was a newspaper for people who were tuned into business and politics, and particularly more sort of politics.

So it wasn't necessarily for the every person.

Yep.

And in particular in the North, the abolitionists and what would become the Republican Party.

So okay, this moment this is like maybe the craziest founder story that we've had on this show in our five years of doing this.

On July 13th 1863.

The Civil War has been going on for two years since Fort Sumter, but there wasn't a draft for the army yet.

In July, the government declares a draft.

And there are actually draft riots in New York City about this.

People are really upset.

Lots of people have family in the South.

They may be sympathizers with the South.

This is hugely, hugely controversial.

And the mobs target the newspapers that are sort of the mouthpieces of Lincoln and the Republican Party through the war.

So a mob descends on the New York Times headquarters building and Raymond, because he's buddies with Lincoln, he gets the War Department to ship a bunch of rifles and two Gatling guns to the Times because they know this is going to happen.

And he leads a defense of the building and the company.

He hands out rifles to the whole staff.

He's manning one of the Gatling guns himself.

And he gives the order that if any of the mom tries to break into the building, you're to fire at will on these people.

It's crazy.

Nobody is.

No shots are actually fired, but they do successfully defend the building.

Uh, the mob instead ends up attacking the tribune and storming the tribune's building.

Totally, totally crazy.

Next time we hear about like a tech ceo doing something that seems uh bold, think of henry raymond back in the day Yeah.

Protecting this house.

Completely nuts.

After the Civil War ends, Raymond passes away not long after in 1869.

His partner, George Jones, then takes over as publisher and continues running it in a fine fashion.

I wouldn't say it grows hugely, but he's a good story to the business.

However, when he dies in 1891, there's a succession crisis.

What's going to happen to this company?

So a group of staff, a group of reporters end up putting together a buyout and raise about a million dollars to buy the Times from the estates of Jones and Raymond.

And they start operating the company, but they're not.

They're all like editors.

They're all from the news side.

They're not business people.

So they don't really know how to manage the publishing or the business of the newspaper.

And in 1893, there's a financial crisis.

And kind of much like 2008, which we'll get to later in the story.

This is really bad for newspapers, for advertising, for circulation.

And the paper ends up going bankrupt.

Circulation had fallen all the way down below 9,000.

It was up at 100,000 plus during the Raymond and Jones days.

That's so crazy.

Basically, the New York Times is going to disappear unless somebody comes in and saves them.

I mean even just think about all the machinery that they had and all the delivery trucks that they had in order to deliver the Times.

And how do you downsize that fixed cost infrastructure from shipping out 100000 papers a day to 9000?

It's very easy to understand how this business ends up upside down quickly.

Yeah.

Totally.

I mean, there's the rent on the space.

There's the raw materials that you need to print the paper, the ink, the pulp, the paper.

There's the people, the laborers.

You need to employ highly skilled laborers on the printing side, and then the delivery infrastructure.

You're not just scaling down your AWS usage.

Yeah, totally.

If only Jeff Bezos were around back then.

So this is when Adolph Ox enters the story and rescues the New York Times.

And this is really a second founding of the business.

And it's just an amazing American story.

Likewise, I knew that the Sulzberger family controlled the times.

I probably mostly only knew that because I used to be an investment media investment banker and worked at the Wall Street Journal.

But I didn't know anything about this history.

Like the New York Times is the one who- Snapchat has the triple class structure.

That's right.

I forgot about that.

Where if you own shares on the market, you get zero votes.

It's hardcore.

Yeah.

But yeah, the Times pioneered this when they went public in what?

1969.

Yeah.

I mean it sort of laid dormant there undiscovered, until tech CEOs decided to do it with all their companies.

Yeah.

Okay.

Adolf Ochs was born in Cincinnati Ohio, in 1858, so seven years after the founding of the New York Times, to Jewish immigrants from Germany.

Pretty poor.

He was not a Rockefeller or a Morgan.

And After the Civil War the family moved to Tennessee where he has to work as a boy to help support the family.

So he gets a paper route in Knoxville, Tennessee.

And he gets a paper route for the Knoxville Chronicle.

And he ends up just falling in love as a young child with the newspaper business.

At the age of 11, he gets taken off the streets, so to speak, and he goes to work in the office as an assistant to the editor of the Chronicle, William Rule, who kind of becomes a mentor for him.

And then, when he's a little older, his family sends him away to Rhode Island to go work in his uncle's grocery store up there.

They thought he would make more money doing so, but he hates it.

He's a newspaper man.

He's a newspaper man that's in his blood.

So at age 14, in 1872, he dies.

Drops out of school in Rhode Island comes back to Tennessee restarts working at the Chronicle, this time in the printing operations, as what's called a printer's devil helping out around the factory.

And then, a bit over five years later, at age 20, he decides to move to Chattanooga, which is becoming an iron mining boom town in Tennessee.

This is also crazy.

Like imagine how far away we are from New York city and the New York times here.

And here's this kid of like Jewish immigrants who started as a newspaper boy and Moves to Chattanooga, Tennessee.

And in Chattanooga he knows that there's an existing newspaper called the Chattanooga Times, but it's not very well managed.

And he's got a hunch that he might be able, even as a 20-year-old kid with no money, to be able to take this thing over.

He's so freaking enterprising because he's a dropout.

He's trying to make money for his family to support them.

And he's not doing the traditional thing that you would go earn a wage.

He's trying to say well, I want to go and revive this newspaper business because I know a thing or two about papers.

And he's doing it in a place, Chattanooga, that is having a moment And it's interesting.

I was sort of trying to figure out why it's not sort of like the dominant city in Tennessee today, because in this postbellum era we're here in the late 1870s.

The country has started to sort of heal and rearrange itself.

And Chattanooga is in this interesting middle between a northern territory and a southern territory.

And I think it's in this great book called The Trust, which chronicles the history of the times, that I was reading to prepare.

They call it a distinctly American city, neither northern nor southern.

And it's really this, you know, not only economically because of the iron mining, but culturally becoming a boomtown.

Yep.

So young Adolf, man, this kid is like so enterprising.

So he negotiates with the guys who own the Times in Chattanooga to buy the paper for a down payment of 250.

And then effectively for those in small cap private equity.

They'll know this term.

A seller's note of 5500.

So he gets them to agree for this tiny down payment that he'll take over the business.

And he thinks he can turn it around and make it profitable enough that over the next set of years he can generate enough profits to pay the original owner's 5500 out of the profits that the incremental profits he'll generate.

Wait.

So this business is in dire condition and these guys are saying we'll take 250000 and believe you that you're going to generate 5500 worth of profits in the ensuing years to pay us.

I mean, whether they believed it or not, they were willing to do the deal.

They were willing to part with $250,000 and the $5,500 was house money if they could get it.

Yeah, exactly.

And I mean, I'd say it was a good deal.

They should have just like kept equity in the paper instead of debt, because they get the money, because he does it within 10 years.

He's completely turned around the paper.

It's the premier newspaper in Chattanooga.

Chattanooga has been growing and he's pulling in.

He Ox is pulling in 25000 in annual profit cash flow for himself and his family out of this paper.

Just amazing.

Whoa, I didn't realize he was pulling that in personally.

Yep, he's moved his entire family to Chattanooga.

He's got them all working in the business.

His father, his uncle, his siblings, his wife, his wife's family, they're all working in the business.

But fatefully, he's so long on Chattanooga and he loves the city.

He loves Tennessee.

He decides to buy up a lot of land around Chattanooga.

I couldn't tell if it was for sort of housing speculation or for the mines, but he ends up losing 100000 on this real estate.

Yeah, this was.

I think it was called like the over the river company or something like that, because it was land that was like over the river from everything else.

It was wildly speculative.

Yep.

Wildly speculative.

And so famously, he learns his lesson from this.

He's like, I am a newspaper man.

This is in my blood.

This is all I will ever do.

I will never do anything else.

I could imagine him praying one night being like, I'm sorry, God, for going into real estate.

I will be the greatest newspaper man ever if I can bail out my debts.

Not to mention it worked well when he bought stuff sort of with other people's money and with leverage, and it really didn't go well when he decided to buy a bunch of land with his own personal capital.

So he sort of gets this seed planted of huh, I should use other people's money to buy stuff from now on.

Exactly.

So OK, he's pulling in twenty five thousand dollars of cash flow from the Chattanooga Times, but he needs one hundred K, like faster than four years.

He's that's not going to cut it.

He does know he can turn around newspapers, though.

So he starts putting out some feelers and traveling around the country looking for another newspaper that he could buy and take over, just like he did.

And Chattanooga was sort of the perfect place to pull that idea from.

Totally.

Very, very, very much his ethos.

So that's when he hears, he gets wind of the bankruptcy proceedings going on in New York for the New York Times.

And at first he's like, supposedly he's like...

That's too big.

Like, I can't go.

You know, I'm Adolph Ox from Chattanooga, Tennessee.

I can't go, like, take over the New York Times.

And at that point, even though it was in dire trouble, the brand of the New York Times.

It was the best newspaper brand in the country.

Still, it was definitely thought of as, like, the paper.

Yeah.

But some mentors convince him that he can do this.

So in 1896, he packs up his bags, hops on the train, goes up to New York.

He leaves his family behind running the Chattanooga Times.

And he scrapes together.

So the Times is in bankruptcy proceedings.

He scrapes together a plan to the creditors and to the receivers in bankruptcy to take the paper out of bankruptcy and take it over.

This is incredible.

So he's like this this, you know I think he was late 30s at the time from Tennessee, shows up in New York, kind of walks into the bankruptcy court and is like, believe me, I can do this.

And to convince...

Ooh, no, I don't.

He convinced a Chattanooga bank to wire money to a New York bank so that if in New York people check to see like are you wealthy?

He had a bank account with money in his name.

And to the Chattanooga bank, who he knew well.

He wrote them a personal check and said look, I'm good for it.

I promise.

Just wire the money.

I don't intend to use it.

That's amazing.

It's like there's some incredible huckster stuff going on that he sort of pulls strings to.

He's got the entrepreneurial hustle.

So did you read about the other thing he did to convince the creditors of his legitimacy?

Ooh, I don't know.

This is amazing.

So President Grover Cleveland at the time, like United States President, had come through Chattanooga, I think while he was campaigning.

And as the leading newspaper and publisher of the Chattanooga Times Ox, was on the welcoming committee.

So he got to meet Grover Cleveland while he was campaigning.

And he kept his address at 1600 Pennsylvania Avenue.

He knew where to find him.

So he writes to the president while he's going up to New York and he writes to Cleveland.

He says I am negotiating for a controlling interest in the New York Times and have fair prospects of success.

In other words, say what you can of me as an honest, industrious and capable newspaper publisher.

This is incredible.

And he needed that support because at the time until this apparently I did find this the Trask and the rest of the committee that was dealing with the bankruptcy of the Times was in favor of a different plan to merge it, like to basically unload the assets, merge it in with a different paper, wipe their hands clean and say look, we got something for it.

And instead, Adolf's walking in here with a whole different plan of like...

I am going to figure out how to revive this thing and make it great.

And of course there is some wicked financial engineering that he promises and that he really has to make the case of, like it's not a cash buy here.

You're going to have to believe in me and my plan in order to make this work.

Yep.

So Cleveland writes him back with a letter of endorsement.

And he walks in there with a letter of endorsement from the President of the United States.

Incredible.

So the bankruptcy committee accepts his plan.

He pays $75,000 up front to the creditors, which he also had scraped together with borrowed money.

Because remember, he owes $100,000.

Right.

This is the craziest thing.

This guy buys the New York Times.

He will eventually have a controlling interest in it.

And as it says in the trust, this is my favorite passage.

The yokel from Tennessee had accomplished the impossible.

He had bought the New York Times using none of his own money.

Amazing.

This is like the minnow swallows whale from when Cap Cities bought ABC.

100%.

So how does it work exactly?

There's like 75k that he in quotes puts up.

But actually he goes in like gets people in Tennessee to put it up right.

Yeah, he rounded up the money from some people in New York, some people in Tennessee.

I think he waved around the letter from Grover Cleveland to a bunch of people.

So that was a small part of the consideration.

The other part is he uses seller's notes again of 600000 in debt to owe back to the creditors that they will pay off over some number of the coming years from profits he'll generate.

Right by running this paper that has 9000 subscribers and is bleeding, I think on the order of about half a million dollars a year at this point in losses.

You can see why, if you're Trask or the existing bankruptcy committee, you're like I think we'll take the merger.

This doesn't sound like any kind of guarantee.

It is this guy that no one's ever heard of.

He's coming in from Tennessee.

You got to sympathize with the original plan.

Yeah, totally.

But somehow he gets it done.

So he emerges with the New York Times and he has just one problem, which is okay.

How are you going to turn this thing around?

Okay, so what's the grand plan?

What's the plan?

Well, so the plan is basically to be really boring and really cheap.

So at the time...

People may be familiar with William Randolph Hearst, and I think it was Joseph Pulitzer.

Hearst, of course, ran the Journal in New York among many papers all over the country, and Pulitzer ran The World.

Those were the two heavy hitter publications in New York at the time.

They each had about half a million circulation.

But what they were, were what was called i remember studying about in school yellow journalism so they were super sensationalist this was right at the time of the spanish american war like these guys were like the i don't know if they were like the national inquirer but like they were fast and loose with the facts and basically trying to like sell copies with any sensationalism that they could come up with do you know why it is called yellow journalism oh i feel like i did but i don't remember So both of these papers published a comic called The Yellow Kid.

And this cartoon was like, you know, trashy.

Like it was like a lowbrow cartoon.

And coupled with it, both of them were obviously doing tons of sensational headlines.

It was the sort of original clickbait.

You know, famously around the Spanish-American War they were sort of making up headlines to make the war sound even more interesting than it is.

And I always, like knew that yellow journalism was sort of tied in with these papers, tied in with the original clickbait, with sort of untrustworthy headlines.

But I did not know until doing this research that it is because they shared the Yellow Kid comic.

Ah, interesting.

If I did know that, I had totally forgotten it.

But yeah, these guys are like the I don't know, maybe BuzzFeed is probably doing a disservice to BuzzFeed, but they're like the I don't know, like Gawker of the BuzzFeed and Gawker, both of whose editors-in-chief now work at the New York Times as columnists.

I know.

Amazing.

So...

Ox lays out his plan for positioning for the New York Times, which is that they're going to provide journalistic integrity and something that is quote not going to soil the breakfast linen.

Which is really exciting.

Because it means his plan, like the thing he knows how to do from Chattanooga, like that's kind of the playbook that needs to be run again, just a much bigger scale.

Yep.

So he decides he needs to come up with a motto to express this new positioning to the New York public.

And he comes up with the phrase, all the news that's fit to print.

And he's not too sure about it, though.

I mean, this is how the story goes.

I think probably he's maybe more like Pulitzer and Hearst than he lets on.

And he wanted to run a marketing stunt.

Yeah.

So he runs a prize competition for anybody in New York who can come up with a better slogan, offering a 100 prize for the winner.

And they run it.

