Argyle Executive Forum: The Future of The New York Times Conference Call Transcript

The New York Times (NYT)

Argyle Executive Forum: The Future of The New York Times Call

June 10, 2008 10:00 am ET

Executives

Jason Redlus

Arthur Zaczkiewicz - Director of Content, Argyle Executive Forum

Rafat Ali - Editor and Publisher, paidContent.org

Bruce Eatroff - Founding Partner, Halyard Capital

Susan Lavington - SVP of Marketing, USA Today

Santo Politi - Co-Founder and General Partner, Spark Capital

Michael Zimbalist - VP of Research and Development Operations, The New York Times Company

Analysts

Kate Kaye - The ClickZ

Julie Kosterlitz - National Journal

Presentation

Operator

Good morning. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to The Future of The New York Times conference call presented by Argyle Executive Forum and paidContent. (Operator Instructions).

Thank you. Mr. Redlus, you may begin your conference.

Jason Redlus

Okay. Thank you, operator. Good morning, everyone. We are sorry we are a few minutes late. We had a last minute agenda change. We were waiting for the new speaker to come in. Dennis Miller from Spark can not do it. So, in his place from Spark is their Co-Founder, Santo. We just wanted to give him a minute or two to dial-in. He is dialing in momentarily, but we wanted to get started. We are sorry we are a few minutes late.

So, operator is going to just let us know when Santo has dialed in. In the meantime, we will get started. Welcome to the call. Thank you for carving out the time to be here. Arthur Zaczkiewicz for our team is going to lead the discussion. I am going to cut my remark short just in this period to get this moving. Arthur, the floor is yours, let's take it away and get started so we can be respectful of the calendar. Sorry, we are late everyone.

Arthur Zaczkiewicz

Okay. We are going to just dive right in here. We’ve Rafat Ali, Editor and Publisher of paidContent, who will be offering the digital perspective. So we will start off with him. Then we will move into the investors' perspective with Michael Zimbalist, Vice President of Research and Development at The New York Times. Then we will have Susan Lavington weigh in. She is the Senior Vice President of Marketing of USA Today. Then, with the inventor perspective from Bruce Eatroff, Founding Partner of Halyard Capital, as well as Santo, who is the General Partner in Spark Capital.

So Rafat, what is driving, maybe you could give your perspective on what is driving the shift in content distribution from traditional channels such as newspapers to other channels?

Rafat Ali

Yes, hi. This is Rafat from paidContent. I think I will try to make this sound as if I am not resulting to clichés, but the point is that I think the trends are very clear. People are moving away from print to online. I think that nobody at this point disputes. I think the various distribution channels are certainly being the biggest part of it.

The amount of choices that people have of news, which is at this point all around everybody, is one of the major reasons why people are just moving from one specific distribution channel for news which is print and then TV news in specific instances to online, which is distributed among thousands of different sites and channels, and further, average person reads news on a bunch of different sites. I think the reading habits have moved from two sources 5 to 10 to 15 and 20 in a lot of cases as far as the people. I mean they get news wherever they are at this point. So I think that is one of the key things that are happening.

Arthur Zaczkiewicz

So, how is this shift in distribution impacting publications such as The New York Times?

Rafat Ali

Well, I think The New York Times, keep in mind, today is among the very few in the US, at least, left that are national newspapers and the USA Today. Susan is on the call is from the second, meaning is among the only others that you can claim to be national newspapers.

So, there are certain differences in that versus a lot of other newspapers, but for New York Times on the print side, it means declining circulation, declining advertising. On the online site, what has managed that is it is truly is not just a national newspaper; it is an international worldwide newspaper at this point.

Whether you agree or disagree with it, The New York Times still sets the agenda for pretty much the rest of the media. Whether it sets agenda for the rest of the country is debatable, but certainly the rest of the media picks up a lot of what New York Times says and reports, and then sets the agenda for it.

But for New York Times what that means is that it has to grow the online revenues at a much faster clip than its print revenues are declining. That probably has not happened for any major newspaper at this point.

I think that is what everybody is aiming for and that also means that New York Times has to expand beyond its gambit of reporting news to adding a lot of other elements, which it has over the years. It’s bought About.com, certainly the biggest move that it did in terms of digital. It is been investing in a lot of startups that are in the news media technology space. I think that is a key for New York Times going ahead.

Arthur Zaczkiewicz

So, how would you grade its digital editorial content A, B, C?

