Last Saturday, The New York Times Company (NYSE:NYT) announced that it would sell off the Boston Globe and other media companies based in New England to Boston Red Sox owner John W. Henry. The financial press has rightly pointed out the sad disparity between the sales price, $70 million, and price the Times initially paid in 1993: $1.1 billion. Naturally, the Times wants to put the memory of this business division — its only other division besides the “New York Times Media Group” — into a steel gray cabinet along with other faded press clippings and newspaper memorabilia. Investors too should have no qualms about relegating the Boston Globe to nostalgia. The Times is proficiently executing its way to becoming a more relevant and profitable company.
Yahoo! and NYT are employing the same strategy
Marissa Mayer, CEO of Yahoo! Inc. (NASDAQ:YHOO), has a gift for succinct expression of business strategy. Mayer describes Yahoo! Inc. (NASDAQ:YHOO)’s progression to greater revenue as a series of sprints, which she simplifies to “People then products then traffic then revenue.” This means that first Yahoo! Inc. (NASDAQ:YHOO) will hire highly skilled, creative people — the best available (even if this means buying small companies whole with Yahoo! Inc. (NASDAQ:YHOO)’s considerable cash). Products that make the company relevant again, such as the social networking site Tumblr or Yahoo! Inc. (NASDAQ:YHOO)’s revamped Flickr page, will lead to increased traffic, which will entice advertisers to increase their spends. And in tandem, numerous products that were a drag on net income or no longer relevant to increasing traffic, such as AltaVista, have been shut down in the year since Mayer was appointed CEO.
The New York Times Company (NYSE:NYT) has employed a very similar approach in revamping its business model. As I explained in a previous article, the company is absorbing the decline of its print circulation business by growing its digital subscription business. After successfully introducing its digital paywall in 2011, the company has seen steady increases in online subscriptions. In fact, online revenue from subscriptions is really the only area where The New York Times Company (NYSE:NYT) has made progress over the last five years as it has struggled with its diminishing newsprint business:
|New York Times |
|New England |