They get lots of entries.

The winner is chosen.

And the official motto of the New York Times is going to be all the world's news, but not a school for scandal.

Really rolls off the tongue, doesn't it?

Funny, I like oxes a lot better.

Yeah, he did too.

So he's like, that's nice.

I'll pay you a hundred bucks, but I'm keeping my motto.

So all the news that's fit to print.

Still shows up in the upper corner of the New York Times print edition today, right and on the website which we will get to later.

So he also comes up with sort of an informal credo for the company and for the newsroom, which is to give the news impartially, without fear or favor.

And this is going to come up later when we get to the trust, but that really is the credo of the organization in a very fundamental way.

Yeah, and it follows with.

So it is to give the news impartially, without fear or favor, regardless of any party, sect or interest involved.

And that was a deliberate call out particularly around party for the highly, highly politically leaning papers of the time.

Interesting, interesting.

I didn't see that because the, well, where I got the quote from is going to come back in a sec.

That must have gotten dropped at some point.

Yeah, he specifically did that because the Times, which is hilarious at a 180 at this point, was considered an organ of the Democratic Party.

So funny.

So it's like a little bit of like a hey, I'm going to run this a different way, but I'm going to say it kind of softly here and I'm not going to piss anybody off too much, because it's going to sound reasonable the way that I'm putting it here.

Yeah.

Okay.

So he's got the positioning down.

We're going to report the news impartially, without fear, without favor, no preference for party.

What about the price though?

So remember, there were the penny papers back in the day that the new printing technology had enabled, and that was what the New York Daily Times sold for.

By this time, probably because of the financial difficulties, they jacked the price of the paper up 300x to three cents.

And there's inflation going on because this is what 40, 50 years has gone by.

Yeah, exactly.

The World and the Journal were also selling at three cents.

And this is before the antitrust regulation.

Pulitzer and Hearst were colluding.

They wanted to raise the price to five cents.

And so they're like doing the sensationalism with the yellow journalism.

It's only helping themselves, helping each other.

They're like, yeah, we're going to raise the price.

This is going to be great.

And do you know why Ox was so financially motivated to sell more copies?

Well, I assume I was going to talk in a sec about the business model of newspaper.

As you sell more, as your circulation goes up.

Not only do you get the circulation, the subscription revenues, you also get to sell a lot more advertising too.

Yeah, there is definitely the classic business model dynamic going on.

There's one term in particular that was a part of the newspaper purchase that he cares deeply about personally.

Oh, I didn't find this.

This was if the newspaper is profitable for a certain number of years—don't quote me on this, but I think it was three years— and he runs it profitably for three years, then he is able to unlock a new piece of ownership.

It is shares that are held in escrow that are then transferred to him, and he becomes the controlling owner.

Right now, he's just a minority owner.

He gets to run the business, but he doesn't have control.

And so...

He desperately is trying to figure out a way.

How can I make this thing profitable and keep it for 36 months straight?

Which there was actually a funny misunderstanding where the previous owners of the Times were trying to insist that it was three calendar years.

Ox was able to get it profitable for a 36-month straight stint.

And I think they ended up actually bringing in lawyers to arbitrate this.

But yes, this is an attempt by Ox to say I need to pull some crazy lever and I'm going to drop the price in order to try and get circulation to the point where I can actually get this thing profitable enough to control it.

I love it.

To pull forward a playbook theme here, this is such an entrepreneurial story.

When your back is against the wall and you have to make something work and you have no resources and you're running out of money.

That's when genius happens, when you're forced into these constraints.

Yeah.

So you know probably even more than the positioning of the news.

This is what really makes the times.

He cuts the price from three cents down to one cent, which would seem crazy.

Like you're trying to make more money.

Why would you cut the price?

This is huge.

Circulation goes, subscriptions go through the roof.

Because remember...

The Journal and The World, they're now $0.03.

They're trying to go to $0.05.

This is getting out of reach for your average person in New York every day.

And there was some interesting criticism going on at the time that it wouldn't work.

There were papers that sold for $0.01.

But they were tabloids, you know, they were kind of trashy.

And people were saying Ox, you know you're trying to this crazy move.

You're doing the people who are reading those tabloids the one cent things.

They're not interested in your content, this business stuff, this political stuff.

And so what Ox did was he basically made the bet that I can steal share from my competitors.

There's plenty of people that want to read three cent news, but they will totally go to whoever's offering the three cent news at the one cent price.

And he was right.

And he stole a bunch of share and the growth exploded when he dropped the price.

Totally.

So grows 3X in his first year, back up to 30,000 circulation.

By 1899, it's at 76,000.

So back above the 75,000 that it had been.

Crosses 100,000 in 1901, 200,000 in 1912.

And by the 1920s, after World War I, he's up at over three quarters of a million circulation and has become the dominant not just paper in New York but like the probably most prestigious, most respected, most widely known American journalistic organization out there, that when we think of the New York Times, this was it.

And it was all Ox.

This is the birth of the modern times.

Totally.

So we alluded to the business model a little bit and why circulation's so important.

There's this dual revenue stream nature of newspapers and the media business. is just beautiful.

It's like all the incentives are for you to make great content that gets more readers, because obviously they pay for the newspaper being delivered to them, which is a nice business.

You know it's like relatively lower margin compared to other media business parts of the business because you got to print it and you got to deliver it.

It's not all margin dollars the way that advertising is.

Right.

But advertising, you can have an ad sales department.

And as your circulation goes up, and in particular Lee, as your circulation goes up, amongst attractive demographics for advertisers, say like a growing, expanding middle class with lots of new disposable income, you're going to do very, very well with no marginal costs on the advertising side.

Yep.

The other crazy thing about the physical paper business is today we kind of think about like well, you can be a free website that has ads, or you can be a paid website that has no ads.

And obviously it's oversimplifying and there's lots of ways to do both.

But there's nobody that's reading the paper for free.

Everyone is either buying it on a newsstand or paying to have it delivered to their home or business.

So it is an era of having your cake and eating it too, where you both have every single person who's reading paying, maybe some people who are reading it in a restaurant or something and you're able to sell ads in every single one.

And on top of that here's sort of the like magic thing that Ox figured out that would later be sort of taken by the Wall Street Journal was.

It became the business newspaper of record.

Ox made a really big bet on we should be producing more business content, and people will be willing to pay more for it because it is either actually a business expense or it inspires them that they could sort of do more with their business.

And so they were the first big American newspaper to target businessmen.

You know, at the time business people now as the demographic, which is just fascinating sort of reading that and being like wait, that's the journal strategy.

Totally.

I mean when I was working at the journal.

This was before the Times implemented their now very, very successful paywall.

But we were the only upscale newspaper and news organization in the US that had a paywall digital content.

And it was all because most of the paid subscriptions were on expense accounts.

Yeah.

So this was a super cool gem that I got from the research.

So it's actually.

You know the the famous John Wanamaker quote about 50 of the money I spend on advertising is wasted.

I just don't know which 50% that was actually stolen from ox.

So yeah Wanamaker, I don't know if they were friends or something, but um, It was originally an Ox quote.

In 1916, Ox said I affirm that more than 50 of money spent on advertising is squandered and is a sheer waste of printer's ink.

Wanamaker got a hold of that.

He was an advertiser.

He was a retailer in Philadelphia.

And he turned it around to, you know, I know half the money I spend on advertising is wasted.

I just can never find out which half.

Yeah.

Super cool.

Yeah, Ox becomes the premier newspaper man in New York, if not America, and if not the world.

Before we pull too far forward from this time, there's one interesting sort of fun anecdote that Are you going to talk about the headquarters?

Yes.

Go for it.

So this is the beginning.

You have more details on this than I do, I'm sure.

But this is the beginning of the New York Times company's obsession with real estate sort of obsession of I want a really fancy headquarters.

I want it in a really interesting place.

I mean, they've got these big printers.

So a big part of their business is actually a physical thing with distribution, which at some point they would move to other parts of New York and start to sort of have a separate newsroom from there.

But that's not the way it started.

And in 1904 the newspaper moved its headquarters to a building called the Times Tower at 1475 Broadway in what was then called Longacre Square, later renamed Times Square after the New York Times.

After the New York Times.

So awesome.

What do you know the other part of the story?

No, keep it going.

Okay.

So when Ox moved the building to Longacre Square in this new building, he of course wanted to make a show of this.

It never was a marketing opportunity ever, the entrepreneur.

So he had pyrotechnicists illuminate the new building with a fireworks show right around the holidays when he moved there.

Oh, is this the ball dropping?

Yeah.

And so that kind of becomes the thing.

He does it for a couple of years.

And then New Year's from 1907 to 1908, he has a big electric ball installed on top of the building.

Oh, it's amazing.

Boom, dropping the ball.

It's the New York Times.

Times Square, New York Times, dropping the ball on New Year's Eve.

It's all Adolph Foxx.

Wow.

That's such an interesting.

I didn't really realize I should have known Times Square like duh, but maybe I knew that at some point in my past but I completely forgot.

Yeah, it's just so you're like, oh, Times Square.

It's like air.

You're like, oh, yeah, I don't know if it's called Times Square because it's called Times Square.

Yeah.

The stock tickers too, were originally the New York Times that implemented that on the outside of their building.

Before I want to say, Dow Jones took it over.

Just an incredible entrepreneurial story.

We're going to move on to the next chapters here.

Okay, so two years after that press release, Ox does pass away in 1935.

Okay.

But there's a problem though, which is Ox only had one child, and his child which he viewed as a problem for succession was a daughter.

Yeah, I mean, this is some hardcore sexism.

Hard, hardcore.

So Iphigen, his daughter, was an incredible woman.

And if she had been born probably 30 years later, which is when Catherine Graham was born, she would have been Catherine Graham at the Washington Post before Catherine Graham.

But there was just kind of no countenancing by Adolph or anyone else involved in the company that she should take it over.

Well, Adolph also basically just shirked responsibility on this and didn't want to be the person to explicitly say I do not give it to my daughter.

So he just like, this is a New York Magazine quote from a great article on the family.

It says, ultimately, Ox punted on the decision.

When he died in 1935, his will essentially left it to and I'm sure you'll explain these people Arthur, Julius and Iphigen, to work it out amongst themselves.

Yep.

Yeah.

They each had a vote on who would become the next publisher.

So Arthur Sulzberger was Iphigen's husband who would become the next publisher.

And Julius was, I believe, Ox's nephew, who was also working in the business.

That's sort of a legitimate claim to the throne, so to speak.

And I believe the story is that Ox set it up this way that each of the three of them had a vote because he wanted if a gene, he wanted to essentially make sure that arthur was a good husband to her, because she had the deciding vote between him and her cousin to be the publisher uh, which is both like really weird and sexist and kind of strange, but also like super crafty.

Yeah, and for all this like style building up of Ox, we've done.

This is not the only time throughout history, but it will be the first sort of part of the New York Times' history where you sort of have to look at it with a squinty eye and go ooh, that's a little bit of a black mark.

Yeah.

So she went to Barnard and was college educated.

She double majored in economics and history.

She was super, super smart, as you would expect of the only child of Adolph Ox.

And it's hard to tell exactly what she wanted, but some accounts say she did want to take over the Times and become the publisher.

Unfortunately that wasn't in the cards, but she remained on the board of the company for pretty much her whole life.

She lived to be 98 years old.

She didn't die until 1990.

Whoa.

And there's some debate on this.

You know, people might know, our audience might know the sort of nickname of the times is the gray lady.

And there's multiple sort of origin stories of the gray lady nickname.

Did it later become the good gray lady or where does good come in?

Maybe that's part of it.

So I think the origin is the Bank of England was called the good lady or something like that.

And so it was sort of borrowed from that.

Some people say the gray came from like looking at the paper.

It's a bunch of gray newsprint.

It's a great paper.

And so it became the great lady.

Alternatively, though, Iffy Jean is the gray lady.

She was a presence on the board and sort of the link to Ox and the moral fiber, if you will, of the company for 90 years until 1990.

It's crazy.

And this is really introducing the very first of many...

Not necessarily outwardly contentious, but inwardly contentious succession decisions that happen.

The New York Magazine quote continues from earlier if a gene being the deciding vote supported her husband, thus cleaving a fault line in the family that was never repaired.

And that you can imagine.

Generations go by.

This thing really starts to compound because there starts to be, you know, massive numbers of cousins who are, you know, the same way related to Adolf, that the people who end up sort of succeeding Adolf and you know five generations later they're sort of by blood the same amount related, but theirs was not sort of the chosen bloodline to pass down the paper through yeah, and it has always been a male heir that has become the publisher now through five generations, even though there are plenty of daughters in the family.

So you know ox crafty, like he is, he's sort of his um so gate lease, a great writer from the 50s 60s 70s uh, who actually worked as a.

He wrote sort of the definitive book about the New York Times in, I think he came out in 1969, called The Kingdom and the Power.

Which I don't think the family loved.

Like this one I was reading.

The Trust from about right around year 2000 refers to the kingdom of the power.

And I think he was always, after he released that, kept it a little bit of an arm's length.

Yeah.

So he writes about this.

He says, how long the times would survive would depend largely on how well Ox's heirs got along in the decades ahead.

He knows this.

Nothing would crumble his foundation faster than family squabbles, selfish ambition or short-sighted goals.

His successors would have to make money but not be enticed by it.

Would have to keep up with the trends but not be carried away by them.

Would have to hire talented people, but not people so talented or egocentric that they could become too special as writers or indispensable as editors.

Editors, or or else they'll go start a sub stack.

Yeah, exactly.

Thank God.

Substack didn't exist in, uh, in those days or what would Adolf have done?

Um, the times would go on indefinitely.

He hoped, towering over all individuals and groups in its employee and his family, would work together, repressing any personal animosity, for the greater good.

And if possible, choose mates in marriage who would also be wed to the times.

Yeah.

So how does he set this up?

And I was able to get a hold of from the proxy statement, I think from the 1990, maybe 10K of the New York Times.

The proxy statement, the sum of the language in the 1986 trusts.

There were then several trusts amongst branches of the family, but they were all linked together.

This is what it says in the organizing documents of the trust, and to vote such Class B common stock against any merger, sale of assets or other transaction pursuant to which control of the New York Times passes from the trustees, unless they unanimously determine that the primary objective of the trust, which is to maintain the editorial independence and integrity of the New York Times and to continue it as an independent newspaper entirely.

Here it is entirely fearless, free of ulterior influence and unselfishly devoted to the public.

Welfare can be better achieved by a sale distribution.

Blah blah blah blah, blah.

Wait, so it's primary purpose.

The primary purpose of the family trust is to ensure.

Yes.

That it continues to own the New York Times.

To ensure one, that the family continues to own the New York Times.

And two, that the mission of the New York Times to continue as an independent newspaper, entirely fearless, free of ulterior influence and unselfishly devoted to the public welfare.

That is the purpose of the trust.

So he sets this up so that all of his descendants in perpetuity.

The only way they can maintain the wealth associated with the times and their ownership of the times and all of the you know the dividends at the time, but I would you know wealth that comes with it, is by not selling it and by supporting this mission.