Rafat Ali

Well, I mean editorial content for New York Times has always been great and that is the journalist of product that they have. Its how they present it, how they include others in the conversation. You have to believe at this point that news media is part of the conversation. If anything, it is born out of the move from print to online. I think that is the big case as news is just one part. It is the glue to all the conversations that are happening online.

I mean New York Times certainly has been a big part of that. I think they did a smart move moving TimesSelect, which was their subscription thing, from subscription to free. I think that was a big part of what people know New York Times Editorial for. I would say probably at this point I would give it a B plus just in terms of their efforts. They have done a lot online. Their site has been among the leading sites at least in terms of experimentation of all kinds of stuff online, be it on the advertising side, be it on the business model side, or be it on the editorial presentation side.

Arthur Zaczkiewicz

Michael, the industry you really look at some of those innovations as being something incredible. I mean you have done a lot by adding video and blogs and being on the forefront. The Times has excelled in it. So maybe you could walk us through what the newspapers R&D Department is currently cooking at it’s lab and what we could see in the months ahead and years ahead?

Michael Zimbalist

Sure. I am happy to. So, let me just put this to a little bit of context. About three and half years ago, The Times made a historic decision to integrate its print and digital operations. We began this transformation from strictly being a newspaper company to being a multi-platform news and information company. You see that manifest throughout all the innovations, many of which you alluded to and Rafat has alluded to. So I want to talk about your R&D Department in that context, because the R&D Department was setup about two and half years ago. I think it was set up in recognition of the fact that even as we undergo this transformation, the world around us continues to change at an incredible clip.

The primary mission of the R&D Department per se, is to continually to look ahead, to look just beyond the current product cycle that are being developed and rolling out across our digital properties, and to look at two things primarily. One is, what are the changes in consumer behavior that are taking place, and secondly, what are the changes in the technological landscape that are also taking place, and how do those intersect with a news and information company like ours, in terms of the kinds of products that people are going to expect. So, we matrix those changes in technology and behavior against products and we prototype new approaches and new concepts, for the kind of things that we want to put into the pipeline 18 months from now.

So that is a methodology of our R&D Department per se and we stay very closely aligned line with our business units, so that our innovations have an impact. So we are not off on a hilltop somewhere just thinking about the things. When we do that, the kinds of things that we see are related actually to one other things that Rafat mentioned which is ubiquity. One of the trends that we are tracking is ubiquity. We used to call it “Ubiquitous Wireless Broadband” a year ago, and that seems like a new thing. Now, a year later and the world is changing fast, and it is only been a year since iPhones are out, and everybody thinks, sure ubiquitous wireless broadband, I can look at multimedia wherever I am.

So we’ve expanded that view and we talked about ubiquitous computing, which is that, computation is going to be prevalent in every object, and everything. The ability for objects to be networked in, on the net is going to rapidly take hold, and the potential for news moments and news touch points is going to expand dramatically. So, we are looking at this trend towards ubiquity, and asking ourselves what kinds of things will be delivering news. Things like of example, the Kindle, which we were one of the first news suppliers on it, certainly smart phones and Blackberry's.

There is an intersection of this work with mobility, because, if you talk about that audience trend, the audience is completely wed to their mobile phones. There was a statistic that came out recently, that 91% or 92% of Americans keep their mobile phones within three feet 24 hours a day. So, we are very focused on mobility, and how we can support very new mobile device which is as rich and appropriate a content experience as imaginable.

Arthur Zaczkiewicz

Michael, what is it? You talked about the changes in behavior and technology, which is driving which?

Michael Zimbalist

It is a great question. I mean, I think that, it tends to be cyclically reinforcing in a funny way. Sometimes the technology breakthrough precedes the behavior. We saw that with the first internet bubble, we were planning, we meaning the internet industry were planning for a time when people were watching video online, but meanwhile 40% of the country was online, that was it, and most of them on dial-up connections. So often the technology - in that case we were expecting a behavior, but the technology held it back. Other times, we see the picture like getting news on the mobile phone and we supply it. We are right there to supply it, so, it depends.

Arthur Zaczkiewicz

What about the print product? Is there a future, do you continue to see print products of the New York Times over the next two decades or could you put a ball on that.

Rafat Ali

Well, we do not put a time, but we see the future of the product as being very good and we see the print product evolving within this media ecosystem in interesting ways. So, for example, one of the areas that we are very interested in the R&D is how print and mobile coexist in a very interesting way.

