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The New York Times Company

Season 8, Episode 2

ACQ2 Episode

February 17, 2021
February 17, 2021

The Complete History and Strategy of The New York Times

For the entire 20th Century, you’d be hard pressed to find a better business than an American newspaper — Warren Buffett famously described them as “franchises” — and no American newspaper stood taller than the New York Times. Controlled by a single family bound by a legal oath “to maintain the editorial independence and integrity of The New York Times and to continue it as an independent newspaper, entirely fearless, free of ulterior influence and unselfishly devoted to the public welfare”, the Times served as the paper of record for generations of Americans and people around the world.

But no good thing lasts forever, and the dawn of the 21st Century saw both the Times and this once-mighty industry devastated by the dual disruptive forces of the internet and the 2008 financial crisis. And yet by 2021, The Times, essentially alone of its former peers, has reemerged from the American newspaper wreckage and transformed itself into a thriving digital business with an order of magnitude more subscribers than its print heyday. Curious how it all happened? We dive into 170 years of history to find out!

If you love Acquired and want more, join our LP Community for access to over 50 LP-only episodes, monthly Zoom calls, and live access for big events like emergency pods and book club discussions with authors. We can't wait to see you there. Join here.

The New York Times Company Playbook:

1. When you find yourself sitting in front of a big approaching demand wave... ride it!!

  • The New York (Daily) Times was founded during the newspaper boom of the 1850s, and similarly Adolph Ochs took over the local Chattanooga paper at the start of that city’s mining boom.
  • The NYT made huge investments in its reporting during the two World Wars as the public’s appetite for news exploded, while its rivals missed the ball worrying over preserving advertising space. Likewise NYT launched The Daily (which would become the biggest podcast in the world) immediately following Trump’s inauguration in early 2017.
  • Arguably NYT’s biggest business mistake was missing the cable wave -- which Rupert Murdoch leveraged brilliantly to build Fox News into the most valuable news media franchise in the world.

2. Where there’s an entrepreneurial will, there’s an entrepreneurial way.

  • Adolph Ochs bought the Chattanooga Times with $250 and sellers’ notes, and then acquired The New York Times out of bankruptcy with no personal money down and $100k of real estate debt. And turned them both into successes on a level no one (even himself at times) believed possible.

3. Recurring Acquired theme: the media business is still the second-best business of all time, behind technology.

  • Media’s ability to generate dual revenue streams (advertising and subscription) from the same content product generates enormous leverage on investment, AND most of those costs are fixed vs. variable (especially in a digital environment).

4. This is why “content is king” has always been true in the media industry.

  • NYT’s version of this strategy has always been to invest more in high-quality journalism than any of its peers. It was true in 1896 when Ochs took over, true during the World Wars and the Pentagon Papers, and perhaps has never been more true than today when NYT employs 1,700 journalists around the world and pays them an average of >2x the rest of the industry.

5. That said, distribution is critical as well. To build a world-class media organization you must be great at both content AND distribution.

  • In the old media landscape, NYT built great distribution through its printing and delivery operations, as well as savvy investments like the Index which led to libraries and researchers across the country relying on the Times as the “paper of record”.
  • However in today’s media landscape, the task of building great distribution falls on the newsroom and journalists themselves. The job is no longer finished once you hit publish -- reporters and editors must own the responsibility of getting their work in front of readers via social media and shareable story elements.


Carve Outs:

Episode Sources:



We finally did it. After five years and over 100 episodes, we decided to formalize the answer to Acquired’s most frequently asked question: “what are the best acquisitions of all time?” Here it is: The Acquired Top Ten. You can listen to the full episode (above, which includes honorable mentions), or read our quick blog post below.

Note: we ranked the list by our estimate of absolute dollar return to the acquirer. We could have used ROI multiple or annualized return, but we decided the ultimate yardstick of success should be the absolute dollar amount added to the parent company’s enterprise value. Afterall, you can’t eat IRR! For more on our methodology, please see the notes at the end of this post. And for all our trademark Acquired editorial and discussion tune in to the full episode above!

10. Marvel

Purchase Price: $4.2 billion, 2009

Estimated Current Contribution to Market Cap: $20.5 billion

Absolute Dollar Return: $16.3 billion

Back in 2009, Marvel Studios was recently formed, most of its movie rights were leased out, and the prevailing wisdom was that Marvel was just some old comic book IP company that only nerds cared about. Since then, Marvel Cinematic Universe films have grossed $22.5b in total box office receipts (including the single biggest movie of all-time), for an average of $2.2b annually. Disney earns about two dollars in parks and merchandise revenue for every one dollar earned from films (discussed on our Disney, Plus episode). Therefore we estimate Marvel generates about $6.75b in annual revenue for Disney, or nearly 10% of all the company’s revenue. Not bad for a set of nerdy comic book franchises…

Season 1, Episode 26
LP Show
February 17, 2021

9. Google Maps (Where2, Keyhole, ZipDash)

Total Purchase Price: $70 million (estimated), 2004

Estimated Current Contribution to Market Cap: $16.9 billion

Absolute Dollar Return: $16.8 billion

Morgan Stanley estimated that Google Maps generated $2.95b in revenue in 2019. Although that’s small compared to Google’s overall revenue of $160b+, it still accounts for over $16b in market cap by our calculations. Ironically the majority of Maps’ usage (and presumably revenue) comes from mobile, which grew out of by far the smallest of the 3 acquisitions, ZipDash. Tiny yet mighty!

Google Maps
Season 5, Episode 3
LP Show
February 17, 2021


Total Purchase Price: $188 million (by ABC), 1984

Estimated Current Contribution to Market Cap: $31.2 billion

Absolute Dollar Return: $31.0 billion

ABC’s 1984 acquisition of ESPN is heavyweight champion and still undisputed G.O.A.T. of media acquisitions.With an estimated $10.3B in 2018 revenue, ESPN’s value has compounded annually within ABC/Disney at >15% for an astounding THIRTY-FIVE YEARS. Single-handedly responsible for one of the greatest business model innovations in history with the advent of cable carriage fees, ESPN proves Albert Einstein’s famous statement that “Compound interest is the eighth wonder of the world.”

Season 4, Episode 1
LP Show
February 17, 2021

7. PayPal

Total Purchase Price: $1.5 billion, 2002

Value Realized at Spinoff: $47.1 billion

Absolute Dollar Return: $45.6 billion

Who would have thought facilitating payments for Beanie Baby trades could be so lucrative? The only acquisition on our list whose value we can precisely measure, eBay spun off PayPal into a stand-alone public company in July 2015. Its value at the time? A cool 31x what eBay paid in 2002.

Season 1, Episode 11
LP Show
February 17, 2021

6. Booking.com

Total Purchase Price: $135 million, 2005

Estimated Current Contribution to Market Cap: $49.9 billion

Absolute Dollar Return: $49.8 billion

Remember the Priceline Negotiator? Boy did he get himself a screaming deal on this one. This purchase might have ranked even higher if Booking Holdings’ stock (Priceline even renamed the whole company after this acquisition!) weren’t down ~20% due to COVID-19 fears when we did the analysis. We also took a conservative approach, using only the (massive) $10.8b in annual revenue from the company’s “Agency Revenues” segment as Booking.com’s contribution — there is likely more revenue in other segments that’s also attributable to Booking.com, though we can’t be sure how much.

Booking.com (with Jetsetter & Room 77 CEO Drew Patterson)
Season 1, Episode 41
LP Show
February 17, 2021

5. NeXT

Total Purchase Price: $429 million, 1997

Estimated Current Contribution to Market Cap: $63.0 billion

Absolute Dollar Return: $62.6 billion

How do you put a value on Steve Jobs? Turns out we didn’t have to! NeXTSTEP, NeXT’s operating system, underpins all of Apple’s modern operating systems today: MacOS, iOS, WatchOS, and beyond. Literally every dollar of Apple’s $260b in annual revenue comes from NeXT roots, and from Steve wiping the product slate clean upon his return. With the acquisition being necessary but not sufficient to create Apple’s $1.4 trillion market cap today, we conservatively attributed 5% of Apple to this purchase.

Season 1, Episode 23
LP Show
February 17, 2021

4. Android

Total Purchase Price: $50 million, 2005

Estimated Current Contribution to Market Cap: $72 billion

Absolute Dollar Return: $72 billion

Speaking of operating system acquisitions, NeXT was great, but on a pure value basis Android beats it. We took Google Play Store revenues (where Google’s 30% cut is worth about $7.7b) and added the dollar amount we estimate Google saves in Traffic Acquisition Costs by owning default search on Android ($4.8b), to reach an estimated annual revenue contribution to Google of $12.5b from the diminutive robot OS. Android also takes the award for largest ROI multiple: >1400x. Yep, you can’t eat IRR, but that’s a figure VCs only dream of.

Season 1, Episode 20
LP Show
February 17, 2021

3. YouTube

Total Purchase Price: $1.65 billion, 2006

Estimated Current Contribution to Market Cap: $86.2 billion

Absolute Dollar Return: $84.5 billion

We admit it, we screwed up on our first episode covering YouTube: there’s no way this deal was a “C”.  With Google recently reporting YouTube revenues for the first time ($15b — almost 10% of Google’s revenue!), it’s clear this acquisition was a juggernaut. It’s past-time for an Acquired revisit.

That said, while YouTube as the world’s second-highest-traffic search engine (second-only to their parent company!) grosses $15b, much of that revenue (over 50%?) gets paid out to creators, and YouTube’s hosting and bandwidth costs are significant. But we’ll leave the debate over the division’s profitability to the podcast.

Season 1, Episode 7
LP Show
February 17, 2021

2. DoubleClick

Total Purchase Price: $3.1 billion, 2007

Estimated Current Contribution to Market Cap: $126.4 billion

Absolute Dollar Return: $123.3 billion

A dark horse rides into second place! The only acquisition on this list not-yet covered on Acquired (to be remedied very soon), this deal was far, far more important than most people realize. Effectively extending Google’s advertising reach from just its own properties to the entire internet, DoubleClick and its associated products generated over $20b in revenue within Google last year. Given what we now know about the nature of competition in internet advertising services, it’s unlikely governments and antitrust authorities would allow another deal like this again, much like #1 on our list...

1. Instagram

Purchase Price: $1 billion, 2012

Estimated Current Contribution to Market Cap: $153 billion

Absolute Dollar Return: $152 billion

Source: SportsNation

When it comes to G.O.A.T. status, if ESPN is M&A’s Lebron, Insta is its MJ. No offense to ESPN/Lebron, but we’ll probably never see another acquisition that’s so unquestionably dominant across every dimension of the M&A game as Facebook’s 2012 purchase of Instagram. Reported by Bloomberg to be doing $20B of revenue annually now within Facebook (up from ~$0 just eight years ago), Instagram takes the Acquired crown by a mile. And unlike YouTube, Facebook keeps nearly all of that $20b for itself! At risk of stretching the MJ analogy too far, given the circumstances at the time of the deal — Facebook’s “missing” of mobile and existential questions surrounding its ill-fated IPO — buying Instagram was Facebook’s equivalent of Jordan’s Game 6. Whether this deal was ultimately good or bad for the world at-large is another question, but there’s no doubt Instagram goes down in history as the greatest acquisition of all-time.

Season 1, Episode 2
LP Show
February 17, 2021

The Acquired Top Ten data, in full.

Methodology and Notes:

  • In order to count for our list, acquisitions must be at least a majority stake in the target company (otherwise it’s just an investment). Naspers’ investment in Tencent and Softbank/Yahoo’s investment in Alibaba are disqualified for this reason.
  • We considered all historical acquisitions — not just technology companies — but may have overlooked some in areas that we know less well. If you have any examples you think we missed ping us on Slack or email at: acquiredfm@gmail.com
  • We used revenue multiples to estimate the current value of the acquired company, multiplying its current estimated revenue by the market cap-to-revenue multiple of the parent company’s stock. We recognize this analysis is flawed (cashflow/profit multiples are better, at least for mature companies), but given the opacity of most companies’ business unit reporting, this was the only way to apply a consistent and straightforward approach to each deal.
  • All underlying assumptions are based on public financial disclosures unless stated otherwise. If we made an assumption not disclosed by the parent company, we linked to the source of the reported assumption.
  • This ranking represents a point in time in history, March 2, 2020. It is obviously subject to change going forward from both future and past acquisition performance, as well as fluctuating stock prices.
  • We have five honorable mentions that didn’t make our Top Ten list. Tune into the full episode to hear them!


  • Thanks to Silicon Valley Bank for being our banner sponsor for Acquired Season 6. You can learn more about SVB here: https://www.svb.com/next
  • Thank you as well to Wilson Sonsini - You can learn more about WSGR at: https://www.wsgr.com/

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Transcript: (disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)

Ben: Welcome to season eight, episode two of Acquired, the podcast about great technology companies, the stories, and playbooks behind them. I'm Ben Gilbert and I'm the cofounder of Pioneer Square Labs, a startup studio and venture capital firm in Seattle.