And so like anything that goes against that would violate that.

Oh, that's so fascinating.

It's crazy that you can't.

I mean maybe they can and we just don't know.

But like that he can do that and it survives him.

Like that you know he can decide that my wealth and the wealth created by this thing that I started or bought and sort of restarted, can only be inherited under these circumstances.

Yeah, pretty crazy.

And you know the family must, I think, support it, because the trusts have been redone a few times but they, you know, I think there's there's like eight family members who comprise a board right now and that they sort of make the decisions for the.

You know dozens and dozens and dozens of numbers of cousins that there are now.

Yeah, crazy.

So, okay.

So, Sulzberger takes over in 1935.

He remains publisher until 1961.

He does many things.

He's kind of a you know he's a great publisher and story to the Times, sort of transitional from the Ox period to more modern New York Times.

He adds, he makes it a little more readable, the paper.

He adds a style section and the crossword puzzle.

He expands distribution.

But it's really during World War II, which is during his time as a as publisher, that I would say probably is both like the best of the times history and also the worst, all in in world war two, that we should talk about.

So you know the best is that.

So the raw materials for newspaper production were rationed during the war ink and paper and material, et cetera.

So there was only limited space that newspapers could publish.

Most newspapers decided to cut back on reporting and keep their advertising load.

The Times vastly cut back on advertising and upped the war reporting and really became the foremost chronicler of World War II.

Which this is definitely a playbook thing for them, that I don't know if they have intentionally done this in modern eras because they learned from this time when it sort of went well for them.

But the Times now has a pattern of sort of buying low when others are sort of selling and in particular investing in high quality journalism when the industry is going through, you know, terrible financial times.

Totally.

And famously, as we'll get to, they did not lay off any reporting staff.

Uh, in 2008 2009 uh, when every other paper did.

So this culminates in, this is amazing.

Um science reporter for the times.

William Lawrence is the only journalist given access to the Manhattan project.

Uh, as it's going on during the war.

And he ultimately writes in the times.

And then I believe books afterwards that the sort of the official history of the Manhattan project.

Uh, And he's the only journalist that witnesses the dropping of the bomb in Nagasaki.

Wait, he witnesses it?

Like he was on a plane?

I don't know.

I guess he must have been in the plane.

I don't know for sure, but pretty incredible.

Totally incredible.

So that's sort of like the best of the times during this period.

Unfortunately.

Yeah, it's the best of the times and simultaneously kind of the worst of America, you know, reporting on us and our, you know.

Neither of us are actual historians and neither of us are passing judgment on on obviously dropping the atomic bomb but, like gosh, that just the absolute last thing that any powerful nation wants to sort of have to do, and for the times to be the people there with literally the front row seat is just it's heavy.

Yeah, seriously.

Speaking of heavy the Times and they would say I'll quote from their own reporting here on their 150th anniversary in 2001 the Holocaust was in contrast to being the foremost war reporters in America during World War II.

The Times basically ignored the Holocaust.

And the reason that they did.

As we discussed, the Ox family and the Sulzberger family were Jewish families.

That is a Jewish family that controls the paper.

They were paranoid, particularly Arthur Sulzberger, about being known as a Jewish newspaper, Jewish family, inviting prejudice bias, discrimination against the paper.

And so they were rabid about not wanting to seem too parochial or biased towards Jews.

And so they, even though you know, reporters knew, editors knew what was happening in the Holocaust, they didn't report on it.

And in fact you know, they famously talk about 400000, I believe they say Europeans killed by the Nazis.

Those were 400,000 Jews that they changed.

Oh, they reported and used the word Europeans.

Instead of Jews.

Yeah.

I mean, how many lives could have been saved if the Times had done that sooner?

I mean, it's a really striking example of fear of anti-Semitic backlash, preventing speaking out about anti-Semitism.

And obviously, it doesn't just have to be anti-Semitism.

This can be applied to all injustice.

But yeah, the idea that both the Sulzberger family would come under fire but also that the newspaper would lose credibility, the sort of fear of that loss of credibility leading to him turning a blind eye at some of the most horrific events in human history.

Totally.

So um in 2001 and the 150th anniversary issue.

Former executive editor at the time, Max Frankel, wrote sort of the title article on that.

And uh, and he says, then there was failure, none greater than the staggering, staining failure of the New York times to depict Hitler's methodical extermination of the as a horror beyond all other horrors in World War II, a Nazi war within the war, crying out for illumination.

And that, obviously, the Times did not, chose not to illuminate.

So, yeah, heavy stuff.

Yeah.

And listeners.

I will say like this is something that David and I both sort of realized in the research.

And my initial reaction was like, ooh, do we really want to talk about this on this episode?

It's heavy.

You know, it's different than us talking about tech multiples.

And...

It is commendable that the times, albeit 50 years later, like did self-reflect on this and like realize that hey, we got to own up to this.

And maybe they did in earlier times as well.

But frankly it reflects positively on an organization, especially one that was owned by the same family and the same people, and all those people were still alive to be self-critical.

Yeah.

And for us frankly, to not have to go out on a limb on this episode and criticize The Times, but to be able to just quote them being critical of themselves.

Yeah, it's meaningful.

Yeah.

And, you know, while we're on the subject of criticism of The Times too, you know, I think it's obvious that we also need to say here we've talked a little bit about discrimination against women within the company, also against people of color.

Um, so it was not only, if he didn't, who who was obviously qualified to become the publisher that you know, it was her husband that she was passed over for her husband.

The first woman reporter joined the times in 1912, Jane Grant to report on society, uh, um she had to fight her way into the city staff and then like the management made it clear like you will never be an editor here like that's just not gonna happen she ended up leaving the organization started new york magazine and then became a leader in the women's rights movement so um you know screw you guys and then women for you know decades were relegated to basically just the society and style sections um The New York Times wouldn't hire its first black reporter until 1945.

That person wouldn't even last that long.

Then in 74 women reporters filed a class action lawsuit against the Times for discrimination and wage bias.

In 1977, minority reporters sued for the same thing.

The Times settled on both of those cases.

But you know today, of course, dean becky is a black man, the executive editor, the ceo of the times is a woman.

Last year they won the pulitzer for the 1619 project.

You know things are different now, but you know we have to point out that uh and i think the times would point out too, that it was not always uh, not always a rosy picture.

Yeah Okay, back to Sulzberger.

He presides through all of this.

In 1961, he becomes infirmed and he is succeeded.

Again his oldest child.

His and Andy Fijian's oldest child is a daughter by her husband, Orville Dreyfus.

This guy, Orville Dreyfuss is the Timothy Dalton of the New York times family succession.

Like he is definitely for any James Bond fans out there.

Like he's the one that was kind of like in one or two movies.

And you're like, wait, that guy played James Bond.

And then quickly you're onto the next one.

Like gil amelio.

Yeah no yeah, he's the gil amelio.

That's an even better comparison.

Yeah, dreyfus lasted two years.

Two years unfortunately, because he died unexpectedly.

But so his wife, you know, marion um salzburg, and ephedrine's daughter, like she came up with the idea for people magazine.

So like all of these women involved at the time, so like total ballers.

Maybe here's an idea keep them.

Yeah, exactly So.

When Dreyfus dies in 63, then the youngest Arthur and Iphigen's youngest child, who is their only son, Arthur Ox, nicknamed Punch Sulzberger, succeeds him as publisher.

And because they're all A-something Sulzberger, we're just going to call him Punch.

The rest of the episode.

Yeah, he's Punch.

So far we've got like...

Arthur, or we've got Adolf Ox, then we've got Arthur Salzberger, then we've got Punch.

Well, I mean, we had Dreyfus, but Timothy Dalton Gil Emilio, so you got Punch.

Then we'll have Punch's son, who we'll call Junior, who is a Arthur Arthur Salzberger Junior yeah, right after after him, so we'll just call him Junior.

And then there's AG, who's the publisher today.

Yes, exactly all a something Salzberger for everyone keeping score at home okay, uh.

So punch ends up being publisher, sort of like his father, for um almost 30 years.

He would remain publisher until 1992 and he really led the times through a lot of change.

But it was 63 when he took over and, of course, like what is a huge, huge change, besides all the change that's happening in the 60s in america, television is out there.

So like, not only does the times have a competitor, like the whole medium has a competitor.

Now right, and they realized and i i think as best as i can tell a lot of this was was punch that the best way to differentiate from tv news was that they needed not just to sort of report the facts anymore, like what the differentiation that newspapers had was.

They could go deeper, they They were like the acquired of news reporting.

They could interpret the facts and the meaning behind the facts and tell people why this is important and why this is happening.

And that was really a big sort of change, I think, for the Times newsroom.

Because, you know, if you think back to Ox, it was all about like.

Just the facts, impartial, no judgment.

And here you can't help but introduce some judgment.

But there's a service of explaining meaning as well.

Right.

And not just on the opinion page, but choosing what context to put around a story in just reporting.

In reporting the story, you're introducing your own bias, your own judgment in choosing what context to include around the facts.

Right, yep.

So punch develops a saying that i actually uh ag, the current publisher, you know, i read a quote from him uh that he still references uh a view that people don't come to the times for news, they come for judgment.

So in the kingdom and the power, gay talese writes.

Of course, the trick was to do this without editorializing.

While there was a difference between interpreting and editorializing, Then-executive editor Catledge Turner knew that the line between the two was sometimes thin.

And if The Times was to achieve the new goal and yet avoid making a mockery of Ox's motto about objectivity, it had to have a more vigilant copy desk, more unchallenged authority in New York.

And here again rose the problem of power.

Who was to decide what and where?

So the Times invests a lot more in copy editing editors.

This is when they introduced the op-ed page opposite the editorial page to bring in outside views into the Times as well.

We should also say classically, the person leading the newsroom at the New York Times has traditionally not been a member of the family to intentionally sort of create that distance between the publisher.

You know the people responsible for the times as a business.

And, of course, stewarding its mission.

Are not actually the people making the calls on?

You know what stories run on our paper and which ones don't?

Now, of course, in practice, like the publisher family does actually own the paper.

And so they can sort of make a final call, but that arm's length is intentionally created.

Yep.

So that was great.

I think what was less great it was sort of like okay, give maybe a C grade to Punch during his tenure was from a capital allocation perspective.

What you really want to do here is differentiate versus this new medium, but you also want to invest in the new medium, right?

And so they realized this and they, along with many other newspaper families in the 60s 70s 80s, start buying television stations.

So the company actually, back in 1944, had bought two radio stations in New York.

But Punch realizes, probably with the help of an encouragement of some bankers on Wall Street, that they should go buy some televisions and some television news properties as well.

Plus, this is conglomerate times.

Let's diversify.

Yep.

Go, go, go.

So this is when the company goes public in 1969 on the American Stock Exchange with the dual class share structure where the family still retains voting control.

Then, I think, the right to elect 70 of the board, but exponentially larger voting control with their shares.

But the reason they went public, I had thought it was like a family.

So it was privately held all the way to this point?

Yeah, yeah.

So I had thought the reason they went public was probably, just as there were more generations, you needed to divide the wealth and ownership.

No, the reason they went public was to get a liquid public stock to make acquisitions with.

Oh, no way.

Yeah.

Wow.

Yeah, I would have figured the same thing.

But you're right.

It's always been a dividend stock.

And so they were always able to pay out to all the errors just with dividends.

So they wouldn't have needed to go public just for liquidity.

Yeah.

So this is why they go public.

So they buy a bunch of TV stations, a bunch of affiliates in Alabama Arkansas Iowa Pennsylvania, Oklahoma and Virginia.

They collectively named this the broadcast media group within the company.

Unfortunately, though, that was fine.

They end up selling the broadcast media group to...

I think Oak Hill, maybe private equity firm in 2007 for about $600 million.

So like, yeah, you know, fine.

The huge mistake they make is they don't get into cable though.

And as we've chronicled many times on this show episode yeah man, cable was the internet before the internet.

That's where the money was.

So punch steps down as publisher in 1992 after a almost 30 year run.

And as we said, his son, Junior, succeeds him.

Which, by the way, what a time to step down.

1992, the internet is starting to transition out from ARPANET to become a little bit of a consumer thing.

It would be nice to have a transition to someone here who's not going to get completely blindsided by what's coming.

That is not what they did.

They got completely blindsided by what's coming.

Not to mention they were heavied up on some crazy assets.

Like David, you mentioned TV stations, but like all these newspapers, there's maybe like 20 different local newspapers that they had picked up and then they would continue to pick up in the 90s.

There's magazines.

Oh, we're going to get into some crazy stuff.

Okay.

All right.

Because like this diversification goes way too far.

Totally.

So, I mean, I think it's maybe unfair.

I think it's unfair to say they were blindsided by the internet.

They definitely knew it was coming.

Junior knew it was coming.

And they developed a whole strategy around it.

And so in June 1994 they partner with AOL and launch At Times, the At Times channel on AOL, which is garbage.

Yeah.

But in 1995 they hire this guy named Martin Niesenholz to come in and run a whole new electronic media division within the company.

Martin had started the ad agency Ogilvy and Mathers Interactive Marketing Group.

And actually Brian McCullough over at the Internet History Podcast did a great episode with Martin that we'll link to in the sources.

You should go check out.

Great interview with him.

Wait, let me defend my blindsided thing.

So this is a couple of things to know.

In 1983, the Times decided that it was not important to have electronic rights to their content.

Ah, yes.

So they sold it to LexisNexis.

The New York Times didn't own the own rights to their content.

So like, okay, in 1983, you couldn't see the internet coming.

Fine.

And even in the early 90s you weren't sure if you're going to make a bet on the World Wide Web or if you should make a bet on CompuServe or AOL.

It was specifically the archive, the rights to the archives.

So they were able, with some negotiation, to put breaking not breaking, but like new news on the site.

But they couldn't have the archives until they got the rights back.

And they did in 94 ultimately get the rights back.

And then I think in 1996, that's when NYTimes.com went up for the first time.

Yep, totally.

So when Niesenholtz comes in, he's like, holy crap, we got to work through all these rights issues.

So that was part of it.

They also had to decide on the business model.

So the plan, this is fascinating.

The original plan was to charge for NYTimes.com, charge digital subscriptions.

And Niesenholtz said, we can't charge because this product sucks.

And like, who's going to pay for this?

So when they do launch the site in January 96, the real site, not the AOL site.

So there's no CMS.

There's no content management system.

What they do.

They literally every day.

They create an image like a GIF and and put it at like.

So wait wait, wait.

I'm sorry, we have to stop the episode.

You're a gif person, you don't say gif.

Oh yeah, i do say gif.

Oh, all right, you had me.

Okay, like we can, we'll still keep doing the pod, i guess.

Okay okay okay sorry sorry, i just got so carried away.

I got carried away by the fact that they literally make a gif of an image that they create in the art department.

And then if you go to nytimes.com, it loads a GIF.

Oh, it's unbelievable.

Yeah, that's the first version.

And I imagine if you're using It's not PageMaker but whatever they're sort of like, They probably use robust software to do the page layout of the physical paper.