So, if you think about it, print and the Web never really worked together in the following sense. There is no real consumer use case, where people are sitting looking at their computer and reading a magazine or newspaper. At least it is a very rare experience.

If you think about television and the Web, that is not the case at all. We all have our laptops open while we are watching television, so those two media work really well together. We believe that print and the Web may have similar coexisting and reinforcing properties. If you think about it, print and mobile may work together in that same way.

Print is a mobile technology and you see people on the call all the time with their Smartphone with their magazine or newspaper. We’ve been exploring a lot of ways that those two reinforce and it may in fact gradually evolve the nature of what goes into the printed newspaper. Concrete example might be a movie review, where you have a 2D barcode that your camera phone can launch into a trailer for that very movie.

Arthur Zaczkiewicz

Susan, can you give us a snapshot of circulation landscape and maybe about the print advertising role, is it remain a worthwhile investment in today’s market, why or maybe why not.

Susan Lavington

Yes, absolutely, and circulation generally is challenging. Just in that as media fragments as print circulation just like all other media fragments too; there are more content providers across all different platforms. As long as there are people and there continue to be people in the millions and millions every day who read newspapers, absolutely print advertising makes sense. So, the audience is still there, I do not think anybody has debated that the audience has evaporated from print newspapers, as challenging as it might be.

I am a marketer, so depending on your brand, your message, your campaign, print may be the perfect answer for you. There just happens to be a plethora of more choices these days.

So, we continue, all of us who have print entities, still need to continue to innovate, as Michael have talked about, not just in the online product, but the print product to make sure that we are creating relevant content that is going to continue to drive circulation but also provide interesting avenues for our advertisers and are competitive with the plethora of choices out there for our advertising dollars.

Arthur Zaczkiewicz

So, from a content perspective both editorial and advertising there is a lot of noise in the market. So, Susan, how do you cut through that noise? Is it a combination of a print and online, maybe could you walk us through some of the strategies?

Susan Lavington

How would an advertiser cut through that noise?

Arthur Zaczkiewicz

Exactly.

Susan Lavington

It is different for every advertiser. I think if anything, what we’ve learnt in the last couple of years is there is no one size fits all solution for every advertiser and there never is going to be. When there were fewer choices, there were a fewer different ways you could spin a campaign. But the truth is that there are so many different choices now, there are so many different ways to reach out and be relevant to your consumers, that there is no one size fits all.

Nobody can say they figured it out because nobody has, and it is going to be different for every campaign and every brand. Which is why an advertiser just needs to be more in touch with, we always say the consumer is in control these days. The best advertisers are going to be really in touch with the consumers, really know what they value, whether that is print, online, television, anything else, and make sure they are putting their messages in the appropriate place.

And that breaks through the clutter. It is sort of Marketing/Advertising 101. If you are putting a relevant message in a relevant place then it is going to work, and if it does not, that transcends the medium. That works for anybody.

Arthur Zaczkiewicz

So, how has the advertisers expectations changed obviously given this new landscape, what are they expecting for their ad dollars?

Susan Lavington

Yes. I think the biggest change that we’ve seen from a print standpoint is just the accountability factor, and advertisers have always demanded accountability. But to a certain extent there weren’t the metrics in print or news, TV or anything. There weren’t metrics, the easy available metrics that are available online.

Now that advertisers have gotten used to those metrics and can really tie them very directly back to sales very quickly, they want the same thing out of all their media. Perhaps that is the most challenging piece of meeting our advertisers' needs is how do we provide those metrics and work with our advertisers to help them know how we are driving their business.

That is I think the biggest change that we’ve seen is just the accountability factor and the belief that we should be able to make things measurable. It is no longer that we provide the media, and they provide the creative. If it is not moving the business, then it is the creative fault. We’re a team and we’ve got to figure it out together and figure out what is working and what is not working and report back to our advertisers very quickly on that.

Arthur Zaczkiewicz

Okay. We are going to move to Bruce. Bruce, can you just give us the investment point of view and maybe walk us through some of the challenges?

Bruce Eatroff

Sure.

Arthur Zaczkiewicz

And opportunities facing The Times?