David: And I'm David Rosenthal, an angel investor based in San Francisco.

Ben: And we are your hosts. For over 100 years, you would've been hard-pressed to find a better business in the world than an American newspaper. Each one had a local monopoly and 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.

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

Ben: Indeed. 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. 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. Really, their newspaper shaped your perception of America itself, your parents perception, and your grandparents perception, you get it.

It is probably safe to say that the five generations of the Ochs 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.

David: Indeed. I can't wait to talk about that part of their history.

Ben: Yet, somehow today, they've been accused of being a monopoly in the journalism industry. 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. How do they turn it around? Who is this mysterious family? What does the future hold for The New York Times? Today, we dig in.

If you love Acquired and you want to be a deeper part of what David I do here, you should become an Acquired Limited Partner. You'll get access to our library of over 50 interviews and deep dives on company building topics, monthly zoom calls, and—this is new—live access to listen in while we record big events, like emergency pods, and our book club discussions with the authors. If you are not already an LP, you can click the link in the show notes or go to acquired.fm/lp and we can't wait to see you there. If you want to talk about all things Acquired, the goings on of the tech world, and find just a genuinely smart community to talk about all the stuff, you should join Slack at acquired.fm/slack.

Now, on to the presenting sponsor for all of season eight, Tiny. This season, we have an exclusive interview miniseries with Tiny on the topic of building wonderful Internet businesses the Tiny way.

Jeremy, most people have decided that high-growth investing is the only way to go about investing in tech companies, but Tiny has shown successfully that it's possible to be a value investor in tech. Can you talk about the unique strategy that you have here and why you do that?

Jeremy: High-growth investing is almost (by definition) about the outliers. Really, what we're interested in is that mean area under the curve. That's hundreds of thousands of software businesses that produce millions of dollars in profit every year, solving specific problems for people or businesses. Our strategy is really simple, it's just going after those businesses that have very high-quality recurring revenue, that are looking for liquidity or are looking to sell, and are looking for new stewards. We think that those are just fantastic businesses to own for the long-term.

Ben: That's great. We are super excited to have Tiny back for season eight. If you are contemplating a sale or even wonder what it might look like in the future for your wonderful Internet business, you should reach out and just tell them that Ben and David from Acquired sent you. You can learn more at tinycapital.com or by clicking the link in the show notes.

David, it's time to take us in. Listeners, as always, this show is not investment advice. David I may have investments in the companies we discuss. The show is for educational and, I sure hope, entertainment purposes.

David: 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're talking about the banking system. I think this is going to the second farthest back in history we've ever started. I'm not even going back before the company.

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

David: No, I think it was in the 1890s.

Ben: Wow.

David: Yeah. There were no cars when The New York Times was started.

Ben: Crazy.

David: Okay, we go back to 1851 and the founding of the well-known, world-renowned New-York Daily Times, which—

Ben: It doesn't quite have the ring.

David: It doesn't quite have the same ring, New-York Daily Times. What was going on in 1851? It was a media boom time in the US. There was a growing population in the country, vastly increasing literacy rates, urbanization, and of course, war on the somewhat near-term horizon, in the coming US Civil War.

Then—as now—bad news sells newspapers. There was a hugely, hugely growing demand for news. New newspapers were sprouting up all over the country. In the year 1800, there were 200 newspapers in the US, and in the year 1860, there were 3000 newspapers in the US. Isn’t that crazy?

Ben: Did printing presses get way cheaper, too?

David: Yes. It got a lot cheaper to print newspapers. It must have in various forms of machinery, all rudimentary automation. And just the demand. The growing population, the demand for news, literacy. It was like the Substacks of 1851. Everybody was starting a newspaper. 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.

Before this time, newspapers were selling (I think) around 5–6¢ a copy, but starting in the 1850s, newspapers—in particular, new newspapers—dropped in price to 1¢ per copy. This is going to come back later. You could reach a whole new mass market.

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 newspaper venture in this brave new landscape and they published the first edition on September 18th, 1851 of The New-York Daily Times.

Who were these guys? 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 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.

Ben: His wife's father's—no, I've no idea.

David: Benjamin Gilbert, the well-known New York socialite.

Ben: No way. Really?

David: Really. I thought that we got to include this here.

Ben: I got to do some research to see if I'm related.

David: 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—that’s a lot of money in 1851—from just some casual family connections he has. Several members of the Morgan family end up financing this.

Ben:  J. Pierpont Morgan?

David: Yeah, exactly.

Ben: Wow.

David: As he does.

Ben: This guy shows up in all these old stories. I feel like everyone somehow was getting financed by JP Morgan these days.

David: Totally. That's Jones. He's the business guy. He brings the capital, but it's really Raymond who's the real force behind this. Who was Henry Raymond? He was quite the interesting character. As we mentioned, he had worked at the Tribune with Jones, which is where they met. That was the premier respectable penny paper out there, as they were known for the 1¢ papers. He had also been very involved in politics. 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?

Ben: I feel like I should remember this from AP US history but I do not.

David: A little organization called the Republican Party of which he was a founder. One of five founding members, kind of incredible. This 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. All of this is happening concurrently.

Ben: Was it like a mouth piece for the Republican Party in the early days?

David: Not quite. 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, the precursor to the Republican Party, but he had stepped down and then he decided to start The Times with Jones, which they do.

Raymond is running The Times. He is the managing editor, 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. That's when he, along with Lincoln and also along with Horace Greely from the Tribune, they and a couple of other people started the Republican Party. The platform, of course, is abolitionism and the abolition of slavery in the United States. That was the origin of the platform of the party.

While this is going on, Raymond becomes the second chair of the Republican National Committee. He's 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, writing all the editorials.

Ben: That is so insane. It's funny. On the one hand, I was like, wow. Today, this would not fly. Then, I'm thinking of myself, today this is what's happening. Not The Times, but yeah.

David: It's crazy. This thread is going to come back so often throughout this history. 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, and he doesn't want The Times to be sensational.

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.

Ben: I love this piece so much. Not only is it a beautiful little piece of writing but it is pithy. It captures so much of what their intent is in creating what would become an enduring institution, and how they view it in such a pragmatic way. Listeners, we will link in the sources to where we found this or if you're listening to this more than a week after it comes out, you can check it out in the transcript. I want to have it framed and put on my wall. It’s wonderful.

David: It’s a beautiful statement. It's probably worth pausing here for a minute before we get too much further in the story and explain what exactly is it that happens at a newspaper. What are the various departments here? There are really two-and-a-half pieces of any news media organization, newspapers included, cable news, television networks—we will talk about that as we go along here—and 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.

Ben: Where does the publisher fit into this?

David: Back in Raymond’s day, Raymond is both executive editor. He's managing all this and publishing. The publisher is the running of the business—managing subscription, circulation, advertising, the cause side. 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—The New York Times Company—that publishes The New York times.

Ben: An easy shorthand for this, for people who are familiar with tech companies, would be you have someone running a product, and a CRO—someone running revenue.

David: Exactly. Sometimes, throughout the history of The New York Times, there's 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. Today AG Sulzberger is the fifth generation, Ochs Sulzberger who is the publisher of The New York Times and chairman of the board, and Meredith Kopit Levien is the recently appointed CEO who reports to him and the board.

Ben: They have even further bifurcated the duties where the publisher has a little bit more of a figurehead and a consistency throughout history. Voice and the CEO is actually running the business. But again, neither of them is actually involved in overseeing the editorial product and overseeing the newsroom. That has always been traditionally kept at arm's length.

David: Yes. Most of the CEOs in The New York Times Company history have been COOs before becoming CEO. Meredith was COO until recently when she became CEO. We're going to cover today the history of The New York Times from the business and publisher side. We'll talk about the newsroom as we go, but as always, this is the corporate history perspective that we're going to cover The New York Times from.

Ben: David, I teased the Ochs Sulzberger family in the intro and I heard you just mention that AG Sulzberger is the fifth generation publisher. These two people we’re talking about here, not Ochs or Sulzberger, this is previous founding ownership.

David: What happened here? Back to Raymond. He's wearing all these hats, things go well for the first 20+ years of The New York Daily Times. Within two weeks of starting, they hit 10,000 copies in circulation—which is pretty great—26,000 in the first year, then in September of 1857—six years after they started—they dropped the daily and shortened the name to just The New-York Times, still with the hyphen. It would be Ochs who would remove the hyphen later,  but things are going well.

By 1858, circulation’s up to 40,000. By the time the Civil War started with the attack on Fort Sumter in 1861, circulation was 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. 10%+ of the city is taking The Times at this point.

Ben: Totally. 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 politics. It wasn't necessarily for every person.

David: Yup, and in particular in the north, the abolitionists and what would become the Republican Party. This is 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 had been going on for two years since Fort Sumter, but there wasn't a draft for the army. In July, the government declared a draft, and they're actually drafting 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. The mobs target the newspapers that are the mouthpieces of Lincoln and the Republican Party through the war.

A mob descends on The New York Times headquarters building and Raymond—because he's buddies with Lincoln—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. 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 mobs tries to break into the building, you're to fire at will on these people.

It's crazy. No shots were actually fired, but they do successfully defend the building. The mob instead ends up attacking the Tribune and storming the Tribune's building. Totally crazy. Next time we hear about a tech CEO doing something that seems bold, think of Henry Raymond back in the day.

Ben: For anyone who's seen gangs of New York, I think this is that scene toward the end of the movie. That is the scene you can picture where there's the freaking publisher of The New York Times strapping a Gatling gun to the front steps and protecting the paper. Completely nuts.

David: Protecting the south. 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? 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. They start operating the company, but they're all 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.

In 1893, there's a financial crisis, and much like 2008 which we'll get to later in the story. This is really bad for newspapers, for advertising, for circulation. The paper ends up going bankrupt. Circulation had fallen all the way down below 9000. It was up at 100,000+ during the Raymond and Jones days. Basically, The New York Times is going to disappear unless somebody comes in and saves them.

Ben: Even just thinking about all of the machinery and delivery trucks that they had in order to deliver The Times, how do you downsize that fixed cost infrastructure from shipping out 100,000 papers a day to 9000? It's very easy to understand how this business ends up upside-down quickly.

David: Totally. There's the rent on the space, there are the raw materials that you need to print the paper—the ink, the pulp, the paper—there are the people, the laborers you need to employ, highly-skilled laborers on the printing side and then the delivery infrastructure.

Ben: You're not just scaling down your AWS usage.

David: Totally. If only Jeff Bezos were around back then.

This is when Adolph Ochs enters the story and rescues The New York Times. This is really a second founding of the business. It is 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 a media investment banker and worked at the Wall Street Journal, but I didn't know anything about this history.

Ben: I only knew about it, frankly, because when we saw all these tech CEOs starting to do this crazy dual class structure stuff, famously Zuckerberg and I think the Google founders did it, obviously Snapchat and freaking everyone since.

David: Snapchat has the triple class structure.

Ben: That’s right. I forgot about that.

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

Ben: It’s hard-core. The Times pioneered this, when they went public in what?

David: 1969.

Ben: Yeah. It laid dormant there, undiscovered until tech CEOs decided to do it with all their companies.

David: Adolph Ochs was born in Cincinnati, Ohio in 1858, seven years after the founding of The New York Times, to Jewish immigrants from Germany, in pretty poor. He was not a Rockefeller or a Morgan. After the civil war, the family moved to Tennessee where he has to work as a boy to help support the family. He gets a paper route in Knoxville, Tennessee. 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 goes to work in the office as an assistant to the editor of The Chronicle, William Rule, who becomes a mentor for him.

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.

Ben: He’s a newspaperman.

David: He's a newspaperman. That's in his blood. At age 14 in 1872, he 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. A bit over 5 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. Imagine how far away we are from New York City and The New York Times here. Here's this kid of Jewish immigrants who started as a newspaper boy, moves to Chattanooga, Tennessee. In Chattanooga, he knows that there's an existing newspaper called The Chattanooga Times, but it's not very well-managed. He's got a hunch that he might be able, even as a 20 year old kid with no money, to take this thing over.

Ben: He's so freaking enterprising because keeping in mind that he's a dropout, he's trying to make money for his family to support them. He's not doing the traditional thing that you would go earn a wage. He's trying to say, I want to go and revive this newspaper business because I know a thing or two about papers. He's doing it in a place (Chattanooga) that is having a moment.

It's interesting, I was trying to figure out why it's not the dominant city in Tennessee today, because in this post bellum era, we’re here in the late 1870s, the country has started to heal and rearrange itself. Chattanooga is in this interesting middle between a northern territory and a southern territory, and I think it's in this a 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. It's really not only economically because of the iron mining but culturally becoming a boom town.

David: Yup. Young Adolph—this kid is so enterprising—negotiates with the guys who own The Times in Chattanooga to buy the paper for a downpayment of $250. Effectively—for those in small cap private equity, they'll know this term—a seller's note of $5500. He gets them to agree for this tiny downpayment, that he’ll take over the business and he thinks he can turn it around to make it profitable enough that over the next set of years, he can generate enough profits to pay the original owners $5500 out of the incremental profits he’ll generate.