And so...

Like you know, you're not necessarily going to be super HTML savvy and figure out how to render in a web appropriate way.

So you're like well look, we put all this energy into laying out the type and laying out the articles and the columns and the column width and all this stuff.

Like let's just export from that and we'll put that on the web, yep and um.

So he's like we can't charge for this.

It's crap, uh.

But also like.

The other point was like he's like we, we got to build an audience, like we got to train people to come to nytimescom, like otherwise why would anybody come here, especially if they got to pay us money so they go free and, of course, all sorts of long-term consequences of that.

Would the internet have been a different place if they had decided to go paid right off the bat?

Because for a whole decade and a half after that, no one could do anything paid on the internet.

Except the Wall Street Journal.

But again, it was all because of B2B.

We would always pat ourselves on the back, but it's like hey, the reality is these are all corporates that are paying for this stuff on expensive accounts.

But I just can't help but think that if The Times and a few other early content websites had made a different decision, it could have been culturally acceptable for existing media outlets to charge on the web in a way that it just wasn't.

Yeah, it could have been very different.

So why do I argue that it's not totally right to say they were blindsided by this?

So, hey, they did all this work.

But the bigger reason, I think, is that look, this was still so early in the Internet's lifetime, even with the Internet boom in 1989.

Everything that was going on here kind of didn't matter.

They missed the boat big time on cable news that I was referring to kind of at the end of Punch's tenure.

So, while all this is going on, just a couple blocks away over at 1211 Avenue of the Americas, rupert murdoch.

He knows news and he's looking out at everything going on.

This we're in the mid 90s and he's like holy crap, like i see espn, i see how valuable that is, i see how valuable cnn is and i see a bunch of problems with it and a bunch of opportunities to do better and different.

Um, I'm going to build and launch Fox News.

And so in 1985, News Corp had bought 20th Century Fox, the studio.

They also own and run Sky in the UK.

And so they had a 24 hour news network, Sky News in the UK.

So we can bring this to America.

So in 1996, they announced that they're going to start a new 24 hour cable news network, Fox News.

And Rupert says is quoted the appetite for news, particularly news that explains to people how it affects them, is growing enormously.

And so he sees this opportunity.

And then certainly the other part of what he sees, which the Times would never do, given Doc's mission to the company, as we talked about, is what Murdoch brilliantly sees is there's an opportunity to create a news organization targeted for conservatives out there.

And, like CNN, the media as a whole, certainly New York Times, people believed were left leaning and liberal leaning.

And he thought, man, there's this whole market out there.

So he hires Roger Ailes from CNBC to come over and be the first CEO of a long time.

I didn't know Ailes was CNBC before.

Yeah, he was at CNBC, but before he was at CNBC, this is crazy.

I didn't know this till I looked it up.

I used to work in the building.

Ailes was a Republican party media strategist.

So part of Murdoch's plan is like okay, I'm going to target Republicans and conservatives to watch my network.

Um, Ailes wasn't just any media strategist for the Republicans.

He was the guy who Nixon tapped to help Nixon with his television presence for the second time when he successfully ran for president.

Because Nixon, when he ran against Kennedy, got destroyed in the TV debates.

He was like sweaty and he's obviously not as handsome as JFK.

So he brought in Roger Ailes as his like fixer for the second go around to like... do well on TV.

So that's who Murdoch goes and taps to start Fox News.

Small world.

And then he does something even more bold.

He's like the anti-Adolf Fox.

He goes to the cable systems.

You know usually, as we've chronicled on Acquired, the beauty of the cable network model was you got paid a subscriber fee by the cable systems to carry you and you sold advertising, kind of just like newspapers.

Murdoch goes out to all the big cable systems and he's like hey, I'll tell you what I'll pay you to carry Fox News and to give me prime placement in your channel lineup.

That's like the opposite of the ESPN's amazing cash cow business model.

Well, the idea is that over time, as it becomes... People get... you know become loyal to fox news that he'll be able to flip this and of course he does so to say like this works is oh it's so brilliant pay for the distribution to start and then once people are more loyal to you than the cable company then you can then flip it huh and start you know uh all the carriage debates and whatnot.

And you know hey, we're going to pull Fox News from you know Comcast, if you don't write in and tell them, you know how upset you're going to be, et cetera.

So this is incredible.

I knew this from working at News Corp, like that Fox News was a great business.

It is an incredible business.

So by 2002.

So that's eight years after launch.

Fox News is the number one news network on TV, becomes number one passes CNN.

It remains number one every single week from then for literally 19 straight years, until January of this year, after the Capitol riots, when it lost a lot of viewers.

Like literally 19 straight years.

It is the most watched news network on American television.

That is unbelievable.

Yeah.

So whatever you think of Fox News as an organization, we're not here to judge one way or the other.

It brings in.

So this is Fox's total cable network segment, of which Fox News is by far the lion's share.

In 2019, generated $5.4 billion in revenue and $2.5 billion of EBITDA.

So that's like a 50%, near 50% EBITDA margin.

That's Facebook good.

Yeah.

I just found this so interesting because in so many ways now people think of the New York Times on one end and Fox News on the other end.

Even though the New York Times would absolutely assert we are in the center and we are on no end.

Totally.

But this is like an ESPN level business that the times would have built something different.

But I think you know look, they got into broadcast television, they're getting into the internet.

Missing the boat on the opportunity for a cable news was huge here.

Hmm.

Yeah, it's interesting.

If you hadn't told me about all the diversification that the New York Times had done and you knew of it today, just the way they are a single brand, pseudo-single product company and said should the New York Times go into cable or should they have gone into cable?

I'd be like, no, that's not what they do.

It's not their core competency.

They barely do video on their website and their mobile app well.

They definitely shouldn't do that.

But clearly they were trying stuff and they were willing to do stuff like this and just missed it.

Yep.

They frankly just missed it.

And did they miss it?

Like.

One question I have is the times doesn't have it in them to do something outwardly and intentionally partisan.

And so maybe they saw the opportunity, but didn't believe that it was there for a centrist reason.

That could be.

I mean, CNN, you know, existed and does very well.

So I think that it could have been different.

And it would, I think, be very unlikely that the Times would have said, oh, OK, great.

We're going to make a cable network, but we're going to target liberals, you know, specifically.

Right.

So it's certainly complicated.

But I just like I wanted to go dive into the research of Fox News because I was like all right well, like let's people compare these two organizations so often.

I want to find out the history.

And what just like hit me over the head was again whatever you think of it, whether you watch it or don't watch it, it is an unbelievable business.

So it has a 50% EBITDA margin.

How much revenue did you say it does?

Uh, close to 6 billion.

So that's over 3x the Times' revenue today.

Now, that does include Fox Business and some of the other spinoffs.

Some Fox Sports, I think, that they didn't spinoff is still in there.

But the vast majority of that is Fox News.

I don't think, if you would have asked me what's a bigger business, that I would have told you.

Fox News.

Yeah.

It's a bigger business.

Crazy.

So meanwhile, the other side of the coin here for the New York Times company missing the cable news opportunity.

They made some Ben you alluded to this shall we say poor capital allocation decisions during the 90s and 2000s.

So in 1993, they purchased the Boston Globe for $1.1 billion for the Globe.

And I think they got a couple of small regional papers as well with that.

In 1994, they did.

This is the other crazy thing.

They did get into the cable network industry by buying a 40% interest in the Popcorn Channel.

Have you ever heard of the Popcorn Channel, Ben?

No.

And we all made some mistakes in the 90s.

Oh, my God.

Do you know what it was?

No.

This is so kind of movie.

Well, that's what I thought.

Like popcorn channel.

Maybe it's like a HBO knockoff or something.

This is a cable network.

Its sole reason for existence was it showed previews like movie previews and displayed local, you know movie times.

Oh, my God.

Why the New York Times invest in this is beyond me.

Then in 2001, they team up with John Henry in Boston to buy a 17.75% stake in the Boston Red Sox.

So the New York Times... owns close to 20% of the Boston Red Sox.

Yeah, that's a good idea.

I think, didn't they also take a minority interest in Fenway Park itself?

Yeah, that was also part of the madness.

Oh, madness.

I think that and there was like some kind of NASCAR team that they owned half of like this is when they really went ham they they, they bought Golf Digest, Golf World, like a bunch of magazines, like Family Circle, Snow Country.

I mean it was like This is like a.

What were they thinking?

And really like 15 to 20 local papers.

Like the Santa Barbara News Press, the Press Democrat, Gainesville's paper.

It's like Cap City's gone wrong.

The amount of fees that investment bankers must have been making off the Sulzberger family at that point in time like woof.

But it was juicing the stock, and it was juicing revenue, to be totally fair.

The Times today has less revenue than it had during this go-go era.

A hundred percent.

They also acquire about.com for 410 million in March, 2005.

Famed tech company at about.com.

Yeah.

So I mean, all of this, it's easy to dunk on these things, but probably the worst offense.

I mean, I haven't modeled out exactly the financial impact of this, but this kind of blew my mind.

Throughout the 90s and 2000s they bought back almost 3 billion of stock that they financed with debt.

So they load up the company with debt and buy back $3 billion of stock over the course of a decade.

I didn't know you could buy back stock with debt.

Oh, yeah.

You do it all the time.

So mechanically, what you're asserting if you're doing that is that my company is so undervalued right now and we are going to be so profitable in the near future that I think it's actually less dilutive for my shareholders if I take on a bunch of debt To buy back shares to sort of like undilute shareholders reverse dilution, anti-dilute.

What's so such like lunacy about this is, you know, A, all of that.

And the company was, of course, massively cash flow positive because you know it's like this is not a longstanding business.

The idea was you could use the cash flow to pay down debt over time.

I'd finance these transactions.

I mean, it's just a private equity play, but because of the way the trust is set up, the family can't sell shares.

So the way the family monetizes the business is through dividends.

Like it's just madness, you know, like you're, you're.

They're cutting into the amount of cashflow that they could use for dividends.

Yeah.

Oh, that's interesting.

Well, they're benefiting in an illiquid way because the value of their stock is going up because of the buybacks.

Yes, but they can't sell the stock.

Assuming the enterprise value continues to rise.

Right, right, right.

But ostensibly, the dividend per share could go up.

But you're right.

But you're using money.

It actually isn't going to go up because you're, yeah, huh.

I mean, I guess they could personally borrow against the value of their stock.

But anyway, it's just somebody was smoking something around the New York Times boardroom at this point in time.

So when does Carlos Slim come into the picture?

Yeah.

So this keeps going until the mid-2000s.

And even around 2006 or so, everybody's like, this is fine.

The company's spitting off 3, 35 billion of revenue, a couple hundred million dollars of operating cash flow.

We're plowing that into debt service.

Fine.

And keep in mind, 2005 through 2008, they're making over $3 billion a year in revenue.

Today, they do 1.8.

So lots of revenue coming in.

Lots of revenue coming in.

And then we talked about the headquarters building.

You know, pride always comes before the fall.

Anytime you see a company build a flashy new headquarters, immediately your radar should go off.

In 2007 they move into a brand new 850 million headquarters building just off Times Square by the Port Authority called the New York Times building, designed by Renzo Piano, who designed the Pompidou in Paris and the Shard in London.

Okay, they move in in 2007.

Real great time, guys.

Uh, because then the financial crisis hits the next year which, of course, also becomes a newspaper crisis, because a advertising revenue completely dries up and b people are like losing their homes and canceling their newspaper subscriptions.

So it's brutal out there over the course of the next two years.

You know they would lose 25 of their revenue in two years and Yeah, the rise before the fall.

Yeah, exactly.

So compound this macroeconomic crisis going on with the smartphone launching exactly one year before the financial crisis, the App Store coming the same year of the financial crisis, massive acceleration not only of internet adoption but of smartphone adoption, and the New York Times.

To give them credit, they've started a digital newsroom.

It is in a different building than the actual newsroom.

It is that separate.

They don't get to be in the fancy headquarters.

Correct.

And the newsroom is so separate from sort of thinking with a business mindset that they refer to anyone who is not a journalist at the Times as the business side.

Right.

So think about digital product people like designers, product designers who are building the mobile website business side.

Like programmers, business side.

Everything is like, if you're not a journalist, you're on the business side.

And here you are suddenly thrust into this new era where you're in the worst financial shape you've ever been in as a company.

You own all these things.

I don't know what the right phrase is, but you've got a massive chasm between what you perceive as the core competency of business producing print journalism and everything else over on the business side and not thinking about any distribution.

And I'm sure they're thinking about it, but not in a serious way as the sort of crisis of the business other than how do we sell more papers?

Yep.

And you've now just missed not one, but two technology waves, with cable and the Internet.

So in 2009 is when the shoe drops.

So, January 2009, they announce a 250 million debt deal with Carlos Slim the billionaire, the Mexican billionaire, one of the wealthiest billionaires people in the world.

And his primary business is telecom, right?

Telecom.

Yep.

So he, interestingly, I didn't realize this.

He already owned 7% of the company that he had just been buying in the public markets.

They do this 250 million debt deal at a 14 interest rate on the debt for plus warrants for another 10 of the company.

So 14 interest rate debt, 10 equity of the company and Slim exercises those warrants over the years.

Let's unpack that a little bit.

So contextualize 14% for us.

If you were going to go borrow and get some debt for your company now, what would you do?

You would pay like 1.

Like, I mean, we are in a zero interest rate environment.

Yeah.

But I mean, I remember even back then, so I was an immediate investment banker at the time and I remember doing junk bond deals for like failing movie studios at like I don't know.

Call it six, 7.

You know interest rates like um, you know 14.

Now granted, this was the throes of the financial crisis, but like, that's bad.

And so then mechanically, how does the 10% warrants to buy another 10% of the company work?

So I don't know what the strike price of those warrants were, whether they were penny warrants, which is effectively like free equity, like stock options to employees, or whether they were at the then current stock price of the company or some discount.

But they're effectively like free call options at whatever the strike price is on the company for the future.

And so how long does he wait before then deciding I am going to go pick up another 10 of the times at this attractive price?

I think he waits until the expiry dates, which is a few months years later, but he he does, he exercises them and um, and he becomes the largest individual shareholder in the New York times, owning about 17.

He's since trimmed his stake a little bit.

I think he still owns 13, 14%.

Yeah.

He's right around there.

So kind of like it's like a Warren Buffett type deal that that he does.

Although I would say, unlike you know, at this time, when Buffett was investing in Goldman and like Harley Davidson and the like, like those were solid companies, like there were some real question marks around the times at this point in time.

February, the next month, they eliminate the dividend altogether.

So man, family members must have been pissed that they're like doing buybacks for the last few years.

And now you just eliminated the dividend to save money.

In March they announced a 225 billion sale and lease back of a portion of the headquarters building.

So they just built this damn headquarters building.

And, And they sold it to WP Carey and agreed to lease it back for 15 years with an option to buy back the portion.

They sold in 2019 for 250 million, which they exercised.

So they now own the building again.

Which we should say, this is actually like one of the savviest investments of all time by the Times.