Bruce Eatroff

Absolutely, I think you really have to separate the two. I strongly believe that as a subscriber and a reader of New York Times, it is not going away and it continues to be a great content property. The challenge is, is it a good investment opportunity and that is where it gets more difficult, because you start asking yourself questions about whether they can replace the circulation revenue and advertising revenue that they historically got from print and online. They certainly can replace a portion of it, but whether they can replace all of it, I think it is still to be proven. As we know, there have been advertiser categories that have gone away from the historical newspaper business. CareerBuilder was a recovery movement in the newspaper industry after Monster.

So many things have happened in auto and real estate, which were huge advertising categories for the Times and other papers as well. I think the Times is, as a number of the participants have mentioned, is unique and that it really is the premium national content. There will always be room for a few players who wear that moniker. The Wall Street Journal certainly would be in that category and they are going after a very desirable demographic.

How they charge for and if you look at just the pricing amount today for The New York Times online versus the print, it is certainly a lower priced online product. I think they continue to have to find ways to report their content in an economic models to meet challenges as has been mentioned.

But today they are probably getting a smaller percentage of the media pie. If you are going to look five years forward, I think it is going to be hard to, even when you combine digital and print together to argue that the New York Times or other newspapers are going to actually increase their share of the media pie. Clearly online and out-of-home and direct marketing, these are all places that obviously are growing their share of the media pie.

Arthur Zaczkiewicz

So how much, just focusing on print for a second.

Bruce Eatroff

Sure.

Arthur Zaczkiewicz

How does the landscape look nationally, are we going to have like one or two big national papers and then a flurry of smaller niche B2B’s and community newspapers? What’s the landscape going to look like?

Bruce Eatroff

I think you will have very few national players, because I think it is very costly and two of the participants on the panel clearly have leadership positions in that regard. So I don’t think you will see many other national players. We think it’s going to be a barbell market. We think you will also continue to see very local papers. I think there really is not any alternative to the Little League scores and the PTA techniques and we also believe that those weekly community newspapers will continue to have a role in the marketplace and they’ll be very local advertisers, who will really to be the most efficient way whether it is local services like plumbers or restaurants that will still be a good place to advertise.

I think the challenge are the myriad of either small or daily papers, who really do not have the staff to deliver the quality of content that the bigger national organizations do, and so they’re getting some of their national content from the Associated Press. So their product looks very similar to what you can get online for free, and I think those properties are at risk. If you just look at the total number of newspapers in this country, the number has gone down considerably, over for any 10 or 20 year period I think that number will continue to shrink.

Arthur Zaczkiewicz

Santo, can you weigh in on that perspective on the investment perspective, either with the New York Times or the entire newspaper industry?

Santo Politi

I think we do two things here at Spark. One is, we try to disrupt industries that are with new technologies, and the other is we try to help the same industries, try to figure out a way to survive. Those are like two opposing investment [teams] that we have. We actually have been investing in publishing services for the last 2.5 - 3 years, because we see a lot of opportunity there, especially with online players like Google now becoming even less friendly to the publisher as they start aggregating news and vying for the same ad dollars and eyeballs that are out there.

From an investment perspective, I think, specifically for New York Times is like very, they have been very aggressive in their Website and are I think well ahead of a lot of people that are out there. I think in my opinion, if I were in their position, what I will try and do is I’d try to figure out how I would leverage my position and all these technologies are built to become the aggregator for the industry for various different things.

So, becoming for example, a vertical ad network for all other newspapers, or trying to replace some of the players out there for some of the small print advertising. In fact to leverage my position of great content creator and great circulation, to provide these services to the rest of the industry so that they can benefit from their overall position rather than just trying to protect theirs.

In terms of like investing in publisher services, what we’ve been looking at is, we’ve been looking at three things. One, publishers, they cannot afford to have as big as an editorial staff as they used to. So, what we’ve been looking at is ways to make the editorial staff and publisher look 10 times, 20 times bigger and doing that through automated content.

So, we’ve been looking at companies that allow you to generate automated content, so that you look a lot deeper and a lot more complete than you would otherwise look. You can actually allow your editors to focus on writing stories, not putting together background pages.

The other thing that we’ve been looking at is, how do you allow the editors to interact better with their audience. How do you get the editors to connect the audience and allow the audience to help editors to actually make the publishing so that is not a one-way interaction, it is a multi-interaction. If you connect your audience then your audience is going to take you places that you never expected them to.

And then the third thing that we’re looking at is monetization. everybody has a lot of ad space. They sell all these ads, but they are traditionally not in the advertising business that they need to be, so, trying to intermediate between a publisher and all the advertising channels that are out there in an efficient way.