Ben: Wait, so this business is in dire condition and these guys are saying we'll take $250 and believe you that you're going to generate $5500 worth of profits in the ensuing years to pay us?

David: Whether they believed it or not, they were willing to do the deal.

Ben: They're willing to part with $250 and the $5500 was house money if they can get it.

David: Exactly. I would say it was a good deal. They should’ve just kept the 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 Ochs is pulling in $25,000 in annual profit, cash flow for himself and his family out of this paper. Just amazing.

Ben: I didn’t realize he was pulling that in personally.

David: Yup. 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. 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 housing speculation or for the mines, but he ended up losing $100,000 on this real estate.

Ben: 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.

David: Yup, wildly speculative. Famously, he learns his lesson from this. He’s like, I am a newspaperman. 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 newspaperman ever if I can bail out my debts.

Ben: Not to mention, it worked well when he bought stuff 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. He gets the seed planted, I should use other people's money to buy stuff from now on.

David: Exactly. He's pulling $25,000 of cash flow from The Chattanooga Times, but he needs $100,000 faster than four years; that’s not going to cut it. He does know he can turn around newspapers, though, so he starts putting out some feelers, traveling around the country, looking for another newspaper that he could buy and take over just like he did with The Chattanooga Times.

Ben: We should say, a key component to the success of him turning around The Chattanooga Times comes from the fact that Chattanooga was this melting pot of north and south, and Adolph really believed in that. He really believed in The Chattanooga Times as an unbiased paper of the people, representing a balanced view of the world. Chattanooga was the perfect place to pull that idea from.

David: Totally. 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. At first supposedly, he’s like, that's too big. I can't go. I'm Adolph Ochs from Chattanooga, Tennessee. I can't go take over The New York Times.

Ben: And at that point, even though it was in dire trouble, the brand of The New York Times was the best newspaper brand of the country, still. It was definitely thought of as the paper.

David: But some mentors convince him that he can do this. In 1896, he packs up his bags, hops on the train, goes up to New York, leaves his family behind running The Chattanooga Times. 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. He's in his late 30s at the time from Tennessee. He shows up in New York, walks in the bankruptcy court, he’s like, believe me I can do this.

Ben: Do you know the thing about the interbank transfer?

David: No, I don't.

Ben: He convinced the 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. 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.

David: That's amazing.

Ben: There's some incredible huckster stuff going on that he pulled strings.

David: He's got the entrepreneurial hustle. Did you read about the other thing he did to convince the creditors of his legitimacy?

Ben: I don't know.

David: This is amazing. President Grover Cleveland, at the time United States president, had come through Chattanooga while he was campaigning. As the leading keynote newspaper and  publisher of The Chattanooga Times, Ochs was on the welcoming committee. He got to meet Grover Cleveland while he was campaigning. He kept his address at 1600 Pennsylvania Avenue; he knew where to find him. He writes to the president while he's going up to New York. He writes to Cleveland. He says, “I am negotiating for a controlling interest in The New York Times and have fair prospects of success. I write to respectfully ask that you address by return mail a letter to Mr Spencer Trask, chairman of The New York Times publishing company, giving your opinion of my qualifications as a newspaper publisher, general personal character, my views on public questions, judged by The Chattanooga Times. In other words, say what you can have me as an honest, industrious and capable newspaper publisher.”

Ben: This is credible 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. To basically unload the assets, merge in with a different paper, wipe their hands clean and say, look, we got something for it. Instead, Adolph’s walking in here with a whole different plan of, I am going to figure out how to revive this thing and make it great. Of course, there is some wicked financial engineering that he promises that he really has to make the case of, 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.

David: 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. The bankruptcy committee accepts his plan. He pays $75,000 upfront to the creditors which he also has scraped together with borrowed money, because remember, he owes $100,000.

Ben: 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.”

David: Amazing. This is like the minnow swallows whale from when Capital Cities bought ABC.

Ben: 100%. How does it work exactly? There's $75,000 that he “puts up,” but actually he goes and gets people in Tennessee to put it up, right?

David: Yeah. He had 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. That was a small part of the consideration. The other part is he uses seller's notes again of $600,000 in debt owed back to the creditors that they will pay off over some number of the coming years from profits he'll generate 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.

Ben: You can see if you're Trask or the existing bankruptcy committee, you're like, I think we'll take the merger. This doesn't sound any kind of guarantee. This guy that no one's ever heard of, he’s coming in from Tennessee. You got to sympathize with the original plan.

David: Totally, but somehow he gets it done. 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?

Ben: Okay, so what's the grand plan?

David: What's the plan? The plan is basically to be really boring and really cheap. At the time, people may be familiar with William Randolph Hearst and I think it was Joseph Pulitzer. Hearst 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. They were called—I remember studying about in school—yellow journalism. They were super sensationalist. This is at the time of the Spanish-American war. These guys were, I don't know if they were The National Enquirer, but they were fast and loose with the facts and basically trying to sell copies with any sensationalism that they could come up with.

Ben: Do you know why it is called yellow journalism?

David: I feel like I did, but I don't remember.

Ben: Both of these papers published a comic called the yellow kid. This cartoon was trashy. It was a lowbrow cartoon. Coupled with it, both of them were obviously doing tons of sensational headlines. It was the original clickbait. You couldn't trust what was in the newspaper because it was always trumpeted up and famously was around the Spanish-American war. They were making up headlines to make the war sound even more interesting than it is.

I always knew the yellow journalism was tied in with these papers, tied in with the original clickbait, with untrustworthy headlines, but I did not know until doing this research that it is because they shared the yellow kid comic.

David: Interesting. If I did know that, I'd totally forgotten it. BuzzFeed is probably doing a disservice to BuzzFeed, but they like Gawker.

Ben: BuzzFeed and Gawker, both of whose editors-in-chief now work at The New York Times as columnists.

David: I know. Amazing. Ochs lays out his plan for positioning The New York Times which is that they're going to provide journalistic integrity and something that is “not going to soil the breakfast linen.” It sounds really exciting.

Ben: Which is great because it means his plan, the thing he knows how to do from Chattanooga, that's the playbook that needs to be run again, just at a much bigger scale.

David: Yeah, 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.’ 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.

He runs a prize competition for anybody in New York who can come up with a better slogan, offering $100 prize for the winner. They run it, 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?

Ben: Funny. I like Ochs’ a lot better.

David: Yeah, he did too. He's like, that's nice, I'll pay you $100, but I'm keeping my motto, so ‘All the news that's fit to print.’

Ben: Still shows up in the upper corner of The New York Times print edition today, right?

David: And on the website, which we'll get to later. He also comes up with 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. That really is the credo of the organization in a very fundamental way.

Ben: 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 the party for the highly, highly politically-leaning papers of the time.

David: Interesting. I didn't see that because where I got the quote from—is going to come back in a sec—must again drop it at some point.

Ben: He specifically did that because The Times, which is hilarious in a 180, at this point was considered an organ of the Democratic Party.

David: So funny.

Ben: It's a little bit of, hey, I'm going to run this a different way. I'm going to say it 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.

David: Yup. 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? Remember, there were the penny papers back in the day, that new printing technology had enabled. 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 3¢.

Ben: And there's inflation going on, because 40–50 years has gone by.

David: Exactly. The World and The Journal were also selling it 3¢; this is before the Antitrust regulation. Pulitzer and Hearst were colluding. They wanted to raise the price to 5¢ and they’re doing sensationalism with the yellow journalism. It's only helping themselves, helping each other. They're like, yeah, we're gonna raise the price. This is going to be great.

Ben: Do you know why Ochs was so financially motivated to sell more copies?

David: I was going to talk in a second about the business model of a newspaper. As your circulation goes up, not only do you get the subscription revenues, you also get to sell a lot more advertising too.

Ben: 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. 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. He desperately is trying to figure out a way, how can I make this thing profitable and keep it for 36 months straight? There was actually a funny misunderstanding where the previous owners of The Times we're trying to insist that it was three calendar years. Ochs was able to get it profitable for a 36-month straight stint. I think they have actually brought in lawyers to arbitrate this. But yes, this is an attempt by Ochs 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.

David: I love it. To pull forward a playbook theme here. This is such an entrepreneurial story. When your back is against the wall, you have to make something work. You have no resources and you're running out of money. That's when genius happens when you're forced into these constraints.

Probably even more than the positioning of the news. This is what really makes The Times. He cuts the price from 3¢ down to 1¢, which would seem crazy. You're trying to make more money. Why would you cut the price? This is huge. Circulation goes, subscriptions go through the roof. Remember, The Journal and The World are now 3¢. They're trying to go to 5¢. This is getting out of reach for your average person in New York, everyday.

Ben: Yup, and there is some interesting criticism going on at the time that it wouldn't work. There were papers that sold for 1¢, but they were tabloids and they were trashy. People were saying, Ochs, this crazy move you're doing. The people who are reading those tabloids, the 1¢ things, are not interested in your content. This business stuff, this political stuff.

David: They barely know how to read.

Ben: Yeah. What Ochs did was he basically made the bet that I can steal share from my competitors. There's plenty of people that want to read 3¢ news, but they will totally go to whoever is offering the 3¢ news at the 1¢ price. He was right and he stole a bunch of shares. The growth exploded when he dropped the price.

David: Totally. 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 probably the most prestigious, most respected, most widely-known American journalistic organization out there, that when we think of The New York Times, this was it, it was all Ochs.

Ben: This is the birth of the modern Times.

David: Totally. We alluded to the business model a little bit, why circulation is so important. There's this dual revenue stream nature of big newspapers and the media business. It’s just beautiful. All the incentives are for you to make great content that gets more readers because obviously, they pay you for the newspaper being delivered to them, which is a nice business. It's relatively lower margin compared to other media parts of the business because you have to print and deliver it.

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

David: But advertising, you can have an ad sales department. As your circulation goes up amongst attractive demographics for advertisers—like a growing, expanding, middle class with lots of new disposable income—you're going to do very, very well with no marginal cost on the advertising side.

Ben: The other crazy thing about the physical paper business is, today we think about like, well, you can be a free website that has ads, or you can be a paid website that has no ads. 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. 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 were reading at a restaurant or something, and you're able to sell ads in every single one.

On top of that—here’s the like magic thing that Ochs figured out that would later be taken by The Wall Street Journal—was it became the business newspaper of record. Ochs made a really big bet on whether 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 do more with their business. They were the first big American newspaper to target businessmen at that time—business people now as the demographic—which is just fascinating reading that and be like, wait, that's that's The Journal strategy.

David: Totally. When I was working at The Journal—this was before The Times implemented their now very, very successful paywall—we were the only upscale newspaper, news organization in the US that had a paywall digital content. It was all because most of the paid subscriptions were on expense accounts. This was a super cool gem that I got from the research. It's actually the famous John Wanamaker quote about “50% of the money I spend on advertising is wasted, I still don’t know which 50%”? That was actually stolen from Ochs.

Ben: No way.

David: Yeah. I don't know if they were friends or something, but it was originally an Ochs quote. In 1916 Ochs said, “I affirm that more than 50% of money spent on advertising is squandered and is a sheer waste of printers ink.” Wanamaker got a hold of that. He was an advertiser, a retailer in Philadelphia, and turned it around to, “I know half the money I spend on advertising. I just can never find out which half.” Super cool. Ochs becomes the premier newspaperman in New York, if not America, and if not the world.

Ben: Before we pull too far forward from this time. There's one interesting fun anecdote.

David: Are you talking about the headquarters?

Ben: Yes.

David: Go for it.

Ben: You know more details on this than I do, for sure, but this is the beginning of The New York Times Company’s obsession with real estate. Sort obsession of, I want a really fancy headquarters, I want it in a really interesting place. 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 have a separate newsroom from there. But that's not the way it started. 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.

David: So awesome. Do you know the other part of the story?

Ben: No, keep it going.

David: When Ochs moved the building to Longacre Square in this new building, he wanted to make a show at this. Never waste a marketing opportunity, ever the entrepreneur. He hired a pyrotechnist to illuminate the new building with a firework show right around the holidays, when he moved there.

Ben: Is this the ball dropping?

David: Yeah. That became a thing, he did it for a couple years, and then at New Years from 1907 to 1908, he had a big electric ball installed on top of the building. 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 Ochs.

Ben: Wow, that's interesting. I didn't really realize. I should have known Times Square, like duh, but maybe I knew it at some point—

David: It’s like air. It's called Times Square since it’s called Times Square.

Ben: 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.

David: Before Dow Jones took it over. Yup. Just an incredible entrepreneurial story.

We're going to move on to the next chapter here. Two years after that press release, Ochs did pass away in 1935. There's a problem, though. Ochs only had one child, and his child, which he viewed as a problem for succession, was a daughter.