Like, if you think about this, think about how much New York real estate, especially class A real estate, appreciated between 2009 and 2019.

And the New York Times sold these floors for only $225 million.

And they said, a decade later in 2019, we have the right to buy it back forever. for 250 million.

That's really not much appreciation.

I think I found a source that said that they essentially bought 750000 square feet of prime New York office space at 333 a foot.

Nothing in the market is trading around their building under 1,500 a foot.

Wow.

Yeah, they quintupled the value of their holding.

So that's an unbelievable, like for the times, this is like a win.

It's effectively for people who are trying to make sense of a sale lease back here.

What they basically said was they kind of like, owned their house but then they took out a mortgage on it where they said, like I'm going to keep living here.

You're going to own it.

I'm going to pay you every month.

And like it's a bummer thing to have to do, especially when you have so much of your identity tied up in this great building that you needed.

But you needed the $225 million.

You needed the cash.

But holy smokes, to be able to get it back a decade later for close to the same price.

Yeah.

So savvy.

Well, this is what's interesting.

You're hitting on the point here.

So, well, I'll run through a couple other things they do and then we can discuss.

In July, they sell the radio stations they own to Disney for $45 billion.

Then, in 2011, they sell off their regional media group, which is all those crazy regional newspapers that they bought for 143 million.

In 2011 and 2012.

They sell off finally, the Red Sox stake for 225 million.

The Red Sox and Fenway stake.

August of 2012, they sell about.com to IAC for $300 million.

And then in 2013, they took a little loss on that then?

Yeah.

Yep.

So they took about $100, $125 million loss.

In 2013, they sell the Boston Globe and the other New England papers to John Henry.

I don't remember what the price was.

It was a lot less than a billion, though.

Yeah, yeah.

And amidst all this, i think by 2013, that three and a quarter billion of revenue that i previously referenced was down to 14 billion.

Like all these divestitures, not to mention all these, you know, people who are no longer paying for newspaper subscriptions really starting to dry up that revenue.

Yep yep yep, yep.

So this is when you know the um narrative of like the times is effed, uh is at its strongest.

You know the quote, unquote failing New York Times.

But you know all these transactions that they do.

They're freeing up tons of cash and they're paying off this debt.

And so the end of these transactions.

They've generated about a billion dollars in asset sales that have all gone to pay down the debt.

That they had taken out primarily to do share buybacks.

To share buybacks, yeah.

And they're down to just the core New York Times property, but digital and print.

And they're kind of in an interesting position again that not a lot of people realize.

Yeah.

So then, the other thing that they do during this time is they finally get their act together and introduce a paywall, a metered paywall, for mytimescom.

Now, here's what's interesting.

So they announce in 2010 that they're going to do this.

They give a whole year's notice to the world, and then they implement it in 2011.

And people are like pretty outraged.

People are like, you're going to charge for content on the internet?

Like, F you.

Yep.

And it's very controversial.

But they say you get 20 articles a month for free before you have to describe.

It's pretty generous.

And the top news section on the smartphone and tablet apps will always be free.

But people are skeptical.

And so in the first year, it goes like, okay.

They get 400,000 paid digital subscribers in the first year.

By year two, they're up to about 660,000.

Year three, they only had 100,000.

They get to 760.

Year four, they're at 900,000.

So it's going like...

And I think in year three, they chopped the free articles in half from 20 to 10 that you would get.

So they're starting to realize, ooh, we got to pull some levers here to make more people subscribe.

Yep.

More alarmingly though, as they're implementing this metered paywall, people are going elsewhere for news.

So the traffic to the site drops by over half during this time.

This is crazy.

And this.

So this is.

We'll talk about the innovation report in a moment, but this is pulled from the very sort of like famous or infamous innovation report.

In 2011, they had, I think mid 2011, they had 160 million visitors a month to their website.

And by 2013, 80 million.

Like this paywall thing is working-ish for revenue, but boy, is it destroying your traffic.

Destroying the traffic.

So...

Man, things seem bad, right?

Then and they are bad enter 2014 and AG, the heir apparent fifth generation, Sulzberger.

He is tapped by the family to figure out what's going on.

And he writes what becomes known as the Innovation Report.

I think it's titled the Innovation Report and it's internal, but it gets leaked out publicly.

It's pretty amazing.

Yeah.

So check this thing out.

So first of all, just to wind back a bit, the paywall was launched by David Perpich.

He was sort of the person who was heading up the metered paywall.

He's a family member.

So he's a potential person who could take over as publisher of The Times next.

And it's going pretty well.

So people are thinking pretty highly of him in the organization.

AG at this point, I'm not...

I'm not sure if people already knew that he was going to be the next publisher, but publishing the Innovation Report definitely catapulted him past and made people realize oh, this is the leader that we need to bring us through this era.

So he was originally tasked and it was a team of I think 10, 12 people to really start sort of dreaming up products that could fix up the New York Times bottom line.

And they thought they were going to do this.

The new york times had released an app called nyt.

Now, so they, they sort of.

I mentioned that um digital was sort of in a different building.

They had by this time brought them into one one single newsroom.

But the folks on the business side were sort of in charge of uh, of figuring out hey, like how are we going to save the times?

And Sulzberger sort of took it upon himself and the team to treat this innovation report like a piece of investigative journalism.

And so as they sort of met with all the hundreds of people inside the Times, in the newsroom, on the business side, hundreds of people outside the organization, they sort of realized, oh my God, it's not.

Yeah.

What they sort of realized about I don't know quarter of the way into doing it is it is not a new product that we need to launch.

We need to completely change the way the New York Times works.

And that needs to happen from the place that has the most power in the organization outward.

So it needs to come from within the newsroom, and a good example is like i think it's in the report.

They say something like traditionally, our journalists have thought about their job ending when they click, publish and then someone takes over after that on distribution.

We need to be thinking about that.

That's when the job begins and that's when you need to.

You need to always be authoring with distribution in mind.

You need to always be thinking in what properties is this going to get released in and in the newsroom?

There needs to be an understanding of what content gets federated to what properties at what times, is consumed by who.

And they completely sort of changed.

And frankly I don't think this could have happened without a family member leading the charge here but really like reinvented the organization with pretty damning findings in this report from the inside out.

Well, it's kind of like a throwback to Adolf Vox, right?

You got to be a journalist, but you also got to be a marketer and a publisher.

And you got to get the positioning of what you're doing, right?

But you also got to get the distribution, right?

Yeah.

Absolutely.

I mean, there's even quotes in there where they say, the New York Times is winning at journalism.

At the same time, we are falling behind in a second critical area the art and science of getting our journalism to readers.

And they talk a lot about how we don't think that we need to sacrifice our core values to get this done.

And there's a lot of people out there, our competitors, who have way more traffic, and they're referring to BuzzFeed and Vox and all these people by name who are getting unbelievable amounts of traffic.

And the assertion which is like At this point you're kind of head scratching because you're like how are you going to do this?

They basically have a throwback to the yellow journalism era.

And, to be clear, some of the things they reference, like BuzzFeed and others you know a lot of the traffic that they're getting is they're just taking New York Times and other articles and just rewriting the headlines and posting them on their own sites.

And the New York Times is like, That seems fine.

Right.

And what they do here is there's this interesting allegory to the yellow journalism era, where what Sulzberger and the 10 12 person team sort of assert is, if we are willing to step up internally and make big change and bring the right leaders into the newsroom tech and product and distribution and marketing and growth leaders into the newsroom and adopt them as our own, we think that we can hold our values and and grow our subscription business and grow our reach.

And it is this like pretty bold assertion to say like we're not going to sink to the clickbait level of everyone else.

We are going to continue to produce great journalism with an intense focus on integrity and also fix our business.

And it's a little bit.

You're reading it like if.

If we didn't know that it worked, you would be reading this thing being like good luck, good luck man.

Yeah Well, and I think the other thing that they do I don't know how much this was.

I didn't read the report as closely as I know you did.

So I don't know how much of this was in the report versus just they do it.

They also kind of like learn the lesson of not missing technology waves.

So they launch apps.

So in 2014, they launched the New York Times cooking app, which has become a hugely successful, hugely successful.

In 2016, they launched the crossword app, which has become hugely successful.

Yeah, the crossword app on its own is like a 30 million dollar a year business with like zero marginal costs, because they're just running like historical crosswords from years and years and years and, i think, some new ones.

But, like the, the apps business that they have they call it like other digital is growing at 60 year over year and it's crazy high margin revenue the cooking, the crosswords, all that stuff.

And then the other thing, of course, that they launched which will lead into the next big tailwind.

That's helped.

The Times is The Daily.

So they launched The Daily in February.

I think it's February 1st, 2017.

And it gets 100 million downloads in the first year.

In 2019, it passes a billion downloads.

And I think Ben, you may know more of this than me and the right way to judge, but I think it's the biggest podcast in the world.

Every single day receives 4 million downloads of its most recent episode.

Yeah.

That is crazy town.

Crazy town.

They're reaching people that the print reporting could never reach, too.

It's a completely different audience.

So it's something like 75 of people who listen to The Daily are under 40 years old, which is a much younger demographic.

Frankly, a much more attractive one for advertisers.

Their podcasting business.

Today is is a 36 million revenue business just in podcast advertising, which grew 7 million off of last year.

So it's not their biggest, by any stretch, business line, but it is where a lot of their new reach is coming from.

Yeah.

Well, and it's super high margin, all of these businesses.

All this money is dropping straight to the bottom line.

Yeah.

Although they do have like a 20-something person team producing the daily.

So it's like there's material cost to producing that podcast because there's real reporting.

And I'm looking at you every Zoom knowing what our cost structure is.

Well, I'm used to running acquired type margins on things, right?

That's right.

If the labor is zero, then it's nice and high margin.

Yeah.

Do all our own reporting here at Acquired.

Well, if you're going to catch us up to 2016, then there are some other things to say about the times in 2016.

Oh, yeah.

Namely around subscribers.

So let's contextualize some of the subscriber numbers so far, because I made a little timeline here.

So you're right.

Year one, they did like 400,000 new subscribers.

Like 2011, not necessarily great.

By 2012, that's when they reduced it to 10 free articles.

In 2013, the Times announced that, for the first time in decades, they made more revenue through subscriptions than advertising.

So that's print plus online combined.

But that says a lot about both the decline of the advertising business.

And the famous line is trading print dollars for digital dimes.

And it says quite a bit about the fact that they're growing material revenue.

I think there are hundreds of millions of dollars in revenue at this point in 2013 coming from subscriptions, but still not at a.

It had taken the New York Times four and a half years to get to their first million subscribers, and then it only took them a year and a half to get to their second million subscribers, just before the election of President Donald J Trump.

Yeah.

So this you know, when we were referring to the failing New York Times narrative, that you know like it was failing and was so prevalent.

Of course, that got taken up by a certain presidential candidate in the 2016 election and then president thereafter.

Yeah.

The reality is that was the best thing I think that ever happened to the New York Times.

That is the ultimate irony.

The ultimate irony.

The endless news cycles of insane... What's the best way to describe it?

The New York Times, while being berated by this man as being failing, is skyrocketing in popularity and becoming a better business than ever on the fuel of him.

The paintbrush to paint the canvas of the story is so rich and dripping with irony.

I know.

It's incredible.

So you may have these stats too, but they grow digital subscribers 47% in 2016.

These are like tech company growth numbers.

Yeah.

In the first quarter of 2017, when Trump takes office, they add 300,000 subscribers that quarter.

They finished 2017 at 2.2 million.

By 2019, they're at 3.4 million digital subscribers.

This is to the core news product, not including the crossword and the cooking app.

And then last year, 2020...

They grow 48% again.

They pass 5 million digital news subscribers plus another 1.6 million to the standalone products.

Digital revenue surpasses print revenue for the first time ever.

They've retired all the debt.

They buy back their headquarters.

They have no debt on their balance sheet.

Yeah, 2019, completely debt-free.

Completely debt-free.

They have all of this incredibly high-margin digital subscription revenue that no other news organization in the world has.

They have multiples more subscribers than The Wall Street Journal, which is the...

When you say that no other organization in the world has.

So the New York Times, I think.

Today, I think it's seven and a half million new subscribers.

The closest one is the Washington Post was somewhere like two.

And then after that, it drops real far.

The LA Times has like a half million or less.

And like it goes on and on down from there.

And when you look at the number of subscribers that they ever had in print, like ever, in 2002 they had, I think, 11 million.

The New York Times was the number one print circulation newspaper, at least in America.

Only a million subscribers to the print edition.

So they figured it out just at the right time and then had this freaking, unbelievable tailwind happen with the Trump presidency.

Yeah.

And in the meantime, like you alluded to in the hook at the beginning of the show, they're hiring all the best journalistic talent in the world to come right at the times.

And they're paying them more than anyone else because they can afford to, because they've got essentially, a netflix like business model at this point.

Did you know the new york times average salary for a journalist is over twice that of the industry average?

Yep it's, it's crazy.

I think the i think the average starting salary is over a hundred thousand dollars, which like who would have thought in you know 10 years ago that a news media organization, a newspaper, would be paying over a hundred thousand dollars starting salaries to journalists?

Yeah, it's definitely to be congratulated.

Yeah, huge milestone.

Congrats to the team.

And...

Timing is interesting because the experimentation space is really heating up.

Yes.

So why do investors value stat seg at over a billion dollars?

It's because experimentation has become a critical part of the product stack for the world's best product teams.

Yep.

This trend started with Web 2.0 companies like Facebook and Netflix and Airbnb.

Those companies faced a problem.

How do you maintain a fast, decentralized product and engineering culture while also scaling up to thousands of employees?

Experimentation systems were a huge part of that answer.

These systems gave everyone at those companies access to a global set of product metrics, from page views to watch, time to performance.

And then every time a team released a new feature or product, they could measure the impact of that feature on those metrics.

So Facebook could set a company-wide goal like increasing time in app and let individual teams go and figure out how to achieve it.

Multiply this across thousands of engineers and PMs, and boom, you get exponential growth.

It's no wonder that experimentation is now seen as essential infrastructure.

Yep today's best product teams like Notion OpenAI, Rippling and Figma are equally reliant on experimentation.

But instead of building it in-house, they just use Statsig.

And they don't just use Statsig for experimentation.

Over the last few years, Statsig has added all the tools that fast product teams need, like feature flags, product analytics, session replays and more.

So if you would like to help your team's engineers and PMs figure out how to build faster and make smarter decisions, go to statsigcom slash acquired or click the link in the show notes.

They have a super generous free tier, a 50000 startup program and affordable enterprise contracts for large companies.

Just tell them that Ben and David sent you.

Okay.

So in catching us up today, we have to give a huge shout out to a website called Mind Safety Disclosures that put together a deck that provides just some amazing analysis of the times and frankly, makes an amazing bull case that I think we'll cover as we go into bull and bear narratives.

But definitely wanted to give a shout out.

If you've read the Mind Safety deck, you will recognize a lot of that thinking coming through here as we talk about the times today.