So, we look at it as a three-legged stool. We have investments in all these different areas simply to help publishers. We’ve had actually pretty good success. When new medias arise then old media does not really die, it actually remains an old shadow of its own self, but it still survives and it is a big business. I think that it is what is going to happen here in a big way, it has been accelerating, but it is still going to be a big important business. So, actually there is still a lot of money to be made supporting these businesses.

Michael Zimbalist

This is Michael, could I jump in.

Arthur Zaczkiewicz

Yes, please.

Michael Zimbalist

I agree very much with what Santo said and there are few things that we are doing specifically that echos some of that. First of all, when it comes to automated content, a few years ago we purchased a blog company called Blogrunner, which we are now beginning to deploy throughout our Website.

If you think about the evolution again of digital media inside any big media company, but particularly here we began with walled garden approach as many publishers did, that we wanted to keep people in our domains and never link from our domains and we really moved to a philosophy that is really trying to edit the best of the Web using both the judgment of our editors but as a first pass-through that some of these automated tools that you talked about.

Also the notion of letting the editors connect with their audience, this has been a trend that we’ve been really staying on top of and in terms of letting the audience in and we are now hosting thousands and thousands and thousands of comments a day. If you read through them as a Times reader, you can see the quality of those comments and the quality of our readership really comes through in that space.

And lastly just on the monetization point, it was something I wanted to say, because I agree that new channels and new media have always emerged and the old media still remained in place. I am not quite sure if they shadow themselves but they’re big strong businesses, I agree.

Just one anecdote on monetization that gets to some of the things that Susan was talking about as well. This morning I was riding on the stationary bicycle watching Morning Joe, and they do as they do on that show, a rundown of the morning papers. Of course, the Times is a star in that particular segment.

They were holding up this morning’s Times and said, talking about Barak Obama, and Joe Scarborough did something extraordinary that I have never seen. He actually sort of said, “I can’t believe that I’m about to do this”, and he flipped the paper over and showed on the back side of A book, a full-page color ad for the box DVD set of Adams.  I’m serious.

And he said, “Father’s Day coming up.” I am just telling you, now you think about how incredibly impactful that full page color print ad is, and to Susan's point that advertisers are always trying to get the relevant message in the right place at the right time, and print still gets the job done in those kinds of situations in a very positive strong way.

Arthur Zaczkiewicz

So this question is for the entire panel. Would you say the demand for content is greater or is it less or is it more or the same as it was maybe five years ago and why?

Susan Lavington

Yes, this is Susan from USA Today. I think the demand for content is just ever increasing, and to a certain extent, this content overload. Everywhere you go now there is content, be it on your mobile phone, on the Web or even just as you’re walking around down in Times Square in New York City and you’ve got tickers going across all the various different billboards up there with just news and content assaulting you everywhere you go.

So, I think consumers are consuming more content than ever because it is simply more available than ever. That is going to continue to be the challenge for any content producer as well as a marketer.

That is why I think one thing that we haven't touched upon necessarily is obviously content is an extremely important piece, but maintaining the relevance of the brand, we have to have these incredibly strong brands if you want to break through the clutter. That goes back to figuring out what the New York Times or USA Today or Wall Street Journal, what the brand stands for, and then just making sure that we continue to deliver on that and deliver the expectations of our consumers. That can be in a whole bunch of different formats and making sure that we know our audiences and we are getting to the right audiences.

The New York Times is not trying to be USA Today and USA Today is not trying to be The New York Times. We are very, very different brands trying to do very, very different things. Even though we may all be innovating on similar platforms and have print products and mobile products and online products, ultimately it is the brand that is going to break through and drive the consumer choice, and ultimately, the advertiser choice as well.

Arthur Zaczkiewicz

Rafat, can you weigh in on this?

Rafat Ali

One of the things that I think to Susan's point,  New York Times and other newspapers have to decide what their brand stands for. For instance, example of here, it said the movie section of New York Times back when print used to be one of the options people used to read that and decide their movie-viewing habits.

And had that been replaced by movies at newyorktimes.com or had to be replaced by movies At yahoo.com, and I think that is one of the key questions that papers like New York Times have to answer. Are they the source for every activity, leisure activity, leisure or otherwise activity that users are doing or are they an additional layer on top of, let’s say, any Yahoo or any other movie forum has built?