Ben: This is some hardcore sexism.

David: Hard hardcore. Iphigene, his daughter, was an incredible woman. If she had been born probably 30 years later, which is when Katharine Graham was born, she would have been Katharine Graham at the Washington Post, before Katharine Graham. But there was just no countenancing by Adolph or anyone else involved in the company, that she should take it over.

Ben: Adolph also basically just shirk responsibility on this and didn't want to be the person to explicitly say I do not give it to my daughter. This is a New York Magazine quote from a great article on the family. It says, “Ultimately, Ochs 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 Iphigene to work it out amongst themselves.”

David: Yeah. They each had a vote on who would become the next publisher. Arthur Sulzberger was Iphigene’s husband, who would become the next publisher. Julius was (I believe) Ochs’s nephew, who was also working in the business, had a legitimate claim to the throne, so to speak. I believe the story is that Ochs set it up this way that each of the three of them had a vote. 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, which is both really weird, sexist, and kind of strange, but also super crafty. Classic Ochs style.

Ben: For all this building up of Ochs we've done, this is not the only time throughout history, but it will be the first part of The New York Times as history, where you have to look at it with a squinty eye and go, that's a little bit of a black mark.

David: Iphigene 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 Ochs. It's hard to tell exactly what she wanted. 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.

There's some debate on this. People might know, our audience might know, the nickname of The Times is the Gray Lady. There are multiple people sort of origin stories of The Gray Lady nickname.

Ben: Did it later become the Good Gray Lady? And where does Good come in?

David: Maybe that's part of it. I think the origin is the Bank of England was called Good Lady or something like that, so we borrowed from that. Some people say the Gray came from looking at the paper, it’s a bunch of gray. It’s printed, it’s a gray paper, so it became the Gray Lady. Alternatively, though, Iphigene is the Gray Lady. She was a presence on the board and the link to Ochs and the moral fiber, if you will, of the company for 90 years until 1990.

Ben: It's crazy. This is really the introducing the very first of many, not necessarily outwardly contentious but inwardly contentious succession decisions that happen. The New York Magazine “continues from earlier. Iphigene, being the deciding vote, supported her husband, thus cleaving a fault line in the family that was never repaired.”

You can imagine, generations go by, this thing really starts to compound because there starts to be massive numbers of cousins who are the same way related to Adolph, that the people who end up succeeding Adolph five generations later, they're, by blood, the same amount related, but theirs was not the chosen bloodline to pass down the paper through.

David: 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.

Gay Talese, a great writer from the 50s, 60s, and 70s, who actually worked as a reporter at The New York Times for a while, wrote the definitive book about The New York Times. I think it came out in 1969, called The Kingdom and the Power.

Ben: Which I don't think the family loved. Like this one, I was reading The Trust from about right around year 2000, referring to The Kingdom and the Power. I think he was always—after he released that—kept it a little bit at arm's length.

David: He writes about this. He says, “How long The Times would survive would depend largely on how well Ochs’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.”

Ben: Or else they'll go start as Substack.

David: Exactly. Thank God, Substack didn't exist in those days. What would Adolph have done? The Times would go on indefinitely, he hoped towering over all individuals and groups in its employ, 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.

How does he set this up? He creates this trust that goes to Iphigene and Arthur, and their descendants. We don't have the details of the legal documents of the original trust, but it was recast a few times as generational transfers happened. I was able to get a hold from the proxy statement, I think from the 1990, maybe 10-K of The New York Times; the proxy statement. Some of the language in the 1986 trusts—there were then several trust among the branches of the family, but they were all linked together—this is what it says in the organizing documents of the trust, “The trustees of each 1986 trust, subject to limited exceptions described below, are directed to retain the Class B common stock held in the trust, and not to sell, distribute, or convert such shares into Class A common stock, and to vote such Class B common stock against any merger, sale of assets, or other transaction pursuant to which control 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 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.

Ben: Wait, so the primary purpose of the family trust is to ensure to own The New York Times?

David: Yes, to ensure, (1) the family continues to own The New York Times, and (2) that the mission of The New York Times to continue as an independent newspaper entirely fearless, free of ulterior influence, and unselfishly devoted to public welfare, that is the purpose of the trust. He sets this up so that all of his descendants in perpetuity, the only way they can maintain the wealth associated with The Times, their ownership of The Times, all of the dividends, all the wealth that comes with it, is by not selling it, and by supporting this mission. Anything that goes against that would violate that.

Ben: That's so fascinating. It's crazy that maybe they can and we just don't know, but he can do that and it survives him like that. He can decide that my wealth and the wealth created by this thing that I bought and restarted can only be inherited under these circumstances.

David: Yeah, pretty crazy. The family must (I think) support it because the trust had been redone a few times.

Ben: I think there are eight family members who comprise a board of right now, and that they make the decisions for the dozens, and dozens, and dozens of numbers of cousins that there are now.

David: Yeah, crazy. So Sulzberger took over in 1935. He remained publisher until 1961. He does many things. He's a great publisher stored at The Times, sort of transitional from the Ochs period to more modern New York Times. 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 publisher that I would say probably is both the best of The Times’ history and also the worst all in World War II that we should talk about.

The best is that the raw materials for newspaper production were rationed during the war, ink, paper, other material, et cetera. There was only a 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 up the war reporting, and really became the foremost chronicler of World War II.

Ben: Which this is definitely a playbook thing for them. I don't know if they have intentionally done this in modern eras because they learned from this time when it went well for them, but The Times now has a pattern of buying low when others are selling, in particular, investing in high quality journalism when the industry is going through terrible financial times.

David: Totally, and famously (as we’ll get to), they did not lay off any reporting staff in 2008–2009 when every other paper did. So this culminates in—this is amazing—science reporter for The Times, William Laurence, is the only journalist given access to the Manhattan Project as it's going on during the war. He ultimately writes in The Times and then (I believe) books afterwards, sort of the official history of the Manhattan Project. He's the only journalist that witnesses the dropping of the bomb in Nagasaki.

Ben: Wait, he witnesses it?  Like he was in the plane?

David: I don't know. I guess he must have been in the plane. I don't know for sure. But pretty incredible, totally incredible. That's like the best of The Times during this period.

Ben: Yeah, it's the best of The Times and simultaneously the worst of America, reporting on us. Neither of us are actual historians and dead, neither of us are passing judgment on obviously dropping the atomic bomb, but gosh, just the absolute last thing that any powerful nation wants to have to do, and for The Times to be the people there with literally the front row seat is just heavy.

David: Yeah, seriously. And they would say, I 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. The reason that they did as we discussed—the Ochs and Sulzberger families 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. They were rabid about not wanting to see him too parochial or biased towards Jews. Even though reporters knew, editors knew what was happening in the Holocaust, they didn't report on it. In fact, they famously talked about 400,000 (I believe) Europeans killed by the Nazis, as were 400,000 Jews that they changed.

Ben: They reported the word Europeans.

David: Instead of Jews, yeah.

Ben: Wow. How many lives could have been saved if The Times had done that sooner? It's a really striking example of fear of anti-Semitic backlash, preventing speaking out about anti-Semitism. Obviously, it doesn't just have to be anti-Semitism—this can be applied to all injustice—but the idea that both the Sulzberger family would come under fire but also that the newspaper would lose credibility. The fear of that loss of credibility leading to and turning a blind eye at some of the most horrific events in human history.

David: Totally. In 2001 on the 150th anniversary issue, former executive editor at the time, Max Frankel, wrote the title article on that, and he says, “Then there was failure none greater than this staggering, staining failure of The New York Times to depict Hitler's methodical extermination of the Jews of Europe, as a horror beyond all other horrors in World War II. A Nazi war within the war crying out for elimination, and that obviously The Times did chose not to illuminate.” Yeah, heavy stuff.

Ben: Listeners, I will say this is something that David and I both realized in the research. My initial reaction was, do you really want to talk about this on this episode? It's heavy. It's different from us talking about tech multiples. It is commendable that The Times—albeit 50 years later—did self-reflect on this and realize that, hey we got to own up to this. Maybe they did in earlier times as well but frankly 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. 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.

David: While we're on the subject of criticism of The Times, too, 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. It was not only Iphigene who was obviously qualified to become the publisher—it was her husband, she just passed over to her husband. The first woman reporter joined The Times in 1912, Jean Grant, to report on Society. She had to fight her way into this city staff, and then the management made it clear, you will never be an editor here, that's just not going to happen. She ended up leaving the organization, started New York Magazine, and then became a leader in the women's rights movement. Screw you guys. For decades, women were relegated to basically just a society and style sections.

The New York Times wouldn't hire its first black reporter until 1945. That person wouldn't even last that long. Then in 1974 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.

Today, of course, Dean Baquet’s a Black man, the Executive Editor, the CEO of The Times is a woman. Last year they won the Pulitzer for the 1619 Project. Things are different now. We have to point out and I think The Times would point out, too, that there was not always—

Ben: Not always a rosy picture, yeah.

David: Okay, back Sulzberger. He presides through all of this. In 1961, he becomes infirmed and he is succeeded. Again, his and Iphigene’s oldest child is a daughter by her husband, Orvil Dryfoos.

Ben: Orvil Dryfoos is the Timothy Dalton of The New York Times family succession. For any James Bond fans out there, he’s the one that was like in one or two movies, and you’re like, wait, that guy played James Bond and then quickly, you’re on to the next one.

David: Gil Amilio.

Ben: No, yeah. He’s the Gil Amilio. That’s an even better comparison. Dryfoos lasted two years?

David: Two years, unfortunately, because he died unexpectedly. His wife, Marian—Sulzbereger and Iphigene’s daughter—came up with the idea for People Magazine. All of these women involved at The Times, they’re total ballers.

Ben: Maybe here’s an idea, keep them. Promote them.

David: Yeah, exactly. When Dryfoos dies in 1963, Arthur and Iphigene’s youngest child who is their only son, Arthur Ochs nicknamed Punch Sulzberger, succeeds him as publisher.

Ben: And because they’re all A-something Sulzberger, we’re just going to call him Punch the rest of the episode.

David: Yeah, he’s Punch.

Ben: So far we’ve got Adolph Ochs, then we’ve got Arthur Sulzbeger, then we’ve got Punch. We have Dryfoos, but Timothy Dalton, Gil Amilio, we got Punch. Then we’ll have Punch’s son who we’ll call Junior. who is Arthur Sulzberger, Jr., after him so we’ll just call him Junior, and then there’s AG, who’s the publisher today.

David: Yes, exactly.

Ben: All A-something Sulzberger.

David: For everyone keeping score at home. Punch ends up being Publisher like his father for almost 30 years. He remained publisher until 1992. He really led The Times through a lot of change, but he was 63 when he took over. What is a huge, huge change besides all the change that’s happening in the 60s in America. Television is out there. Not only this is The Times’ heavy competitor, the whole medium has a competitor now.

I think as best as I can tell, a lot of this was Punch. The best way to differentiate from TV news was that they needed not just to report the facts anymore. What the differentiation that  newspapers had was they could go deeper. They’re like the Acquired of news reporting. They could interpret the facts, the meaning behind the facts, and tell people why this is important and why this is happening. That was really a big change for The Times newsroom.

If you think back to Ochs, it was all about just the facts, impartial, no judgment. Here, you can’t help but introduce some judgement, but there’s a service of explaining meaning as well.

Ben: Right, and not just on the opinion page but choosing what context to put around the 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.

David: Yup. Punch develops a saying that actually AG, the current Publisher, I read a quote from him that he still references a view that people don’t come to The Times for news. They come for judgement. In The Kingdom and the Power, Gay Talese writes, “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.

If The Times was to achieve the new goal and yet avoid making a mockery of Och’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 and where? 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.

Ben: 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 create that distance between the publisher, the people responsible for The Times as a business and of course, stewarding its mission are not actually the people making the calls on what stories run in their paper and which ones don’t. Now of course, in practice, the publisher family does actually own the paper. So they can make a final call, but that arm’s length is intentionally created.

David: Yup. That was great or somewhat okay, give maybe a C grade to Punch during his tenure. I think what was less great 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.

They realize this and they, along with many other newspaper families in the 60s, 70s, 80s start buying television stations. Back in 1944, the family actually had bought two radio stations in New York. Punch realizes, probably with the help of and encouragement of some bankers on Wall Street, that they should go buy some televisions and some television news properties as well.

Ben: Plus this is conglomerate times. Let’s diversify.

David: Go, go, go. This is when the company went public in 1969 on the American Stock Exchange, with the dual class share structure where the family still retains voting control than (I think) the rate to 70% of the board but exponentially larger voting control with their shares. But the reason they went public, I had thought it was a family succession.

Ben: It’s privately held all the way to this point?

David: Yeah. I had thought the reason they went public was probably just as there were more generations, they needed to divide the wealth and ownership. But no. The reason they went public was to get a liquid public stock to make acquisitions with.