Fun fact Ben, do you know it's a great blog, both a blog and Mind Safety.

Has great visualization tools for 13 Fs for hedge funds and various positions that famous fund managers hold.

Do you know where the name Mind Safety Disclosures come from?

You asked me this before the show.

I do not know.

So apparently I think I saw this on Reddit or somewhere maybe it was on the site that I think this was part of the Dodd-Frank legislation.

Every company now every publicly reporting company, has to include a section in their regular reporting about their mine safety.

Like a gold mine or an iron mine in the ground.

Yeah.

Whether you have a mine or not.

So if you go read the 10K for Google or Alphabet or Apple or whatever, they have a section on mine safety.

They don't have any mines, but they have to have this section.

That's so good.

I wonder if Coinbase is going to have Bitcoin mine safety disclosures.

Oh yeah, that would be amazing.

Yeah.

All right, so let's talk a little bit about the times today.

So we talked a lot about this subscriber run-up.

We're at 7.5 million subscribers today.

They've stated a goal that in 2025 they want to hit 10 million.

Management has since said they're going to blow by that and set a new goal.

You know, this has been a heck of a year for journalism.

They had two quarters, Q2 of 2020 with the coronavirus and Q4 of 2020, both of them unbelievable record subscriber bumps, something like 650,000 new subscribers in a single quarter over these two quarters.

It was the biggest year for news in history.

I mean, at least in modern history.

And the New York Times was really well positioned to sort of feel that acceleration.

So on top of... They added 2.3 million digital-only subscribers this year.

I mean, just thinking back to 2011.

Right when they launched and they got 338000 in one year and it took them four and a half years to get to a million.

This year, they got two and a half million.

So you're really starting to see, like...

They're building a scale business here and I think they're seizing the moment a little bit to do it.

It's not all roses and sunshine.

Ad sales were massively down this year in a pandemic-related way.

I think ad revenue fell 26% year over year.

Well, and also just fundamentally, like...

The ad business for content for text content on the Internet is nowhere near as good a business as it is in print, because most of the value of ads on the Internet accrue to aggregators like Facebook and Google.

Right.

Yeah, the New York Times subscription business is actually now three times larger than the advertising business.

And it used to be the opposite.

Right, right.

It's an unbelievable transition from this early 2000s that was just completely flipped.

So that's interesting to know about the business today.

It wasn't even just the early 2000s.

I mean even reading the Gay Talese book.

It was in the 1950s and 60s.

Advertising was 3x subscription.

That was always how it worked.

Right.

That was the newspaper business.

This comes on the back of.

I think the years were 2012 to 2015 when they really started to get serious about this.

They went to the advertising department and they basically rehired everybody.

They decided that the entire team needed to go, new people needed to come in.

They turned over 85% of the 400-person staff with people with digital skills.

Which is like to have that big of a turnover like that, and say actually, the ads that we're going to be doing in the future have nothing to do with the ads that we've sold in the past.

So we need completely new people to do that.

It's just interesting that you would do that, even when the business is declining so heavily frankly, because it's still just a big business for the times.

And as they make this transition, that needs to stay a strength.

They need to be a major player in internet advertising, even though their primary business model is now a subscription.

Yeah.

Other fast facts on the company today.

It is 4,300 employees.

1,700 of those are journalists.

And interestingly the 1700 number represents about 5 of the total journalists in the United States, the total professionally employed journalists.

Wow.

So it's not just Ezra Klein and Kara Swisher and those folks going to the Times.

They are just vacuuming up the best journalism talent and, frankly, paying them very well for it.

The Times did, we mentioned that $1.8 billion number.

That stayed fairly flat over the last several years in their top-line revenue.

They're seeing, of that, $250 million in operating profit.

Again, also kind of flat right now, probably related to the pandemic.

But the composition of that has vastly, vastly changed.

It's deceptive to look at the top line because it's flat, while part of it is vastly declining and part of it is hugely growing.

Yes.

So we should hold that for one moment.

And I'll just put a pin in sort of, I guess, articulating the scale of the times today.

Their subscriber base—so we talked about how they're killing it and it's not even close—

They have more digital subscribers than the Wall Street Journal, the Washington Post and the 250 local Gannett papers combined.

Wow.

And, to like, add another layer of icing on that stat.

That stat comes from an article written by Ben Smith, a columnist for the New York Times, the former editor-in-chief of BuzzFeed.

Wild, right?

Totally wild.

I mean that makes BuzzFeed Gawker.

Recode, Quartz and Vox on the list of publications whose editors now work at the Times.

It has just become so clear in only six, seven years that to the extent that there's sort of a I don't want to call it a monopoly, because I don't think that's the right word but a scale player at the top and sort of no one in the middle, and then a bunch of successful sort of indies and low-cost structure businesses in the long tail, they are pretty much the only one at the top.

And you've got a couple of other modestly successful publications right now toughening it through.

The Washington Post under Bezos' funding and there's just really not that many more.

Yeah, that that look like the times.

Well, it's such a um.

Well, we'll save this for playbook.

But like the nature of the internet economy, winner take all businesses yeah, winner take all.

And yet globally addressable niches for low-cost structure businesses on the other side, yep.

So I think this is a good place to transition into narratives.

And the narratives for this company.

It's not as clearly bifurcated as it would be on an IPO episode where we're saying here's the reasons to be bullish, here's the reasons to be bearish.

There's sort of an interesting spectrum that we're going to go across here on why would you be bullish on the times and why would you be bearish?

So the first bull case Meredith Kopit-Levian, the new CEO, articulates this regularly on their earnings calls, which is hey, not only is our 75 million person subscriber base growing and of course that includes news subscribers, it includes the digital-only non-news, you know.

It includes the print subscribers.

We think that there's 100 million English-speaking people who are willing to pay for news.

So we think RTAM is like, you know...

15x or something like that.

13x what, what?

Uh, what we're at today, so it's fast growing and it's large and that's sort of like ipso facto must be the tam, because you wouldn't be growing that fast at these large numbers if the market wasn't that big like if you were starting to run out of the market, you wouldn't be adding customers that fast right, right Yeah.

And the second one, this is where we start to get into the sort of like, is it a bear case?

It is a bull case.

We should have the discussion of is the New York Times a tech company?

And I was reading a Medium post by their outgoing former CTO who said things like I think 150 Timesians went through the Reforge growth series.

Not a thing that you would expect to hear from within the New York Times organization.

They're taking it very seriously to think like a tech business, act like a tech business.

Nail distribution on the internet.

Understand where they fit in there.

And from a cost structure perspective, this we owe wholly to mind safety disclosures.

They make the point that with newspapers, the New York Times costs were largely variable.

That is, they increased in proportion with the number of papers produced and sold.

But with digital subscriptions, most of their costs are fixed.

That is, they don't increase as The New York Times adds more subscribers.

So you think about this.

Sure, their revenue's flat, but they're switching out their cost structure from one that's delivery trucks, that's a physical paper, that's printing presses, to this one that actually looks a lot more like Netflix, where you acquire the content and then the whole base that you have, that you can sort of amortize your content costs across.

It's all gravy.

You have content costs, you have fixed costs, you have your variable costs on top, but your revenue is not actually connected to any of those.

Your revenue is actually connected to your audience.

The reason to be really excited right now is that The Times is in a place where they're just about to outrun all those fixed costs and be in this super high margin territory where the audience is so large that they really don't need to grow their costs at the same rate that they're growing their expenses.

Oh, it's just like, uh, we'll discuss this in powers, but it's just like Netflix.

Like why can the times pay a hundred thousand dollars plus starting salaries for journalists and no other organization can afford to?

It's because they have the scale economies of, you know, millions of subscribers.

So like something.

Just like Netflix can pay a hundred million dollars for a piece of content, amortize it across there.

You know many many, many times more subscribers than Peacock.

Same deal, same dynamics here.

Yep.

And it's almost like someone's been holding up a sheet in front of the business while it's been completely reorganizing itself behind.

And you're like, what do you mean?

The sheet's still the same size.

It's like, yeah, but you don't know what's ready to run through it.

That's such a good analogy.

I love it.

Now when we're comparing it to Netflix.

I think there's one more interesting thing to say about the times here.

And that's sort of the bull case is they don't have to go acquire content, like they're not in the business of going and bargaining with someone who owns the content, who's then going to say gosh, you got a lot of subscribers.

You really have to pay a lot.

They create the content.

I mean, I know Netflix switched to this with original content too, but they're massively advantaged in that way where they really do create and own all the content that they're creating.

And while they're paying high salaries, those salaries don't scale with audience and can't get negotiated in a way that scales with audience.

Yep.

That's such a good point.

Like nobody, probably not even Kara Swisher as much leverage as she does have.

She's not going to be able to go to AG and say, hey, you just added 2 million subscribers this year.

I need some percentage of that.

Right.

No one's got a revenue share deal with the Times in their employment contract.

But I mentioned this was sort of a bothy, a bear case, bull case.

My verdict is still no, that the New York Times is not a tech company.

And even though the business profile and the sort of dynamics that we just described definitely make it look that way.

The organization with power inside this company is still in the newsroom.

Much like Facebook has sort of product, Apple has designers, Microsoft has PMs, Google has engineers, the New York Times has journalists at its core with all the power.

And they've sort of brought in lots of people to sort of be a part of the newsroom.

But, like when we talked earlier about sort of the business side being all non-journalists, there's still something to the fact that like, the most important thing to the times is their brand, their objectivity, their ability to sort of like be discerning in this world.

And so where you have things where a tech company would be being like whoa, we have the number one podcast.

Let's launch 30 podcasts.

Or like, whoa, a lot of people like our cooking app.

Let's launch 10 other experimental apps.

Or like, huh, the crossword's going well.

For games, I guess, let's try and be Zynga.

Let's try and do a ton of crazy data science and launch a bunch of games and...

It's happening over the course of years instead of months, and they're not running hard into these opportunities that I think you would sort of see for a tech company in the startup world if they were falling into the success that the New York Times is.

And I think the thing holding them back is the very thing that made them sort of successful, which is the sort of trust in their brand that they need to maintain with this level of journalistic integrity.

Totally.

I mean, I think it gets back to the literally, as we told in the history, baked into the immutable mission of the trust and the company, which is to continue to serve as an independent newspaper, entirely fearless, free of ulterior influence and unselfishly devoted to the public welfare, as a news organization.

Right, that is what they are, that that is undeniable right, right.

So that's sort of the bear case side of them being a tech company.

Like sure, they've adapted well and they certainly have uh, been more sort of tech internet, mobile growth forward than any other news organization and they've undergone i hate to use this phrase, but it literally applies here digital transformation.

Um, They're not a tech company and they have systematic things holding them back from behaving like a startup.

Another bear case to make is that, while subscribers are up, we've talked a lot about their subscriber numbers.

We haven't been talking about, or nearly as much about, their subscriber revenue, because it is not growing as fast.

In fact, their revenue per subscriber is going down and And if you hear them talk on earnings calls, they assert things like we'll actually start increasing it again by the second half of 2021.

They'll say things like, those are promotional discounts that we use to get people in.

And then once they turn into second third, fourth year paying time subscribers, you'll see that start to meaningfully change.

We just don't know if that's true yet.

It's very plausible.

But right now, revenue definitely is not tracking subscriber growth.

It's interesting, right?

That's a tried and true old school newspaper tactic, right?

Of, like you know, you subscribe to the local newspaper for X price for first year and then you know demo race.

Get the times for only a dollar a week.

Yep, exactly.

But the jury is still out about will this work in a digital environment where it's not.

While, as we've discussed, there are some monopoly like factors here, in that, like nobody else has a journalistic organization like The Times, or the number of journalists, or the reach or the content that they're producing.

There are.

It's not like a geographic monopoly, like the old school newspaper business, where you're either getting the times or you're getting no news.

There are other places everyone can go on the internet.

Yep.

For sure.

Another bear case to make, because in my bull case I started painting of why this is an even better business than Netflix.

The Times has seven and a half million paying subscribers.

Netflix has 200 million paying subscribers.

The Times estimates that their total addressable market is half of Netflix's current subscriber base.

Like just to contextualize that.

I think the New York Times' current average revenue per subscriber is right around in the same ballpark this 15 to 17 a month of Netflix.

So it's an interesting comp because from a revenue perspective there, or from a subscription price perspective, they're very comparable.

But the Times, yeah, estimates that its addressable market is half of Netflix's current market.

So when you're thinking on the scale of sort of the Fang-type companies, the New York Times is never going to be that.

Not that they aspire to be that, but that is in no way the scale that we're talking about here, even though they have these sort of tech company cost structure dynamics that they're shifting to.

The next bear case.

I think that's a reasonable one to paint is – this is sort of the classic Ben Thompson point – is there's kind of a conflict here between their business model and their stated mission.

Where, if you're really going to be the paper of record and you're really going to be the paper for everyone, the authoritative source –.

Your business model actually should not be to get a small number of people to subscribe to you.

It should be to get your content to the largest number of people in America, in the world, and not limit your reach at all by your business model.

The argument that if you were a bear you would make here is subscriptions are for niche providers.

You should be figuring out how to run a successful advertising-based open publication for the internet, if what you really want to do is be the neutral sort of paper of record.

Because what you're doing creates an incentive for you to create strong affinity with a certain group.

And whether that group is liberal subscribers or people who don't like the president or whoever you think they've attracted over the last few years.

The New York Times, without a doubt, in this business model, has every incentive in the world to identify a sort of large niche and create high affinity among that niche.

And that may not necessarily align exactly with pure journalistic neutrality.

Super interesting aside, I forgot to include in the history and facts the paper of record, the New York Times, as the paper of record that saying and quote actually comes from a very specific business strategy from the Times.

Really?

They added the index to the Times that they published, I believe quarterly, I think in the 19-teens.

The index was literally an index of every topic and person and institution that appeared in The Times over the past quarter.

And the reason they started doing that and they invested in doing it was so that librarians and researchers around the world would start using The Times as their main news source, because it had this index, and that then they would get into schools and then they would get.

And, you know, and so that's where the paper of record idea comes from.

But to your point it's well.

Actually it may be sort of counter, like they were sort of specifically trying to target a niche group of like we're going to get into the elites in like of researchers and academics and schools.

And but yeah, it's interesting.

Yeah, David, it's interesting.

This really raises the point of to be subscriber only.

Really your motivation is to create really strong affinity from someone such that they're willing to pay for your content.

And you could do this by being really niche subscribers.

But the question is, is there room for sort of one subscription in everybody's media diet where the way that you're creating that really strong affinity is by saying we are just the highest quality, most neutral journalism that you could find?

Does that stimulate a buy decision in the same way that going to someone and saying I'm going to appeal to all of the biases that you have and say like I'm going to keep giving you more of what you love.

Like, can you actually build just as big a business if you are the one scale player to really have the subscription for everyone?

That's interesting.

I don't know.

I mean, my mind goes back to the Fox News discussion, right?

I don't think anybody would argue.

Maybe some people will.

Maybe we'll get emails and comments in the Slack.

But I don't think anybody would argue that Fox News has a target niche demographic of political conservatives.