I think the key is to make sure that, that is the question they have to figure out. Are they the resource for anything that happens in the, on movies or travel or any other sector. I think then the news you can use, part of it is a huge part of growth for any of the sites or any of the media companies. That probably is what is going to drive a lot of growth in the short-term. That actual news part which is reporting from Iraq and everywhere else is still and will probably always be a [lost] leader in most of the cases. The key is how do you sustain part while continuing to grow the others and hope you can subsidize one using the other.

Arthur Zaczkiewicz

Michael, I just want to circle back, real quick on what you had said before, about blogs and user-generated content. Is there a fine line between creating good content and having user-generated content that diminishes the brand?

Michael Zimbalist

We’ve all seen situations online where the user-generated content is not up to the quality of the brand. But we have been very careful about making sure that ours is partially where, thankfully, we have an incredibly articulate, affluent, influential audience and we also do moderate.

We are careful to make sure that the environments are maintained in the user-generated area. However, the user generated area can become quite lively and interesting and valuable editorially in their own right, and particularly users submitting photos from the scenes when things are happening. We saw that recently with a crane collapse. We saw this come in from the field and we run them.

Arthur Zaczkiewicz

I want to switch gears real quick, but I want to send this over to Bruce. Bruce, what is your take on Times as a takeover target for an acquisition? Is it still worthwhile as a target and why?

Bruce Eatroff

Well, that is obviously a complex question. We are not public equity investors, but obviously, there are a couple issues you have, obviously in a family controlled business. The Times is one of many media and other companies that are controlled by a family who have been under pressure to maximize shareholder value, and obviously they have got some new Directors on Board.

I think, quite frankly the real question is, is the public market ultimately the right place to maximize shareholder value for newspaper businesses, given that they are unlikely to be growth vehicles. Even though they are, I think going to be good sustainable businesses, they are going to generate a ton of free cash flow, and I think there are some good arguments to be made that, they may be should not be public and that various private constituents would put higher value on them. That is a questions obviously that is largely in the case of The New York Times which is controlled by the Sulzberger family.

However, clearly I think the market is evaluating all the components and again you can make that analogy to a new or the larger media businesses.

Arthur Zaczkiewicz

Santo, would you agree or?

Santo Politi

Yes, let me answer your previous question and then, as I think both answers would work really well. So, I looked from New York Times standpoint and the two things that I dealt with was my New York Times subscription and my 917 area code cellphone for the last 10 years, right. I actually read the New York Times today more than I ever did, in the last 10 years, simply because of factors, it used to be that I skimmed the paper in the morning, while traveling to work and then I favored the Sunday Times.

Now, I have it on my cellphone. So, every night before I go to bed, after I check the stock quotes of the day. I just look or read at New York Times stories for the next day and I end up reading a lot more on New York Times, a lot of the articles that I actually do not have time to read because of accessibility. I think that is true for a lot of different people there are more of content out there, but royalty content still stands out because its edited properly, it actually conveys point of view. If you are interested in what they are trying to say, what the brand really represents, you want to associate with it and you want to be a part of it and you read all that stuff.

The good thing about that is, advertisers want to be associated with good brands, want to be presented with good brands at the same price and at the same level and the same places. So, if you look at, like there are lots of blogs out there, but you look at the monetization of those blogs. The sources are great, but the monetization does not even compare to the levels of monetization that good media brands get today. As far as I know, the New York Times always have lots of their online advertising, if they had more inventory, they would be able to sell out that inventory as well, which brings me to the answer to your question.

I think New York Times is a great asset and is one of the big brands and big brands always retain value as they move forward. They have been doing a great job, transforming themselves. So our buyout target, I can not really answer that question, because I do not know if anyone, who is going to go in there, is going to do a better job than what they are doing already, reinventing themselves. So, like they are doing the basic blocking and tackling that a smart investor would go do if they were in their place, like for example I was involved with one of these things very recently and our target was not, given the basic blocking and tackling properly, but if you look at New York Times, they are doing great in online monetization. They have one of the best experts in the industry, they are in every kind of medium that could be imagined and they are very aggressive in all these mediums. They have really good people working for them. So, from that perspective, I do not think anyone knew that goes in there, it is next to anything better, so there is a lot additional value to be gained after what is already there. I think what has a lot of value is the brand itself, and what is going to add a lot of value is by being in the middle of all these things that are happening. How they are going to reinvent themselves? If the people are as good as I think they are, they will figure out a lot of things ahead of everybody else. They will become a major player going forward. So, I would consider them to be as vital target for those reasons not because of the fact that they are not being valued properly by the market.