Ben: No way. I would’ve figured the same thing, but you’re right. It’s always been a dividend stock. They were always able to pay out to all the heirs just with dividends, so they wouldn’t have needed to go public just for liquidity.

David: This is why they go public. 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. That was fine. They ended up selling the Broadcast Media Group to I think Oak Hill maybe, private equity firm in 2007 for about $600 million. So yeah, fine. The huge mistake they make is they don’t get into cable, though, and as we’ve chronicled many times on this show—

Ben: ESPN episode.

David: Yeah. Cable was the Internet before the Internet. That’s where the money was. Punch stepped down as publisher in 1992 after almost a 30 year run. As we said, his son, Junior, succeeds him.

Ben: 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. David, you mentioned TV stations. All these newspapers, there are maybe 20 different local newspapers that they had picked up and they would continue to pick up in the 90s. There’s magazines.

David: We’re going to get into some crazy stuff.

Ben: All right. This diversification goes way too far.

David: Totally. 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. In June 1994, they partnered with AOL and launched the @times channel on AOL, which is garbage. In 1985, they hired this guy named Martin Nisenholtz to come in and run a whole new electronic media division within the company. Martin had started the ad agency Ogilvy & Mather’s Interactive Marketing Group, and actually Brian McCullough over 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.

Ben: Wait, let me defend my blindsided thing.

David: Go for it.

Ben: Here are a couple of things to know. In 1983, The Times decided that it was not important to have electronic rights to their content. They sold it to LexisNexis. The New York Times didn’t own their own rights to their content. In 1983, you couldn’t see the Internet coming. Fine. Even in the early 90s you weren’t sure if you’re going to make a bet on the World Wide Web or you should make a bet on CompuServe and AOL.

David: It was specifically the rights to the archives. They were able—with some negotiation—to put new news on the site, but they couldn't have the archives until they got the rights back.

Ben: They did in 1994 ultimately get the rights back. In 1996, that's when nytimes.com went up for the first time.

David: Totally. When Nisenholtz comes in, he's like, holy crap, we’ve got to work through all these rights issues, so that was part of it. They also had to decide on the business model. This is fascinating. The original plan was to charge digital subscriptions for nytimes.com. Nisenholtz said, we can't charge because this product sucks. Who's going to pay for this?

When they do launch the site in January 96—the real site not the AOL site—there's no CMS. There's no content management system. They literally make a GIF of an image that they create in the art department and then put the link. If you go to nytimes.com, it loads a GIF.

Ben: That's unbelievable.

David: Yeah. That's the first version.

Ben: I imagine, they probably used robust software to do the page layout of the physical paper. You're not necessarily going to be super HTML-savvy and figure out how to render in a web-appropriate way. You're like, well, look, we put all this energy into laying out the type, articles, columns, column width, and all the stuff. Let's just export from that and we'll put that on the web.

David: Yeah. He's like, we can't charge for any of this. It's crap. But also, the other point was we got to build an audience. We got to train people to come to nytimes.com. Otherwise, why would anybody come here, especially if they got to pay us money? They go free and, of course, all sorts of long-term consequences of that.

Ben: 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. There's no such thing as paid content.

David: Except The Wall Street Journal.

Ben: Yeah, good point. They still have a hardcore paywall.

David: 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 expense accounts.

Ben: Right. These aren't customers who are browsing the web and deciding, oh, I should start paying because of this paywall. It was until—we'll get there—2011 that The New York Times introduced their concept of metered paywall.

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've been culturally acceptable for existing media outlets to charge on the web in a way that it just wasn't.

David: It could've been very different. Why do I argue that it's not totally right to say they were blindsided by this? They did all this work, but the bigger reason is that this was still so early in the Internet's lifetime, even with the Internet boom in 1989. Everything that was going on here didn't matter. They missed the boat big time on cable news that I was referring to at the end of Punch's tenure.

While all this is going on, just a couple of blocks away over at 1211 Avenue in the Americas, Rupert Murdoch knows news and he's looking out at everything going on—these were in the mid-90s—and he's like, holy crap. I see ESPN, I see how valuable that is, I see how valuable CNN is, I see a bunch of problems with it, and a bunch of opportunities to do better and different. I'm going to build and launch Fox News.

In 1985, News Corp head bought 20th Century Fox, the studio. They also own and run Sky in the UK. They had a 24-hour news network, Sky News in the UK. He said, we can bring this to America.

In 1986, they announced that they're going to start a new 24-hour cable news network—Fox News—and Rupert says, "The appetite for news, particularly news that explains to people how it affects them, is growing enormously on cable."

He sees this opportunity, then certainly, the other part of what he sees, which The Times would never do given Murdoch’s mission of the company as we talked about, is Murdoch brilliantly sees is there's an opportunity to create a news organization targeted for conservatives out there like CNN, the media as a whole, and certainly The New York Times, people believed were left-leaning and liberal-leaning. He thought there's this whole market out there, so he hires Roger Ailes from CNBC to come over and be the first CEO of Fox News.

Ben: I didn't know Ailes was CNBC before.

David: Yeah, he was in CNBC. But before he was at CNBC—this is crazy, I didn't know this until 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, I'm going to target Republicans and conservatives to watch my network.

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 he successfully ran for president because Nixon, when he ran against Kennedy, got destroyed in the TV debates.

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

David: Yeah. He brought in Roger Ailes as his fixer for the second go around to do well on TV. That's who Murdoch goes and taps to start Fox News.

Ben: Small world.

David: He does something even more bold. He's like the anti-Fox. He goes to the cable systems. 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 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.

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

David: The idea is that over time, as people become loyal to Fox News, he'll be able to flip this and of course, he does. To say that this works is an understatement.

Ben: It's so brilliant. Pay for the distribution to start and then once more people are more loyal to you than the cable company, then you can—

David: Flip it and start all the carriage, debates, and whatnot. Hey, we're going to pull Fox News from Comcast if you don't write in and tell them how upset you're going to be, et cetera.

This is incredible. I knew from working at News Corp that Fox News was a great business. It is an incredible business. By 2002—that's eight years after launch—Fox News is the number one news network on TV. It becomes number one, passes CNN. It remains number 1 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. Literally 19 straight years, it is the most watched news network on American television.

Ben: That is unbelievable.

David: Yeah, so whatever you think of Fox News as an organization—we're not here to judge one way or the other—this is Fox's total cable network segment of which Fox News is by far the lion's share. In 2019, it generated $5.4 billion in revenue and $2.5 billions of EBITDA. That's a near 50% EBITDA margin.

Ben: Oh, my God. That's Facebook good.

David: Yeah. I just found this so interesting because in so many ways now, you get people thinking of The New York Times on one end and Fox News on the other end.

Ben: Even though The New York Times, we are in the center and we are on no end.

David: Totally. But this is like an ESPN-level business that The Times would've built something different but they got into broadcast television. They were getting into the Internet. Missing the boat on the opportunity for cable news was huge here.

Ben: It's interesting. If you hadn't told me about all the diversification that The New York Times had done—you knew of it today just the way they are, single-brand, pseudo-single-product company—and said should The New York Times go into cable or should they have gone into cable, I'll be like, no. That's not what they do as their core competency. They barely do video on their website and their mobile app. They definitely shouldn't do that. Clearly, they were trying stuff and they were willing to do stuff like this and just missed it.

David: Yeah, they frankly just missed it.

Ben: One question I have is that The Times doesn't have it in them to do something outwardly and intentionally partisan. Maybe they saw the opportunity but didn't believe that it was there for a centrist cable news network?

David: That could be. CNN existed and does very well. It could've been different and it would be very unlikely that The Times would've said, oh, okay. Great. We're going to make a cable network but we're going to target Liberals specifically.

It's certainly complicated, but I wanted to go dive into the research of Fox News because people compare these two organizations so often, I want to find out the history. What just 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.

Ben: It has a 50% EBITDA margin. How much revenue did you say it does?

David: Close to $6 billion.

Ben: That's over 3X The Times' revenue today.

David: That does include Fox business and some of the other spin-offs. Some Fox Sports that they didn't spin off is still in there, but the vast majority of that is Fox News.

Ben: This shows what a bubble I’m in, but I don't think if you would've asked me what's a bigger business, that I would've told you Fox News.

David: Yeah. It's bigger business; crazy. 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.

In 1993, they purchased The Boston Globe for $1.1 billion for the Globe and they got a couple small regional papers as well with that. In 1994—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 the Popcorn Channel, Ben?

Ben: We all made some mistakes in the 90s.

David: Do you know what it was?

Ben: No. I'm thinking movie?

David: That's what I thought. Popcorn Channel, maybe it's like an HBO knockoff or something. This is a cable network. Its sole reason for existence was it showed movie previews and displayed local movie times. Why The New York Times invested 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. The New York Times owns close to 20% of the Boston Red Sox.

Ben: The Globe and the Red Sox.

David: Yeah. That's a good idea.

Ben: Didn't they also take a minority interest in Fenway Park itself?

David: Yeah, that was also part of the madness.

Ben: There was some kind of NASCAR team that they owned half of. This is when they really went ham. They bought Golf Digest, Golf World—a bunch of magazines—Family Circle, Snow Country.

David: This is like a ‘what were they thinking?’

Ben: And really 15–20 local papers, like The Santa Barbara News-Press, The Press Democrat, Gainesville paper. It's like Cap Cities gone wrong.

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

Ben: 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.

David: 100%. They also acquired about.com for $410 million in March 2005.

Ben: Feigned tech company about.com.

David: It's easy to dunk on these things, but probably the worst offense, I haven’t modeled out exactly the financial impact of this, but this blew my mind. Throughout the 90s and 2000s, they bought back almost $3 billion of stock that they financed with debt. They load up the company with debt and buy back $3 billion of stock over the course of a decade.

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

David: They do it all the time.

Ben: 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 it's actually less dilutive for my shareholders if I take on a bunch of debt to buy back shares, to undilute shareholders, reverse dilution, anti-dilution.

David: What's so lunacy about this is all of that, and the company was massively cash flow-positive because this is a long-standing business. The idea was you could use the cash flow to pay down debt over time and finance these transactions.

Ben: It's just a private equity play.

David: But because of the way that trust is set up, the family can't sell shares, so the way the family monetizes the business is through dividends. You can't even make the argument that they were just doing this out of self-interest for the family because the family wasn't seeing any of the benefit of the stock buyback. It's just madness. They’re cutting into the amount of cash flow that they could use for dividends.

Ben: That's interesting. They're benefitting in an illiquid way because the value of their stock is going up because of the buybacks, assuming the enterprise value continues to rise.

David: Yes, but they kept all the stock.

Ben: Right, but ostensibly, the dividend per share could go up. But you're right. It actually isn't actually going to go up.

David: I guess they could personally borrow against the value of their stock. Anyway, somebody was smoking something around The New York Times' board room at this point in time.

Ben: When does Carlos Slim come into the picture?

David: This keeps going until the mid-2000s. Even around 2006 or so, everybody's like, this is fine. The company's spitting off $3–$3½  billion of revenue, a couple of hundred million dollars of operating cash flow, we're plowing that in the debt service, fine.

Ben: And keep in mind, 2005 through 2008 they're making over $3 billion a year in revenue. Today, they do $1.8 billion, so lots of revenue coming in.

David: Lots of revenue coming in. We've talked about the headquarters building. Pride always comes before the fall. Anytime you see a company build a flashy, new headquarters, immediately, a radar should go off.

In 2007, they moved 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. They moved in in 2007. Real great time, guys, because then, the financial crisis hits the next year which also becomes a newspaper crisis because: (a) advertising revenue completely dries up, and (b) people are losing their homes and cancelling their newspaper subscriptions. It's brutal out there. Over the course of the next two years, they would lose 25% of their revenue.

Ben: Yeah. The rise before the fall. 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. To give The New York Times credit, they've started a digital newsroom. It is in a different building than the actual newsroom.

David: They don't get to be in the fancy headquarters?

Ben: Correct. The newsroom is so separate from thinking with a business mindset that they refer to anyone who is not a journalist at The Times as the business side. Think about digital product people, product designers who are building the mobile website business side, programmer's business side. If you're not a journalist, you're on the business side.

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, the technology landscape is changing out from underneath you, and you have basically built an internal, I don't know the right phrase is but you got a massive chasm between what you perceive as the core competency of a business producing print journalism and everything else over on the business side, and not thinking about any distribution. I'm sure they are thinking about it but not in a serious way as the crisis of the business other than how do we sell more papers?

David: Yeah. You've now just missed not one but two technology waves with cable and the Internet arguably. In 2009 is when the shoe drops. In January 2009, they announced a $250 million debt deal with Carlos Slim, the Mexican billionaire, one of the wealthiest people in the world.

Ben: His primary business is telecom, right?

David: Telecom, yeah. Interestingly—I didn't realize this—he already owned 7% of the company that he had just been buying at the public markets.

They do this $250 million debt deal at a 14% interest rate on the debt 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.

Ben: Let's unpack that a little bit. Contextualize 14% for us. If you were going to go borrow and get some debt for your company now, what would you do?