Right.

It depends on your definition of niche.

It's a huge freaking niche.

Well, right.

That's the thing.

It's a huge freaking niche.

And, you know, even with that business strategy...

They built a $5 billion, 50% EBIT margin business.

Right.

And I guess the question I'm really driving at here is can you similarly get people to fork over their money for neutrality and as driving in a way that they're willing to?

And again, the people aren't.

I don't think they're subscribing to Fox News.

Well, I guess they're subscribing through their cable bundle, but they don't know that.

Yeah, they don't.

They're paying for it, whether they know it or not.

Yeah.

So...

It's a good question.

Certainly.

Yeah.

I think the times would probably argue and maybe believe.

Certainly some people there, I think, would believe that that is what they're trying to do of like be the neutral, you know, highest quality news source across lots and lots of topics.

And then that's worth paying for.

You know, I don't No, but I suspect certainly a large portion of the gosh what five million subscribers they've added since Donald Trump was elected president have chosen to subscribe more for the niche reason than for the neutral reason.

Yeah.

Or at least I think that if I had to sum up and try and like embody the way that a lot of people feel who have subscribed in the last few years, I think I would say I feel like there's so much untrustworthy misinformation out in the world.

I am totally willing to fork over money for something that I know I can trust.

Yeah.

And.

The class of people who are saying that have their own bias.

So when they say that I know, I can trust, it is inherently loaded language because you are more likely to trust something that sort of represents the point of view that you want.

It is impossible to be completely unbiased in reporting anything, because you get to choose what to report.

At the very core, that is true.

But yeah, it is a really fascinating thing to try and understand all of the incentives of a subscription-based model and figure out if that jives with the mission.

Yep.

Okay, so that's sort of bear and bull.

I want to paint this spectrum as we come out of narratives, because I think there's this interesting sort of like decelerating excitement on this spectrum.

So the first thing you realize when you look at the times is whoa, this is a killer subscription business that is growing 40 year over year in their number of paying digital subscribers or, I guess, paying subscribers broadly, mostly from the digital category.

Like that is awesome.

Like that is like a late stage startup, good oh, but it's only growing like 10 year over year in revenue.

Like I really wish that was tracking the subscriber growth.

And then three.

You sort of realize, huh well, total revenue has actually been flat the last few years and it's fell over 50 from their glory days in the early 2000s.

So in some ways, it's like a high growth company by looking at just subscribers.

Certainly not though on total revenue and geez, their revenue glory days may have been behind them.

So if you're only looking at the surface level like this, you're going to get really disappointed, unless you're sort of believing the narrative that I mentioned earlier about you're holding up the sheet and they're fully reshuffling their cost structure underneath of it and they're sort of ready to explode in profitability coming out of this full rearrangement of the business.

Yeah.

And it's totally a compelling narrative.

But it is wild realizing like I was someone who started paying attention to the New York Times' business in the last five years.

And like I have been all on board in this subscriber growth story.

And it is just crazy to like zoom out with a little bit longer lens and be like they used to make way more money.

Yeah.

All right, let's talk about power.

Yeah, I think this is a great transition to power.

For anyone who's a new listener.

Old listeners will know this by heart by now, but we are huge fans of Hamilton Helmer and his work Seven Powers, which describes seven strategies by which companies can earn long-term differential profit margins higher than their competitors.

So basically Ben, as you like to say, why do you strategically deserve to be a defensible winner in your space relative to your competitors?

And the seven are counter-positioning scale economies, switching costs, network economies, process power branding and cornered resources.

This is a super interesting one for the times.

This is one like David.

I'm going to let you take scale economies, because I know you're just like dripping to talk about that.

And I'm going to talk about branding, because rarely do I think that a business actually has brand power.

Ooh, I like it.

I like it.

Like most of the time, because it takes so long to build up brand power and so much trust and so much repeatable years and years and years of convincing customers like hey, I keep delivering on what I say.

I'm delivering on.

That rarely if you hold out.

You know the bottle of Advil versus the generic like Advil has invested a ton of money and time into winning that battle.

But like most companies, especially tech companies that we cover on this show, just don't actually have brand power.

The New York Times has incredible brand power.

They can print things that I wouldn't even believe if some blogger printed it.

But it's literally the exact same story in the Times.

100% I will take that as truth.

Yep.

Well, and it's, you know, the canonical test is the same product.

If it had a different name on the masthead in this case, would you value it differently?

Yeah, 100%.

There could be the exact same word for word article in different places and it would be valued differently.

Yeah, this might be the clearest, I think, example of brand power that we've had on the show thus far.

Right.

Like I pay for the New York Times.

If it was a different masthead and it was all the same articles like, I probably wouldn't be paying for it.

Yep.

Totally.

Okay.

Scale economies.

Interestingly, I think the business has probably both iterations of the business had scale economies.

Certainly the old school print newspaper business did, because you needed a printing press and a distribution network to get your paper out there.

No scale to support that.

Good luck printing a paper and sustaining it.

And then, as we've talked about, in the new school business.

We keep harping on it, but the salaries that they pay reporters and the number of reporters and journalists they employ by being able to amortize that across a much larger subscriber base can certainly outgun any other organization out there.

Yep.

Total classic example.

Is there anything else in here?

This is going out on a limb and maybe tenuous, as so often with this power, but I'm just wondering if maybe we might finally be able to make an argument for process power.

Stewarded by a family, by like a single sort of, you know, shared value set of people.

Yep.

And could you say that that is so wrapped up in the organization that it can't be transferred out?

I think maybe I mean even if I say a group of editors were to leave the times and it'll either start individual sub stacks or a competing organization um, I still don't think it would be the times.

Now, some of that is maybe branding, but even just like the process of creating the paper that once was a physical paper and now is a continuously updated digital masthead every day.

Or as they would call it, the daily report.

Yep.

I think there may be some process power here.

Interesting.

Hard to know without looking under the hood, but I think it's a reasonable, reasonable guess.

But I will tell you, there was absolutely a machine.

It was a miracle.

And I think anybody who works in the news business will tell you this.

Gay Talese writes about it in the book.

It's a miracle that the paper happens every day and that the website updates every day.

And nobody who's part of it can kind of fully explain it.

But somehow everybody comes to work every day and like stories get published and edited and like it happens.

Yeah, i felt that way about when i was at microsoft shipping office every three years, like there was such an unbelievable process to get what three thousand people to all lock their code in a bug free way and get it out the door once every three years.

I i completely see how it's possible for someone not to understand how the entire system works themselves Yep.

Okay, cool.

I don't think there are any others.

No, I think this is pretty clear cut.

All right, into playbook.

You have this distribution with a very, very small amount of scale players and a very long tail of niche players with incredibly low cost structures, and nothing in the middle worked anymore.

And the New York Times went from being at the They were at the sort of head of the distribution but sort of behaved like a lost middle person until they sort of decided that what their strategy was was to be the one scale player and sort of if you're going to publish on the internet, you need to escape to one side or the other.

You need to either have a dramatically, dramatically lower cost structure or you need to be the big guy.

And there's just not that much room in the middle.

It's really reminiscent of the Bob Iger Disney strategy, I think, right?

Like in a world where YouTube exists.

You need to like.

The winning strategy for Disney was go hard into hyper high quality, expensive produced content.

Yep.

And the New York Times has their own version of the Bob Iger three-point plan of you know what was it?

Original content, internationalization, and embracing the digital strategy.

And, you know, you could make an argument that the Times is kind of doing the same thing.

It's the best original content in the news world.

You know, it's the highest quality journalism.

They have a very real international... They're opening more international bureaus than anyone else.

They are frequently having dual english and chinese bylines.

Uh, they are.

You know, i think that right now they're constraining their tam to the english-speaking market, but they have a clear eye on international uh and, and they certainly have reoriented around being digital first and embracing technology to not only distribute the news but report the news starting with snowfall in 2014.

It's really interesting.

I think particularly the international geography point.

You know the times like many papers have had bureaus all around the country and around the world for all of its existence.

But I have certainly noticed that in the past five years or so, as local news has declined.

You see the Times out there reporting all around the country, in the US, all around the world, certainly here in san francisco and silicon valley, i mean in seattle right, we know there are plenty of times reporters who work in seattle, who work in san francisco and who report on tech, even though it's the new york times, like that's, i think, different than in a pre-internet world.

Absolutely, what do you have next?

You know, the one that i wanted to really highlight uh, that I did at the beginning of the episode.

It's just all the way back, like the entrepreneurial journey of um, both the Raymond and Jones and and ox, right.

Like, and particularly um, The moments where it's back against the wall and you have to make something happen with no resources.

And that has happened so many times at the New York Times, but particularly with Ox.

You know, that's just when the entrepreneurial magic happens.

And for an institution like this, like we all think of it as the great lady, the venerable New York Times it's been around for 170 years, but like it too, started in the same way that so many great startups start.

Yeah Yeah, I love that point.

There's a thing that we build as a con earlier that I think there's an interesting playbook of it being a pro.

And that is a conservatism and a lack of radical change as a benefit.

And especially under family stewardship where, if The New York Times was more of a startup and, in 2010 to 2014, decided to do the stuff that BuzzFeed was doing or any of these sort of new media companies that were all the rage, and they decided not to put such an intense focus on the quality of the journalism in The Daily Report, look at where all those companies are today.

None of them worked.

And Vox is sort of the closest in sort of having a successful set of media brands underneath it.

But for the most part, they got washed out.

And AG and the family's sort of insistence on the core values that endured for 160 years before and now have endured another 10.

I mean they almost got destroyed in, not you know, adapting for digital.

But in sticking to... It's kind of like a government.

The government is intentionally supposed to not be able to adapt quickly because it's supposed to be enduring.

And The Times is very much like that where like, they did come out of this as number one because they didn't compromise on their values.

Yep.

That also makes me think of two other playbook themes that are classic media themes that this story reflects too.

I think, which is one?

Content is king.

And it remains true today.

It's funny, BuzzFeed is actually doing well.

So we keep throwing them under the bus.

Not to pick on them, but as an example of this genre of rewriting headlines and creating clickbait.

It's not actually content.

If you're not actually producing the content, you're going to get arbitraged away.

Whereas producing the content is, if it's good quality content, it's going to be valuable.

The other one it reminds me of is... you know, dual revenue streams, man.

Like that was the magic of the media business was subscription and advertising revenue.

And all the great media businesses have that, whether it's cable, whether it's news and now, whether it's streaming video as well.

So, um, you know, we have it at acquired like podcasts have it.

I was gonna.

I was wondering if it was too cheeky to be like yeah, all the great business, media businesses acquired um Yep.

Greatest of all media businesses.

Well, I mean to that point of revenue diversification.

There's definitely something here about them, not quickly, but getting into this non-news digital revenue.

They did grow the cooking and crossword apps by 60% last year to 1.6 million subscribers.

They also nestled in here.

A thing we didn't talk about in one of my very favorite companies, which is now one of my very favorite New York Times media properties, is the Wirecutter.

Yes.

If this were the Acquired podcast in 2016, we would be doing an episode about how amazing it is that the New York Times managed to buy the Wirecutter for only 30 million and now gets 50 million a year of high margin revenue out of it.

Out of the affiliate links.

Holy crap.

It's a great freaking acquisition.

$50 million a year in affiliate revenue?

Yes.

Wow.

I mean, they took it from an electronics thing called the Wirecutter plus the Sweet Home, which was for home gear.

And they said, we're dumping the Sweet Home brand.

And the Wirecutter is now the Wirecutter for everything.

And I think they're going to try and make it sort of the new consumer reports, including something they foreshadowed on the earnings call a digital subscription.

And I don't know what the heck that's going to look like yet, because I don't know exactly how that would work.

But that's an interesting business for them to be getting into, too.

Yeah.

I would say the last five to eight years, their investments and acquisitions have been much, much smarter than in the previous decade.

Yeah, the wire cutter is about.com done right.

Whoever's doing capital allocation now is much better than previous generations.

Yeah, well, the internet's a mature place.

We understand business models on the internet better now.

Yep.

One that I wanted to point out that we didn't point out in the history at all.

Is this really interesting one, where the print business is only declining at like 5 per year and it's going to eventually go to zero?

But for the people who are willing to continue to get the New York Times every day, the print edition, they are increasingly willing to pay for it.

So the Times is like sure, we'll keep printing your paper, but the average annual subscription is like 700 bucks.

Yeah.

And for the 800,000 people that are still getting the times delivered, that's what they're paying.

And so the revenue from paper subscriptions has stayed relatively flat, because the willingness to pay among the core group that's holding on keeps going up.

And I think that's just a great strategy by the times to just get the most that they possibly can out of a very large continuing revenue segment while they shift their business.

That's interesting.

And I haven't looked recently, but several times over the past couple of years I've i've looked at and wanted to add a sunday physical paper yep, to my digital subscription.

It's wildly expensive.

Yeah, i got it for a while, but i definitely after the year i was like okay yeah, probably not.

I'm probably not one of these people that's willing to pay crazy amounts for a paper, but like i could totally see like if that were a habit, i would probably pay a huge amount of money for it, yep.

Well, the last one, at least from me, is that I think you made this point in a different way, but the internet created globally addressable markets.

And it just never seems to surprise me.

I think if I had been born 10, 20 years earlier, I think I would be...

My default assumption would be more that your markets are geographically constrained.

But being someone that grew up in the 90s, my assumption in my headspace is always like well, you put something on the internet and then the whole world will have access to it.

What do you mean?

What market are you launching in?

You just launch on the internet.

And I'm sure generations below me, Gen Z and onward, are going to be even more like that.

But it's just always fascinating to me that before your total addressable audience market whatever was confined to some geo.

And now it is whoever loves your thing anywhere in the world.

And it's just a magical, magical thing.

Man, it must have been so easy to make money in the 90s.

I mean, I guess you could argue it's so easy to make money now.

But literally everything was working in the 90s.

Old school businesses were working, internet businesses were working.

Like you couldn't go wrong.

I mean that yeah, like if i, if everything seemed to be working uh, i would be willing to pay the prices people were willing to pay for stocks in 99 also.

Yeah, you can totally see how that happened.

What does that say about today?

Ah, no kidding, all right, should we move on to value creation, value capture?

Let's do it.

Now is a great time to thank good friend of the show, ServiceNow.

We have talked to listeners about ServiceNow's amazing origin story and how they've been one of the best performing companies the last decade.

But we've gotten some questions from listeners about what ServiceNow actually does.

So today we are going to answer that question.

Well, to start, a phrase that has been used often here recently in the press is that ServiceNow is the quote-unquote AI operating system for the enterprise.

But to make that more concrete, ServiceNow started 22 years ago focused simply on automation.

They turned physical paperwork into software workflows, initially for the IT department within enterprises.

That was it.

And over time, they built on this platform going to more powerful and complex tasks.

They were expanding from serving just IT to other departments like HR, finance, customer service, field operations, and more.

And in the process, over the last two decades, ServiceNow has laid all the tedious groundwork necessary to connect every corner of the enterprise and enable automation to happen.