Arthur Zaczkiewicz

I have a one question for the panelist and will stop with Rafat. In your opinion you think newspapers can successfully enter the social media arena, why or why not?

Rafat Ali

This is Rafat. I think social media is about people connecting over some various context. If the context happens to be news at The New York Times and other newspapers that are covering the specific deep scenarios and specialties are certainly going to be a big part of that of enabling that conversation. To expect that to be a huge part of revenue is placing too much burden on that. I think that will certainly be an incidental part of revenues that probably helps enable some of those discussions that it helps keep people longer on their sites, but in terms of direct monetization from The New York Times perspective with USA Today' perspective.

I mean USA Today was among the first newspaper sites to relaunch their sites and people are using a lot of social media tools. Using social media tools on these sites at this point is pretty much a no brainier. However, whether on sites like Facebook, MySpace and others, whether The New York Times or USA Today plays a big role in it, I mean that is probably, again, as I said, expecting too much out of that. I think it is more indirect monetization for the newspaper than direct monetization. I think it is the user attention that is more important than direct at this point.

Arthur Zaczkiewicz

Michael, would you agree?

Michael Zimbalist

I would pretty much agree with what Rafat had said. I would say that, yes, we can enter the social media space we’ve, and we will continue to innovate and grow our presence in that space with new features and new functionality as it develops. It is a great way to keep our audience engaged and keep them involved and retain them. So I agree.

Arthur Zaczkiewicz

Susan?

Susan Lavington

Yes. I guess it is what are you defining as social media. As Rafat mentioned, we launched a site well over a year ago now where we enabled the social media on our site and commenting on every article on the site, and as well as sharing content back and forth. So, to that end, I would say we enabled social media on our site and when it narrowly defines social media just to the likes of MySpace or Facebook. By its nature, the Internet is a social media organism.

How are we going to leverage the audiences on MySpace and Facebook? Absolutely I think there is a place for us to play. Do we know completely what that is yet? No. We continue to innovate. It is just what are the platforms out there in the Internet that we continue to look at, to innovate, how are we going to be involved. As Rafat said, as news always drives conversation, news will always be a part of the social fabric. On MySpace and Facebook specifically we will continue to figure out how we want to play in that social fabric. However, I would say we are a social media site as we exist now.

Arthur Zaczkiewicz

Okay, Bruce.

Bruce Eatroff

Look, I personally think social media is going to be a part of the fabric of everyone's online experience. I do not think the newspaper companies will likely to be the center of it. Yes, certainly based on the demographic, I think most people are using social networking site as connectors. So, it is unlikely to flow. If you look at the demographics whether it is Facebook as the younger or MySpace as you grow older or I do think some of that higher-end content can build more focused communities around particular topics, whether that be travel or some of the other areas. Thinking about whether New York Times strong book review or The Wall Street Journal has done a great job with their wine column. Those are that you could create such communities around some of the topics, but I do not think from a mass market appeal that is where the traffic is going be from the newspaper perspective?

Arthur Zaczkiewicz

Santo, what your thoughts on this?

Santo Politi

Again I might quote the same stuff. The question is what you mean by social media. I think if you are asking if The New York Times will be a competitive Facebook, I think the answer is no. I think they are already a social media site, and I think all the open idea, open social, all those things are going to have New York Times monetize their content better, which is what some of the media really helps you with. You know your audience is a little bit better in addition to the context of whatever content you are giving them. However, I think more interestingly there are new forms social media that are emerging. I think things like Twitter, which is going to have an impact on news and how it is gathered in our people, our quality and content or different things like social browsing or social shopping or things that have the social monitor that would have an impact on our people rather than news, how news is broken, how people call us around topics. I think those things are interesting to look at from the perspective of near-term], how those things would impact, not Facebook or MySpace or the mass audience that they have, but all these new different social network, you want to call them that, that are happening as we see and how those things are going to impact newspaper, I think that is a little bit more to think about, then just social media.

Michael Zimbalist

Santo this is Michael. Just in case you do not, already do it, you should follow us on Twitter.

Santo Politi

I actually do.

Michael Zimbalist

Okay.