David: You would pay 1%, maybe 2%.

Ben: We are in a 0% interest rate environment, yeah.

David: But even back then—I was a media investment banker at the time—I remember doing junk bond deals for failing movie studios at 6%–7% interest rates. Granted, these were the throws of the financial crisis, but that's bad.

Ben: Then mechanically, how does the warrants to buy another 10% of the company work?

David: I don't know what the strike price of those warrants were, whether they were penny warrants which is effectively free equity, stock options to employees, or whether they are at the then current stock price of the company or some discount, but they're effectively free call options at whatever the strike price is on the company for the future.

Ben: How long does he wait before then deciding I am going to go pick up another 10% of The Times as this attractive price?

David: I think he waits until the expiry dates which is a few years later, but he does exercise them and he becomes the largest individual shareholder in The New York Times owning about 17%. He since trimmed his stake a little bit. I think he still owns 13%–14%.

Ben: Right around there.

David: It's like a Warren Buffett–type deal that he does. Although I would say unlike at this time when Buffett was investing in Goldman, Harley Davidson and the like, those were solid companies. There are some real question marks around The Times at this point in time.

February, the next month, they eliminate the dividend altogether. Family members must have been pissed. They're doing buybacks for the last few years and now you just eliminated the dividend to save money.

In March, they announced a $225 million sale and leaseback of a portion of the headquarters building. They just built this headquarters building. They sold it to W. P. 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.

Ben: Which we should say this is actually one of the savviest investments of all time by The Times. Think about how much New York real estate—especially Class A real estate—appreciated between 2009 and 2019. 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 for $250 million. That's really not much appreciation.

I think I found a source that said that they essentially bought 750,000 square feet of prime New York office space at $333 a foot. Nothing in the market is trading around their building under $1500 a foot. They quintupled the value of their holdings.

For people who were trying to make sense of a sale-leaseback here, what they basically said was they owned their house but then they took out a mortgage on it. They said, I'm going to keep living here, you're going to own it, I'm going to pay you every month.

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

David: This is what's interesting. You're hitting on the point here. I'll run through a couple of other things they do and then we can discuss. In July, they sell the radio stations they owned to Disney for $45 million. Then in 2011, they sell off their regional media group which are all those crazy regional newspapers that they bought for $143 million. In 2011 and 2012, they sell off, finally, the Red Sox and Fenway stakes for $225 million. August of 2012, they sell about.com to IAC for $300 million.

Ben: They took a little loss on that, then?

David: Yeah. 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's a lot less than a billion dollars, though.

Ben: Amidst all these, I think by 2013, that $3¼ billion of revenue that I previously referenced was down to $1.4 billion. All these divestitures, not to mention all these people who are no longer paying for newspaper subscriptions, really started to dry up that revenue.

David: Yeah. This is when the narrative of The Times is effed is at its strongest, the "failing New York Times." But all these transactions that they do are freeing up tons of cash and are paying off this debt. The end of these transactions have generated about $1 billion in asset sales that have all gone to pay down the debt.

Ben: That they had taken out primarily to do share buybacks.

David: Do share buybacks, yeah. They're down to just the core New York Times property but digital and print, and they're in an interesting position again that not a lot of people realize.

Then, the other thing that they do during this time is they finally get their act together and introduce a metered paywall for nytimes.com. Here's what's interesting. They announced in 2010 that they're going to do this. They give a whole year's notice to the world and they implemented it in 2011.

Ben: And people are pretty outraged. People are like, you're going to charge for content in the Internet? F you.

David: Yup. It's very controversial, but they say you get 20 articles a month for free before you have to subscribe to us. Pretty generous. The top news section on the smartphone and tablet apps will always be free.

But people are skeptical. In the first year, it goes like, okay. They get 400,000 paid digital subscribers in the first year. By year 2, they're up to about 660,000. Year 3, they only had 100,000, they get to 760,000. Year 4, they're at 900,000. It's going okay.

Ben: I think in year 3, they chopped their free articles in half from 20 to 10 that you would get. They're starting to realize, oh, we got to pull some leverage here to make more people subscribe.

David: More alarmingly, though, as they're implementing this metered paywall, people are going elsewhere for news. The traffic to the site drops by over half during this time.

Ben: This is crazy. We'll talk about The Innovation Report in a moment, but this is pulled from this infamous Innovation Report. In mid-2011, they had 160 million visitors a month to their website and by 2013, 80 million. This paywall thing is working-ish for revenue, but boy is it destroying your traffic.

David: Man, things seem bad, and they are bad. Enter 2014, AG, the heir-apparent 5th generation, Sulzberger, he's 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.

Ben: Yeah, so check this thing out. First of all just to wind back a bit, the paywall was launched by David Perpich. He was the person who was heading up the metered paywall. He's a family member. He's a potential person who could take over as publisher of The Times next.

It's going pretty well. People are thinking pretty highly of him in the organization. AG at this point, 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.

He was originally tasked and it was a team of (I think) 10–12 people, to really start dreaming up products that could fix up The New York Times’ bottom line. They thought they’re going to do this. The New York Times released an app called NYT Now. I mentioned that digital was in a different building. By this time, they had brought them into one single newsroom.

The folks on the business side were in-charge of figuring out like, how are we going to save The Times? Sulzberger took it upon himself and the team to treat this innovation report like a piece of investigative journalism. As they met with hundreds of people inside The Times in the newsroom on the business side, hundreds of people outside the organization, they realized, oh my God it’s not—

David: I think it’s super cool, too. They interviewed people at every other news organization, customers like CEOs of tech companies, really interesting.

Ben: Yeah, and what they realized about a quarter of the way into doing is it is not a new product that we need to launch. We need to completely change the way The New York Times works. 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.

A good example is—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 that that’s when the job begins, and that’s when 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.

In the newsroom, there needs to be an understanding of what content gets federated,to what properties, at what times, is consumed by who. Frankly, I don’t think this could have happened without a family member leading the charge here but really reinvented the organization with pretty damning findings in his report from the inside-out.

David: It’s like a throwback to Adolph Ochs. You got to be a journalist but you also got to be a marketer and a publisher. You got to get the positioning of what you’re doing, but you also got to get the distribution.

Ben: Absolutely. There are even quotes in there where they say, “The New York Times is winning at journalism. At the same time, we are falling behind in the second critical area—the art and science of getting our journalism to readers.” They talk a lot about how we don’t think that we need to sacrifice our core values to get this done, and there are a lot of people out there—our competitors—who have way more traffic, and they’re referring to BuzzFeed and Vox, some of these people by name, who are getting unbelievable amounts of traffic. The assertion, which is at this point you’re head scratching, is really how are you going to do this? They basically have a throwback to the yellow journalism era.

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

Ben: There’s this interesting allegory to the yellow journalism era where what Sulzberger and the 10-12–person team asset is if we are willing to step up internally, make a big change, bring the right leaders into the newsroom—tech, product, distribution, marketing, growth leaders—and adopt them as our own, we think that we can hold our values, grow our subscription business, and grow our reach.

It is this pretty bold assertion to say 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. They’re reading it like, if we didn’t know that it worked, you would be reading this thing being like, good luck.

David: 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 they do it. They also learn the lesson of not missing technology waves, so they launch apps. In 2014, they launched The New York Times cooking app, which has become hugely successful. Hugely successful. In 2016, they launched the crossword app, which has become hugely successful.

Ben: The crossword app on its own is a $30-million-a-year business with zero marginal cost because they’re just running historical crosswords from years and years and years, and I think some new ones, but the apps business that they have—they call it other digital—is growing at 60% year over year and it’s crazy high-margin revenue. Think of the cooking, the crosswords, all that stuff.

David: The other thing that they’ll launch which will lead into the next big tail that’s helped The Times is The Daily. They launched The Daily in (I think) it was February 1st, 2017, and it got 100 million downloads in the first year. In 2019 it passes a billion downloads. Ben, you may know more about this than me and the right way to judge, but I think it’s the biggest podcast in the world.

Ben: Every single day receives four million downloads of its most recent episode. That is crazy town. They’re reaching people that the print reporting could never reach, too. It’s a completely different audience. 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 a $36 million revenue business just in podcast advertising, which grew 7 million off of last year. It’s not their biggest by any stretch—business line—but it is where a lot of their new reach is coming from.

David: And it’s super high margin, all of these businesses. All this money is dropping straight to the bottom line.

Ben: Yeah, although they do have a 20-something person team producing The Daily. There’s material cost to producing that podcast because there’s real reporting. Have been looking at you overseeing our volume with our cost structures.

David: I’m used to running Acquired-type margins on things, right?

Ben: That’s right. If the labor is zero, then it’s nice and a high margin.

David: Yeah, we do all our own reporting here at Acquired.

Ben: If you’re going to catch us up to 2016, then there are some other things to say about The Times in 2016, namely around the subscribers. Let’s contextualize some of the subscriber numbers so far because I made a little timeline here. You’re right. In year one, they did 400,000 new subscribers, 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. That’s print plus online combined.

That says a lot about both the decline of the advertising business. 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 a million subscribers.

In 2016, it had taken The New York Times 4½ 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.

David: When we are referring to the failing New York Times narrative, that it was failing and was so prevalent. Of course, they got taken up by a certain presidential candidate in the 2016 election and then president thereafter. The reality is that was the best thing (I think) that ever happens in The New York Times.

Ben: That is 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.

David: I know, it’s incredible. You may have the stats, too, but they grow digital subscribers 47% in 2016. These are tech company growth numbers. In the first quarter of 2017 when Trump took office, they added 300,000 subscribers that quarter. They finished 2017 at 2.2 million. By 2019, they’re at 3.4 million, some 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 passed 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…

Ben: In 2019, completely debt-free.

David: 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.

Ben: When you say that no other organization the world has, The New York Times (I think) today is 7½ 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 a half-million or less, and it goes on and on down from there.

When you look at the number of subscribers that they ever had in print, like ever, in 2002 they had (I think) 1.1 million. The New York Times was the number one print circulation newspaper, at least in America. Only a million subscribers to the print edition. They figured it out and just at the right time, and then had this frigging unbelievable tailwind happen with the Trump presidency.

David: 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.

Ben: Did you know The New York Times average salary for a journalist is over twice that of the industry average?

David: Yup, it’s crazy. I think the average starting salary is over $100,000. Who would’ve thought 10 years ago that a news media organization, a newspaper would be paying over $100,000 starting salaries to journalists?

Ben: It’s definitely to be congratulated.

Before we dive into today and then get into the analysis of this episode—we’ve brought a lot of analysis forward—we want to thank Vouch, the official sponsor of the analysis of season 8. Vouch provides business insurance for top startups.

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In catching us up today, we have to give a huge shoutout to a website called Mine Safety Disclosures, that put together a deck of it, provides just an 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 Mine Safety Deck, you’ll recognize a lot of that thinking coming through here as we talk about The Times today.

David: Fun facts, Ben. It’s a great blog. Mine Safety has great visualization tools for 13Fs, for hedge funds, and various positions that vet famous fund managers. Do you know where the name Mine Safety Disclosures come from?

Ben: You asked me this before the show. I do not know.

David: 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, whether you have a mine or not. If you go read the 10-K for Google, Apple, Amazon, or whatever they have a section on mine safety. They don’t have any mines, but they have to have this section.

Ben: That’s so good. I wonder if Coinbase is going to have to bitcoin mine safety—

David: Oh, yeah. That will be amazing.

Ben: Let’s talk a little bit about The Times today. We talked a lot about this subscriber run upward 7½ million subscribers today. They’ve stated a goal that in 2025 they want to hit 10 million. Management has sensed they’re going to blow by that and set a new goal.

This has been a heck of a year for journalism. They had 2 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 2 quarters. It was the biggest year for news in history—at least in modern history—and The New York Times was really well-positioned to feel that acceleration.

They added 2.3 million digital-only subscribers this year. We’re just thinking back to 2011 when they launched and they got 338,000 in 1 year and it took him 4½ years to get to a million. This year they got 2½ million. You’re really starting to see 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. The ad revenue fell 26% year over year.

David: And also just fundamentally the ad business 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 accrued aggregators like Facebook and Google.

Ben: Right. The New York Times subscription businesses is actually now three times larger than the advertising business.

David: And it used to be the opposite.

Ben: Right, it’s an unbelievable transition from this early 2000s that was just completely flipped. That’s interesting to know about the business today.

David: It wasn’t even just the early 2000s. Even reading the Gay Talese book, it was in the 1950s and 1960s, advertising was 3X subscription. That was always how it was.

Ben: Right, that was the newspaper business. This comes on the back of (I think) the years were 2012–2015 when they really started to get serious about this. They went to the advertising department and 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.

To have that big of a turnover and say, the ads that we’re going to be doing in the future have nothing to do with the ads that we sold in the past; we need completely new people to do that. It is 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. 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 subscription.