So when AI arrived, well, AI kind of just by definition is massively sophisticated task automation.

And who had already built the platform and the connective tissue within enterprises to enable that automation.

ServiceNow.

So to answer the question, what does ServiceNow do today?

We mean it when they say they connect and power every department.

IT and HR use it to manage people, devices, software licenses across the company.

Customer service uses ServiceNow for things like detecting payment failures and routing to the right team or process internally to solve it.

Or the supply chain org uses it for capacity planning, integrating with data and plans from other departments to ensure that everybody's on the same page.

No more swivel-chairing between apps to enter the same data multiple times in different places.

And just recently ServiceNow launched AI agents so that anyone working in any job can spin up an AI agent to handle the tedious stuff.

Freeing up humans for bigger picture work.

ServiceNow was named to Fortune's World's Most Admired Companies list last year and Fast Company's Best Workplace for Innovators last year.

And it's because of this vision.

If you want to take advantage of the scale and speed of ServiceNow in every corner of your business, go to servicenowcom slash acquired and just tell them that Ben and David sent you.

Thanks, ServiceNow.

All right, value creation and value capture, David.

Two components to this.

The first one, how are they capturing value compared to the value that they create in the world?

The second one, how does the value they create for the world, not just shareholders, compare to any value destruction?

The second one's a little bit of like an altruism question.

This first one, if you would have asked me about this in 2014, this is like an F, right?

They're creating so much value for the world.

They're doing all this high-quality reporting and the dollars are falling like water through their fingers.

Everyone else is managing to capture it.

Facebook's capturing it, and BuzzFeed's capturing it, and They just, you know, they're like not sure what to do about it and paralyzed.

Today, it's a very different story.

It's still not an A, but they sort of laid the foundation for you to believe how they could be very profitable in the future.

Yep.

100%.

Now, this final one, how much value have they created for the world?

This is a company, when we compare it to Airbnb, where there was a lot of value created, a lot of value destroyed in that company and many of the other companies that we've sort of covered in how they were able to achieve the business outcome that they did.

And then you look at their market cap and you're like, wow, this company managed to be like a $100 billion company or whatever it is, creating and destroying a mixed amount of value along the way.

The New York Times is the opposite of that.

They're capturing in their market cap, what is it, $4 or $5 billion?

And the amount of value they've created for the world over their 170 years is unbelievable.

They have been a pillar of a functioning society.

The work that they've done has been... I don't think it's crazy to overstate it.

Like, Certainly influenced the way that our society developed and without institutions like them, we probably wouldn't sort of have a functioning society like we have today. now or in the past, two things I would point out.

One.

They've won 130 Pulitzer Prizes, which I believe is more than 2x the number of any other organization in the world.

And two, we didn't talk about things like the Pentagon Papers, but this organization and journalists within it throughout history have literally put their health safety livelihood, lives on the line to report on important things that are happening in the world and to call out abuses around the world.

The Pentagon Papers situation was crazy.

And ended up in conjunction with Watergate in a sitting president resigning.

We talked a little bit about World War II and there was World War I, and can't underscore enough what you said, Ben.

That has been created for the world by this organization, existing is immense.

Yep.

All right.

Should we get into grading?

Let's do it.

Well, I think the way I grade this one is forward-looking.

What's an A-plus?

And this, of course, is a business outcome.

What's an F?

And then what's kind of the C scenario?

To me, the A-plus is that they are literally at the inflection point where they don't need to hire many more journalists, many more engineers, many more designers.

I know they are still hiring aggressively for these roles, but where they start to kind of taper in the fixed costs required to produce what they produce and they're able to just turn on a machine to continue acquiring subscribers.

Which is a little bit of a risk to me because, while we're still in a fast news cycle environment, we no longer have the Trump presidency.

Hopefully we won't have the coronavirus soon.

Like, God willing, 2022 is a week can go by and I'll forget to check the news and it'll be awesome.

And that won't be great for the Times.

Like, it's worth calling out.

That is counter to their interests.

I've been thinking about that, though.

I don't think that's likely to happen anytime soon.

Look at how crazy 2021's been.

Yeah.

I've been literally just like thinking about this for like my own life and sanity.

I think we just got to accept that we live in a world of accelerating change, which means lots of frequent disruptions of all types, all of which is probably good for the news business.

Yep.

Yeah, and this turns into kind of like a B, if they're not able to on this fixed cost base, able to just continue the subscriber tear that they've been on, but just sort of like modestly linearly, continue to acquire subscribers.

I think the...

There's an absolute A-plus case if they do keep making investments and really turn into more of a tech company of an experiment.

Learn rapidly, iterate.

The New York Times has revenue opportunities lying around all over the place that they're not taking advantage of.

Literally all over the place.

Yeah, if they can figure out a way to monetize those in a way that feels authentic to the business strategy, which i feel i'd give them a c on so far, or maybe a b minus, then there's like, then i don't care about hey, let's taper off the hiring like, go hire you know google levels of people and go build more and more stuff than double down on what's working.

Even just sticking on the media side, they've done some experimenting with video and streaming content and they've done deals with Netflix, with Prime, with Hulu, with FX.

It's been underwhelming.

It's been very underwhelming and we probably beat the drum enough on this episode about the Times completely whiffing on video.

But an A-plus would be they don't whiff on video this time around because obviously the opportunity is enormous yeah, um.

So then you know the c case.

I think is is very much this like new subscriber tape.

I think there's one more um, one more piece to the a plus case, which is uh, they have to increase our poo for subscribers certainly yeah, Yeah.

They need to prove that people year two and three are willing to make a, and it's a big jump too.

It's not a little, this introductory pricing is way cheaper than year two and three pricing.

So what do you think the F case is?

How do they, how does this not work?

They rebuy the Red Sox?

And what is a reasonable way that this could go super south?

Let's see.

I mean, I'm tempted to say that they get their value aggregated, arbitraged, whatever you want to say, by... and social networks, but I feel like everybody's learned that lesson.

Like, that's unlikely to happen.

Very unlikely to happen.

Not to mention, Facebook's even paying them for content now.

They do have a deal.

Yep.

I guess an...

F scenario for the future, for the times could be that, like the hyper partisan environment that we've been in, that this is just the beginning, and it gets worse and worse and worse and worse and worse.

And there literally is, you know, no room for anything in the middle.

Even whether you think the New York times is the middle or the not, it wants to be the middle.

Right.

And that is just an untenable position.

Yeah. it's so funny.

Like even today.

I always thought it was a widely held belief that the New York times, at least during the Trump presidency, was moderately that a common perception is that it's left-leaning.

And this person who is left-leaning was like, what do you mean?

Like they published that terrible op-ed with that uh, the cotton tom cotton op-ed, and they did all the stuff with hillary's emails.

They got trump elected like they're not.

Why are you kidding me?

And so like i think there might be more and more david exactly of what you're talking about.

What if the you got a pick and and there is sort of less room to be a or at least have a large addressable market as sort of a someone who's trying to be a centrist?

Yep, i hope that's not the case.

Yeah, me too, for all of our sake.

Yeah, One thing I do want to point out that I thought was pretty interesting because I got pretty deep down a Netflix rabbit hole on.

What do you have to believe to believe this kind of looks like Netflix?

Netflix trades around 10 times their trailing 12-month revenue.

And the New York Times is only trading at about 4.8x trailing 12 months.

And certainly if you look at revenue growth, the New York Times doesn't deserve to be anywhere close to Netflix.

But if you're looking at digital subscriber growth And a very similar business model, albeit probably smaller, TAM.

It is interesting to see that the New York Times is, on a sort of relative basis, definitely undervalued compared to Netflix.

I would assume the subscriber growth rate is higher than Netflix.

It's a good question.

I think if I remember right, Netflix tries to grow revenue 30% year over year.

And so that probably charts exactly to subscribers.

And the Times grew.

This past year they grew subs like 48.

Yeah, so if you really believe that, like you just ignore the rest of the business and you believe that revenue will catch up, it's a much faster growing business than than netflix, with a very similar cost structure.

Yeah, interesting.

So just thought that was an interesting one to point out.

All right.

Carvouts?

Yeah.

Carvouts.

We haven't done Carvouts in a while.

We were worried, you know, we're doing these such super long episodes now.

We're like, God, people don't want to listen to Carvouts at the end.

But we've been surprised.

People want the Carvouts.

We've got a lot of pushback.

Yeah.

And I mean, I guess it makes sense.

If you make it this far, why not have some fun?

Yeah. now we're all just like whatever um so my carve out is a really great fantasy series uh book series that i read recently uh saba tahir's ember in the ashes series it's really cool it starts out the first book ember in the ashes i thought was a little slow and felt a little hunger games knockoffy but uh my wife jenny had read the series and she's like no no no like stick with it And, um, by the end of the first book and then into the second and beyond, it gets, gets really good with a really good world building.

Very cool.

Sort of like.

Uh, it was um kind of like Game of Thrones meets Lord of the Rings, meets like the Middle East.

Like, uh, it was, uh, it was good.

Highly recommend.

All right, man.

I haven't, it's funny.

I haven't read fantasy in so long.

Oh, I find it like a really good way.

Fantasy and sci-fi just last couple of years.

I found like the best way to unwind at night and on the weekends, because it's like yeah, just get away.

All right, well, my first carve-out is going to be the opposite of a way to unwind.

It is the book Titan by Ron Chernow.

It actually felt a lot like researching this episode.

It is the history sort of the most recent, I think, biography of John D Rockefeller and the entire story behind Standard Oil.

The book was nothing like I expected it to be.

I heard it recommended, uh, by Dax Shepard on an episode of the Tim Ferriss show.

And uh, Rockefeller is such a fascinating human because he is both the most egregious penny-pinching capitalist of all time and also probably the biggest philanthropist in global history, maybe except for Bill Gates.

And he was able to square the And not in two chapters of his life, simultaneously during his entire life being just, ruthless in the business practices and being puritanical in his religious beliefs and absolute devotion to God.

He somehow thought it was his God-given right and something that he needed to do to make the most money possible and then give it away in the way that he saw fit.

And he did.

Modern medicine, no chance that it would be where it is today absent the absolute monopoly and absolute anti-competitive practices of Standard Oil and the railroads.

It's just so interesting.

He started Rockefeller University, right?

Which is a research institution in Manhattan that has developed many.

I think it's all PhDs and postdocs, right?

Sounds right.

He also is the founder of the University of Chicago and left his name completely off of it.

Yeah.

I didn't know that.

And he put it there specifically because he was like I don't want this to be intermixed with my business practices.

And everyone you know.

If I put it in Manhattan or Cleveland, people will think I'm using it for influence.

Oh, interesting.

That's totally, totally fascinating.

That's wild.

It's a long book.

It's really good.

Ron Chernow, for folks who don't know, also wrote the book that Hamilton, the musical, is based on.

And actually, when I referenced JP Morgan earlier and I said he shows up in all these stories, I was just reading about him showing up in Titan as well.

So...

Can't recommend it strongly enough.

I also have one more carve out that I want to throw in.

Bonus carve out alert.

Great company that we invested in from PSL Ventures called Iteratively, launched and announced their funding, and everything this week.

And it's a product that I'm like so pumped about because I wanted it so bad when I was at Microsoft.

And if you're a data team, a PM, an engineer or sort of an analyst who's ever had to work with analytics and had an analytics outage or had like hey, I swear, we created an analytics event in the spreadsheet that was supposed to be tracked in the code here and it's not firing or it's sending us one character different.

It's an uppercase U and user logged in instead of a lowercase u, so it didn't come up in my query.

Their product solves all of that.

And the cool sort of philosophy behind it is we take software testing really seriously.

Like, you can't ship a bug.

You can't check in something to the code repository that basically won't build.

So why should you be able to check in a bug in your analytics?

And if we can sort of enforce that, then let's take our analytics as seriously as we take you know, bugs.

And it leads to all types of cool stuff like, well, I can go on forever.

Super excited about this company.

Check it out, iterative.ly.

Awesome.

Super cool.

I know you've been pumped about this investment for a while.

I'm chomping at the bit to be able to talk about it publicly.

Yep.

A year and a half under my hat.

Yeah, man.

Well, let's see.

Listeners, I think that brings us to a close of... I don't know.

Should we do another hour just to be sure?

Yeah.

The longest number of years we've ever covered.

I mean, I think, if you want to keep talking about this, I think we're getting increasingly interested in this sort of like Rockefeller era and New York Times.

You know early history.

If you want to talk about this kind of stuff, you should come join us in the Acquired Slack.

It's where we talk about, you know, the most recent episode, future episodes we want to do.

And a place to just talk to great, smart folks about everything going on in tech.

That's at acquired.fm slash slack.

And as a bonus when you sign up, you'll also receive the written playbook from each episode, where we codify the takeaways in some bullet points that you can share with friends or that you can sort of search your email for to reference, for easy findability if you want to remember something that we pointed out in an episode.

Thank you for having me.

Most importantly, though, this is like my favorite thing about what this show has become.

You'll become part of the acquired community.

We've been amazed by the caliber of the people and the insights on our LP calls.

And it's just so clear to David and I that we have the greatest audience in the world, from young people just starting their careers to CEOs and top executives who are running 100 billion companies, general partners at venture investment firms of every size around the world, and People have made friendships, gotten jobs, raised capital, launched new careers, even met co-founders through the Acquired community.

So if you are not already an LP, click the link in the show notes.

Go to acquired.fm slash LP.

Can't wait to see you.

It's pretty cool.

We've got some like mafias forming of acquired LPs and community members at different pretty hot startups around, I was going to say around the Bay Area and Seattle, but really around the world.

Yeah, around the internet.

Absolutely.

Well, if you aren't subscribed, this is maybe your first episode and you like what you hear.

You should if this is, you know, something that you've liked for a long time and you've been waiting for that right episode to share with someone.

For example, I'm sharing this episode with my grandma.

She expressed interest in listening.

Anybody who cares about journalism, the times, you know, the media landscape, please share.

And, you know, of course, one-to-one is great.

Of course, sharing on the internet is great.

You can tag us at AcquiredFM on Twitter if you do so.

And we appreciate anything you do to bring new folks to the show.

With that, we'll see you next time.

See you next time.

[The New York Times: A 170-Year Journey of Survival, Strategy, and Digital Transformation]-[The New York Times Company]

📋 Summary

The New York Times: A 170-Year Journey of Survival, Strategy, and Digital Transformation

The Founding and the Ochs Era

The Family Trust and Editorial Independence

Crisis, Diversification, and the Digital Pivot

The Modern Subscription Powerhouse

Conclusion

🎯Key Sentences

📝Key Phrases

📖 Transcript

[The New York Times: A 170-Year Journey of Survival, Strategy, and Digital Transformation]-[The New York Times Company]

📋 Summary

The New York Times: A 170-Year Journey of Survival, Strategy, and Digital Transformation

The Founding and the Ochs Era

The Family Trust and Editorial Independence

Crisis, Diversification, and the Digital Pivot

The Modern Subscription Powerhouse

Conclusion

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