Other fast facts in the company today, it is 4300 employees, 1700 of those are journalists. Interestingly, the 1700 number represents about 5% of the total journalists in the United States, the total professionally employed journalists. It’s not just Ezra Klein, 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.

We mentioned that $1.8 billion number. That stayed fairly flat over the last several years and in their top-line revenue. They’re seeing $250 million in operating profit. Again, also flat right now probably related to the pandemic.

David: But the composition of that has 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.

Ben: Yes, so we should hold that for one moment, and I’ll just put a pin in articulating the scale of The Times today. Their subscriber base, 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.

To 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?

David: Totally wild.

Ben: That makes BuzzFeed, Gawker, Recode, Quartz, and Vox on the list of publications whose editors now work at The Times. It just becomes so clear in only 6–7 years, to the extent that there’s, 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, no one in the middle, then a bunch of successful 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 toughing it through—The Washington Post under Bezos’ funding. There’s just really not that many more that look like The Times.

David: We’ll save this for the playbook, but the nature of the Internet economy, winner-take-all businesses.

Ben: Yeah, winner-take-all and yet, globally addressable niches for low-cost structure businesses on the other side.

I think this is a good place to transition into narratives. The narrative for this company is not as clearly bifurcated as it would be in an IPO episode, where we’re saying here are the reasons to be bullish, here are the reasons to be bearish. There’s an interesting spectrum that we’re going to go across here on why you would be bullish on The Times and why would you be bearish.

The first bull case, Meredith Kopit Levien, the new CEO, articulates this regularly on their earnings calls, which is not only is our 7.5 million person subscriber base growing—that includes new subscribers and the digital-only non-news; it includes the print subscribers—we think that there are 100 million English-speaking people who are willing to pay for news. We think our TAM is 15X or some like that, 13X what we’re at today. It’s fast-growing and it’s large.

David: And 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. If you [...] run out of the market, you wouldn’t be adding customers that fast.

Ben: This is where we start to get into the, is it a bear case, is it a bull case? We should have the discussion of, is The New York Times a tech company? 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, mail distribution on the Internet, understand where they fit in there. From a cost structure perspective, this we owe wholly to Mine Safety Disclosures.

They make the point that with newspapers, The New York Times cost was largely variable. They increased in proportion with the number of papers produced and sold. But with digital subscriptions, most of their costs are fixed. They don’t increase as The New York Times adds more subscribers.

When 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 amortize your content costs across, is all gravy. You have these content cost, fixed cost, variable cost on top, but your revenue’s 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 cost at the same rate that they’re growing their expenses.

David: We’ll discuss this in power, but it’s just like Netflix. Why can The Times pay $100,000+ starting salaries for journalists and no other organization can afford to? It’s because they have the scale economies of millions of subscribers. Something just like Netflix can pay $100 million for a piece of content, amortize it across there many, many, many times more subscribers than Peacock, same deal, same dynamics here.

Ben: 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. What do you mean? The sheet’s still the same size. Yeah, but you don’t know what’s ready to run through it.

David: That’s such a good analogy.

Ben: Now, when we were comparing it to Netflix I think there’s one more interesting thing to say about The Times here and that’s the bull case, is they don’t have to go acquire content. 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 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. While they’re paying high salaries, those salaries don’t scale with the audience and can’t get negotiated in a way that scales with the audience.

David: That’s such a good point. Nobody, probably not even Kara Swisher—as much leverage as she does have—is not going to be able to go to AG and say, hey you just added two million subscribers this year. I need some percentage of that.

Ben: Right, no one’s got a revenue share deal with The Times in their employment contract. But I mention this was both a bear and bull case. My verdict is still no, that The New York Times is not a tech company. Even though the business profile and the 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 your 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. They brought in lots of people to be a part of the newsroom.

When we talked earlier about the business side, being all non-journalists, there’s still something to the fact that the most important thing to The Times is their brand, their objectivity, their ability to be discerning in this world. Where you have things where a tech company would be like, whoa, we have the number one podcast? Let’s launch 30 podcasts. Or like, whoa, a lot of people like our cooking app? Lets launch 10 other experimental apps. Or like, the crossword’s going well. For games let’s try and be Zynga. Let’s try and do a ton of crazy data science and launch a bunch of games.

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 see for a tech company in the startup world if they were falling into the success that The New York Times is. I think the thing holding them back is the very thing that made them successful, which is the trust in their brand that they need to maintain with this level of journalistic integrity.

David: Totally. I think it gets back to literally—as we told in the history, baked into the immutable mission of the trust and the company—to continue to serve as an independent newspaper, entirely fearless, free of ulterior influence, and unselfishly devoted to public welfare. As a news organization, that is what they are. That is undeniable.

Ben: Right. That’s the bear case side of them being a tech company. Sure, they’ve adapted well and they certainly have been more tech-, Internet-, mobile-, growth–forward than any other news organization, and they’ve undergone, I hate to use this phrase but it literally applies to your digital transformation. 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. 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 once they turn into second-, third-, fourth-year paying Times subscribers you’ll see that start to meaningfully change.  We don’t know if that’s true yet. It’s very plausible, but right now revenue definitely is not tracking subscriber growth.

David: It’s interesting. That’s the tried-and-true, old school newspaper tactic of subscribe to the local newspaper for X price for the first year, and then get them all raised—

Ben: Get The Times for only $1 a week.

David: Exactly. But the jury is still out about will this work in a digital environment. As we’ve discussed, while there are some monopoly-like factors here and that nobody else has a journalistic organization like The Times, or the number of journalists, or the reach, or the content that they’re producing. It’s not 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.

Ben: 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 7½ 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.

Just to contextualize that, I think The New York Times’ current average revenue per subscriber is right around the same ballpark, $15–$17 a month of Netflix. It's an interesting comp because from a revenue perspective or from a subscription price perspective, they're very comparable, but The Times estimates that its addressable market is half of Netflix's current market. When you're thinking on the scale 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 the tech company co-structure dynamics that they're shifting to.

The next bear case (I think) that's a reasonable one to paint—this is the classic Ben Thompson point—is there's a conflict here between their business model and their stated mission. 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 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 paper of record, because what you're doing creates an incentive for you to create strong affinity with a certain group. 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 large niche and create high affinity among that niche. That may not necessarily align exactly with pure journalistic neutrality.

David: Super interesting. I forgot to include in the history and facts The New York Times as the paper of record. That saying and quote actually comes from a very specific business strategy from The Times. 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, person, and institution that appeared in The Times over the past quarter. The reason they started doing 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. Then they would get into schools.

That's where the paper of record idea comes from. Actually, it may be sort of a counter. They were specifically trying to target a niche group of we're going to get into the elites of researchers and academics and schools but it's interesting.

Ben: Yeah, it's interesting. This really raises the point of being subscriber-only, really your motivation is to create a really strong affinity from someone such that they're willing to pay for your content. You could do this by being really niche, but the question is, is there room for 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 than going to someone and saying I'm going to appeal to all of the biases that you have and I'm going to keep giving you more of what you love? Can you actually build just as big a business if you are the one scale player to really have the subscription for everyone?

David: That's interesting. My mind goes back to the Fox News discussion. I don't think anybody would argue, maybe some people will, maybe we'll get emails and comments in Slack, but I don't think anybody would argue that Fox News has a target niche demographic of political conservatives.

Ben: Right. It depends on your definition of niche. It's a huge freaking niche.

David: That's the thing, it's a huge freaking niche. Even with that business strategy, they built a $5 billion, 50% EBITDA margin business.

Ben: 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 is driving them away that they're willing to. Again, the people, I don't think they're subscribing to Fox News. Well, I guess they’re subscribing to their cable bundle.

David: Well, they're paying for it whether they know it or not. It's a good question. I think The Times would probably argue and certainly some people there would believe that that is what they're trying to do, or be the neutral highest quality news source across lots and lots of topics and that's worth paying for. I don't know but I suspect certainly a large portion of the 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.

Ben: Yeah or at least if I had to sum up and try to 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.

The class of people who are saying that have their own bias. When they say that I know I can trust, it is inherently loaded language because you are more likely to trust something that represents the point of view that you want. It is impossible to be completely unbiased and reporting anything because you get to choose what to report. At the very core, that's true, but 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.

That's a bear and bull. I want to paint this spectrum as we come out of narratives because I think there's this interesting decelerating excitement on the spectrum. The first thing you realize when you look at The Times is this is a killer subscription business that is growing 40% year over year in their number of paying digital subscribers. I guess paying subscribers broadly, mostly from the digital category. That is awesome. That is like a late-stage startup good.

But it's only growing like 10% year over year in revenue. I really wish that was tracking the subscriber growth. Then three, you realize how. Total revenues actually have been flat the last few years and it fell over 50% from their glory days in the early 2000s. In some ways it's like a high growth company by looking at just subscribers, certainly not though on total revenue and their revenue glory days may have been behind them.

If you're only looking at the surface level like this, you're going to get really disappointed unless you're 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 ready to explode in profitability coming out of this full rearrangement of the business.

It's totally a compelling narrative but it is a wild realization. I was someone who started paying attention to The New York Times' business in the last five years. I have been all on board in the subscriber growth story and it is just crazy, like zoom out with a little bit longer lens and be like they used to make way more money.

David: Yeah.

Ben: All right. Do you want to talk about power?

David: 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—we are huge fans of Hamilton Helmer and his work 7 Powers, which describes seven strategies by which companies can earn long-term differential profit margins higher than their competitors.

Basically, Ben, as you like to say, why do you strategically deserve to be a defensible winner in your space relative to your competitors? 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.

Ben: Totally. David, I'm going to let you take scale economies because I know you're just dripping to talk about that. I'm going to talk about branding because rarely do I think that a business actually has brand power.

David: I like it.

Ben: 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 of convincing customers, like I keep delivering on what I say I'm delivering on, that rarely if you'll hold out the bottle of Advil versus the generic, Advil has invested a ton of money and time into winning that battle, but most companies, especially tech companies that we cover on the 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.

David: The canonical test is the same product. If it had a different name on the masthead in this case, would you value it differently? 100%. They could be the exact same word-for-word article in different places and it would be valued differently. This might be the clearest example of brand power that we've had on the show thus far.

Ben: Right. I pay for The New York Times. If it was a different masthead and it was all the same articles, I probably wouldn't be paying for it.

David: Totally. Scale economies, interesting, I think probably both iterations of the business had scale economies. Certainly the old school print newspaper business did because you needed a printing press and the distribution network to get your paper out there. No scale to support that, good luck printing a paper and sustaining it.

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.

Ben: Yup, total classic example. Is there anything else here?

David: This is going out on a limb and may be 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. My thought on this is that there is literally 170 year tradition and institutional knowledge of how to do high quality journalism in this organization.

Ben: Stewarded by a family, by a single shared value set of people.

David: Yup, 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 let’s say a group of editors were to leave The Times and either start individual Substacks or competing organizations, I still don't think it would be The Times. Now, some of that is maybe branding, but even just the process of creating the paper—once was a physical paper and now is a continuously updated digital masthead every day…

Ben: As they would call it The Daily Report.

David: Yup, I think there may be some process power here.

Ben: Interesting. Hard to know without looking under the hood, but I think it's a reasonable guess.

David: I can certainly say from when I worked at The Journal and I worked on the “business side,” not on the edit side, but I will tell you, there is absolutely a machine. It was a miracle. I think anybody who works in the news business will tell you this. Gay Talese writes about it on the book. It's a miracle that the paper happens every day and the website updates every day and nobody who's part of it can fully explain it but somehow everybody comes to work every day and stories get published and edited. It happens.

Ben: Yeah, I felt that way when I was at Microsoft shipping Office every three years. There was such an unbelievable process to get 3000 people to all lock their code in a bug-free way and get it out the door once every three years. I completely see how it's possible for someone not to understand how the entire system works themselves.

David: Okay, cool.

Ben: All right.

David: I don’t think there are any others.

Ben: No, I think this is a pretty clear cut.

All right, into the playbook. The very top one for me is something we've talked about already in this episode, but this is the ultimate articulation of it. That is the barbell media landscape that exists on the Internet, where you have this distribution with a very, very small amount of scale players, a very long tail of niche players with incredibly low cost structures, and nothing in the middle works anymore.

The New York Times were the head of the distribution, but behaved like a lost middle person until they decided what their strategy was to be the one scale player. 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 lower cost structure or you need to be the big guy. There's just not that much room in the middle.

David: It's really reminiscent of the Bob Iger-Disney strategy. In a world where YouTube exists, the winning strategy for Disney was to go hard into hyper, high quality, expensive produced content.

Ben: The New York Times has their own version of the Bob Iger three-point plan of original content, internationalization, and embracing the digital strategy. You could make an argument that The Times is doing the same thing. It's the best original content in the news world. It’s the highest quality journalism. They're opening more international bureaus than anyone else. They are frequently having dual English and Chinese bylines. I think that right now they're constraining their TAM to the English speaking market, but they have a clear eye on international trade. 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, The Times produces just amazing visualisations along with their pieces.

David: Totally. That's really interesting. I think particularly the international geography point. Like many papers, The Times had bureaus all around the country and around the world for all of its existence. I would 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. They’re certainly here in San Francisco and Silicon Valley, in Seattle. 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. That’s different than in the pre-Internet world.

Ben: Absolutely. What do you have next?

David: The one that I wanted to really highlight that I did at the beginning of the episode is just the entrepreneurial journey of both Raymond, Jones, and Ochs. Particularly, the moments where it’s back against the wall and you have to make something happen with no resources. That has happened so many times at The New York Times but particularly with Ochs. That's just when the entrepreneurial magic happens. For an institution like this, we all think of it as the Gray Lady, the venerable New York Times, it’s been around for 170 years, but it, too, started in the same way that so many great startups start.

Ben: Yeah, I love that point. There's a thing that we billed as a con earlier that I think there's an interesting playbook of it being a pro. That is 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 2010–2014 decided to do the stuff that BuzzFeed was doing, or any of the new media companies that were all the rage and they decided not to put such an intense focus on the quality of the journalism and the daily report, look at where all those companies are today. None of them worked. Vox is the closest in having a successful set of media brands underneath it.

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 adapting for digital. 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. The Times is very much like that where they did come out of this as number one because they didn't compromise on their values.

David: That also makes me think of two other playbook themes that are classic media themes that this story reflects, too. One, content is king. It remains true today. I think related to what you're saying is that unlike BuzzFeed or many of these other types of new media organizations—

Ben: It’s funny. BuzzFeed is actually doing well; we keep throwing them under the bus.

David: I know, BuzzFeed is doing well. 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 dual revenue streams. That was the magic of the media business, it was subscription and advertising revenue. All the great media businesses have that, whether it's cable, whether it's news and now whether it's streaming video as well. I mean we have it at the Acquired podcast.

Ben: I was wondering if it's too cheeky to be like, all the great media businesses Acquired.

David: The greatest of all media businesses.

Ben: 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, I think we didn’t talk about it, one of my very favorite companies which is now one of my very favorite New York Times media properties is the Wirecutter. If this was 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 the affiliate. It's a great freaking acquisition.

David: $50 million a year in affiliate revenue?

Ben: Yes. They took it from an electronics thing called the Wirecutter plus the Sweethome which was for home gear and they said we’re dumping the Sweethome brand and the Wirecutter is now the Wirecutter for everything. I think they're going to try and make it the new Consumer Reports including something they foreshadowed on the earnings call, a digital subscription. 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. I would say the last 5–8 years, their investments and acquisitions have been much, much smarter than in the previous decade.

David: The Wirecutter is about.com done right. Whoever is doing the capital allocation now is much better than previous generations.

Ben: The Internet is a mature place. We understand business models on the Internet better now. 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 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 print edition every day, they are increasingly willing to pay for it. The Times is like, sure we'll keep printing your paper but the average annual subscription is like $700. For the 800,000 people that are still getting The Times delivered, that's what they're paying.

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. I think this is 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.

David: I haven't looked recently but several times over the past couple years, I've looked at and wanted to add a Sunday physical paper to my digital subscription, it's wildly expensive.

Ben: I got it for a while but definitely after a year I was like, okay, I'm probably not one of these people that's willing to pay crazy amounts for a paper.

David: But I could totally see if that were a habit, I would probably pay a huge amount of money for it.

Ben: The last one at least from me—I think you made this point a different way—the Internet created globally addressable markets. It just never seems to surprise me. If I'd been born 10–20 years or earlier, I think my default assumption would be more that your markets are geographically constrained. But being someone that grew up in the 90s, my assumption and my head space is always like, you put something on the Internet and then the whole world will have access to it, what do you mean like what market are you launching? You just launched on the Internet.

I'm sure like generations below me, Gen Z and onward are going to be even more like that. 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.

David: It must have been so easy to make money in the 90s. 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. You couldn't go wrong.

Ben: If everything seemed to be working, I would be willing to pay the prices people were willing to pay for stocks in 1999 also. You can totally see how that happened.

David: What does that say about today?

Ben: No kidding.

David: Should we move on to value creation and value capture?

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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 like an altruism question.

This first one, if you would ask me about this in 2014, this is an F. 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 and BuzzFeed's capturing it. They're not sure what to do about it and paralyzed. Today, it's a very different story. It's still not an A+ but they laid the foundation for you to believe how they could be very profitable in the future.

David: Yup, 100%.

Ben: Now, this final one, how much value have they created for the world? This is a company, when we compare it to like 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 covered in how they were able to achieve the business outcome that they did. You then look at their market cap, 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 $4 billion or $5 billion. 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—certainly influenced the way that our society developed, and without institutions like them we probably wouldn't have the functioning society like we have today.

David: Totally. No matter what you think of their editorial stance now or in the past, two things I’d point out: (1) they’ve won 130 Pulitzer prizes which I believe is more than 2X the number of any other organization in the world, and (2) 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 paper situation was crazy, ended up in conjunction with Watergate and a sitting president resigning.

We talked a little bit about World War II and there was World War I. I can't underscore enough what you said, Ben, that has been created for the world by this organization existing is immense.

Ben: Yup. Should we get into grading?

David: Let's do it.

Ben: Well, I think the way to grade this one is forward looking, what's an A+—this of course is a business outcome—what's an F, and then what’s the C scenario? To me, the A+ 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 they start to taper in the fixed costs required to produce what they produce.

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 Corona virus soon. God willing 2022, we can go by and I'll forget to check the news and it'll be awesome. That won't be great for The Times. It's worth calling out. That is counter to their interest.

David: I've been thinking about that, though. I don't think that's likely to happen anytime soon. Look at how crazy 2021 has been. I’ve been literally just 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.

Ben: Yeah and this turns into a B, if they're not—on this fixed cost base—able to just continue the subscriber tear that they've been on, but just modestly, linearly continue to acquire subscribers. I think there's an absolute A+ case if they do keep making investments and really turn into more of like a tech company of experiment, learn, rapidly iterate.

The New York Times has revenue opportunities lying around all over the place that they're not taking advantage of. If they can figure out a way to monetize those, in a way that feels authentic to The Times but is also a really good business strategy, which I feel I'd give them a C so far, maybe a B-, then I don't care about, let's taper off the hiring. Go high Google levels of people and go build more and more stuff then double down on what's working.

David: Even just sticking on the media side. They've done some experimenting with video and streaming content. They've done deals with Netflix, with Prime, with Hulu, with FX.

Ben: It’s been underwhelming.

David: 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+ would be they don't whiff on video this time around because obviously the opportunity is enormous.

Ben: Yeah. The C case I think is very much this new subscriber—

David: I think there's one more piece to that A+ case which is they have to increase ARPU for subscribers.

Ben: Certainly. They need to prove that people, year two and three are willing to make up and that's a big jump, too. This introductory pricing is way cheaper than year two and three pricing. What do you think the F case is? How does this not work?

David: They rebuy the Red Sox.

Ben: What was a reasonable way that this could go super south?

David: Let's see. I'm tempted to say that they get their value aggregated, arbitraged or whatever you want to say by aggregators and social networks, but I feel like everybody's learned that lesson that's very unlikely to happen.

Ben: Not to mention, Facebook's even paying them for content now. They do have a deal.

David: Yup. I guess an F scenario for the future for The Times could be the hyper partisan environment that we've been in, that this is just the beginning, it gets worse and worse, and there literally is no room for anything in the middle. Whether you think The New York Times is the middle of the knot, it wants to be the middle and that is just an untenable position.

Ben: It's so funny. Even today, I always thought it was a widely-held belief that The New York Times, at least during the Trump presidency, that a common perception is that it's left-leaning. This person who is left-leaning was like, what do you mean? They published that terrible Tom Cotton Op-Ed and they did all the stuff of Hillary's emails. They got Trump elected.

I think there might be more and more, David, exactly of what you're talking about, you got to pick and then there is less room or at least have a large addressable market as someone who is trying to be a centrist.

David: Yup. I hope that's not the case.

Ben: Me too, for all of our sake. One thing I do want to point out that I thought was pretty interesting because I got pretty deep down the Netflix rabbit hole on who do you have to believe to believe this 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.

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 relative basis—definitely undervalued compared to Netflix.

David: I would assume the subscriber growth rate is higher than Netflix.

Ben: That's a good question. If I remember right, Netflix tries to grow revenue 30% year over year, so that pie charts exactly to subscribers. The Times grew 40%.

David: This past they grew subs like 48%.

Ben: Yeah. If you really believe that you just ignore the rest of the business and you believe that revenue will catch up, it's a much faster growing business than Netflix with a very similar cost structure.

David: Interesting.

Ben: I just thought that was an interesting one to point out. All right, carve outs?

David: Yeah, carve outs. We haven’t done carve outs in a while. We were worried, we’re doing these super long episodes now, people don’t want to listen to carve outs at the end, but we've been surprised. People want the carve outs.

Ben: We got a lot of push back.

David: Yeah. I guess it makes sense, if you make it this far, why not have some fun. Now, we're all just like whatever. My carve out is a really great fantasy series, a book series that I read recently, Sabaa Tahir’s An Ember in the Ashes series. It's really cool. The first book, An Ember in the Ashes I thought was a little slow and felt a little Hunger Games knock-off, but my wife Jenny has read the series and she’s like, stick with it. By the end of the first book and into the second and beyond, it gets really good. It has really good world-building, a very cool Game of Thrones meets Lord of the Rings meets the Middle East. It was good, highly recommended.

Ben: All right. It's funny, I haven’t read fantasy in so long.

David: I find it like a really good way—fantasy and sci-fi. The last couple years, I found the best way to unwind at night and on the weekends. Just get away.

Ben: 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 by Dax Shepard on an episode of the Tim Ferriss show.

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. He was able to square 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 an 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 anticompetitive practices of Standard Oil on the railroads. It’s just so interesting.

David: He started Rockefeller University which is a research institution in Manhattan and has developed many (I think) all PhD’s and post-docs, right?

Ben: Sounds right. He also is the founder of the University of Chicago and left his name completely off of it.

David: No way.

Ben: Yeah.

David: I didn't know that.

Ben: He put it there specifically because he was like, I don't want this to be intermixed with my business practices. If I put it in Manhattan or Cleveland, people will think I'm using it for influence.

David: Interesting.

Ben: Yeah, it's totally fascinating.

David: That’s wild.

Ben: 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. Actually, when I reference 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. I can't recommend it strongly enough.

I also have one more carve out that I want to throw in which is a great company that we invested in from PSL Ventures called Iteratively. They launched and announced their funding and everything this week. It's a product that I'm so pumped about because I wanted it so bad and I was at Microsoft.

If you're a data team, a PM, an engineer, or an analyst who's ever had to work with analytics and had an analytics outage or had like, I swear we created an analytics event in the spreadsheet that was supposed to be tracked in the code here. It's not firing or it's one character different. It's an uppercase U in user login instead of a lowercase u, so it didn't come up in my query. Their product solved all of that.

The cool philosophy behind it is we take software testing really seriously. 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? If we can sort of enforce that then let's take our analytics as seriously as we take bugs. It leads to all types of cool stuff. I can go on forever, super excited about this company. Check it out iterative.ly.

David: Awesome, super cool. I know you've been pumped about this investment for all while and jumping at the bit to be able to talk about it publicly.

Ben: A year-and-a-half under my hat. Well let's see, listeners I think that brings us to a close.

David: Should we do another hour just to be sure?

Ben: The longest a number of years we've ever covered. We're getting increasingly interested in the Rockefeller era and The New York Times 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 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/slack.

As a bonus, when you sign-up, you'll also receive the written playbook from each episode where we codify the takeaways into bullet points that you can share with friends or that you can search email to reference for easy findability, if you want to remember something that we pointed out in an episode.

If you love Acquired and you want to be a deeper part of what David and I do here, you should become an Acquired Limited Partner. You'll get access to our library of over 50 interviews and deep dives on company building topics, our monthly Zoom calls which was great to do a few weeks ago, so fun to see so many of you. You'll get live access to listen in when we record big events like emergency pods and our book club discussions with authors.

Most importantly though—this is 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. 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 of venture and investment firms of every size around the world.

People have made friendships, gotten jobs, raised capital, launched new careers, even met cofounders through the Acquired community. If you are not already an LP, click the link in the show notes. Go to acquired.fm/lp. We can't wait to see you.

David: It's pretty cool, we've got some mafia forming of Acquired LPs and community members of different pretty hot startups around the Bay Area and Seattle but around the world, around the Internet.

Ben: Absolutely. If you aren’t subscribed, this is maybe your first episode and you like what you hear, you should. If this is 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, the media landscape, please share. Of course, one-to-one is great. Of course, sharing on the Internet is great. You can tag us @acquiredfm on Twitter if you do so. We appreciate anything you do to bring new folks the show. With that, we’ll see you next time.

David: See you next time.

Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.

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