Santo Politi

We had invested in Twitter. So it is a very interesting new media and how that takes shape and what impact it has, that is going to be all yet to be seen. I do not have the answer to all those.

Arthur Zaczkiewicz

At this point, we would like to turn the floor over to questions from the listeners. So operator can you assist in that, and may be we can get some questions in if anybody has any?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions).

Arthur Zaczkiewicz

While we are waiting for people to dial-in, I am noticing that, like in The New York Times, The New York Post or The Journal, and my local newspaper where I live, they seem to be shrinking and getting smaller. I was just wondering, anything that you can weigh in on the incredible shrinking newspaper and how far that could go, and what a newspaper will look like down the road?

Rafat Ali

This is Rafat, I can weigh in. I think a lot of the regulation data, in a lot of instances is moving online and New York Times has certainly started doing some of the business section. I think a lot of things like beyond the weekly movies, the movie reviews, beyond some of the general travel stuff, most of it will move online. I think it will keep shrinking to some extent until there is an economic tradeoff in terms of how much can shrink versus the fall-off in advertising that will result, as a result of it.

Because I think a lot of regulation stuff that people are used to seeing, the charts and data and stuff will probably go online, and the jump-off point that Michael pointed before, the jump-off point of moving readers from print away, it ends in print, and then move them online or in the mobile. I think that is one of the keys that will happen. The continuum from print to mobile and then online anything that will emerge out, what shape or form that takes that, just still could be seen, I think a lot of R&D still needs to go into and our investment dollars need to go into it. I think you will keep seeing that.

Arthur Zaczkiewicz

Operator, do you have any questions?

Operator

Yes, your first question comes from Kate Kaye.

Kate Kaye - The ClickZ

Hi, this is Kate Kaye, from ClickZ. I was hoping that someone could and I hope that I did not miss this, if you chatted about it, really early on in the call. However, I am hoping that you can talk a little bit about the self-served ad product that you launched today with AdReady and with a little bit also some of the broader publishing related topics that we’ve been discussing. If you can just share a little bit about what the goals are behind that and if there is any connection with trying to counteract the depletion of classified dollars, if this helps provide an incentive for local and small advertisers, who have in the past bought classifieds and maybe now are gravitating towards the free stuff online that this gives an incentive come back to the New York Times through more interesting types than ad?

Michael Zimbalist

Hi Kate, it is Michael.

Kate Kaye - The ClickZ

Hey, Michael.

Michael Zimbalist

We can actually set you up specifically with the needs in subsequent to this call to talk more, but let me just speak generally about it. We created this self-service opportunity, particularly to service more advertisers, who are easily addressed by our sales force directly. I think it is part of the growing trend to expand the advertiser base and to diversify the advertiser base and to provide them an entry point into our brands and into our environment in a way that makes it as easy as possible?

Kate Kaye - The ClickZ

Okay.

Arthur Zaczkiewicz

Do you have another follow-up?

Kate Kaye - The ClickZ

Just wondering, if anybody wants to talk a little bit about just the local advertising perspective of their assent, when it comes to monetization and, there was some mention of SEO and things like that and how obviously there could be a connection between what The New York Times does to promote its own content through SEO and just optimization for the Web as well as drive traffic to its advertisers.

Santo Politi

May I answer this question?

Kate Kaye - The ClickZ

Sure.

Santo Politi

I think, local advertising I think is a big deal and we haven't talked about this at all. I think if you look at Google and everybody else, like reaching the small business is the very high thing and there are very few channels that have access to those local businesses. I think it is the two channels I can think off is like the Yellow Pages and the newspapers.  I think the newspapers have to resolve in such a way to take advantage of the large percentage of local online advertising. Not too many people are doing a great job there. There is a the Yellow Pages company in New York called Ambassador Yellow Pages that does a very good job with search engine marketing efforts. They have their sales force focused properly on it. However, right now nobody is doing anything there. There is a huge potential, and to think that like the local farmer, the local locksmith is going to advertise online without the help of anybody. I think would be wrong to think that way. I think if you look at how papers are going to evolve; this is a very clear direction in my mind that they could go to where they would have a significant competitive advantage.

Kate Kaye - The ClickZ

Thank you.

Arthur Zaczkiewicz

Do we’ve another question?

Operator

Your next question comes from Steven Introcaso.

Rafat Ali

Hi, Steve.

Stephen Introcaso

Hi. Santos mentioned that his company is investing in services for the newspaper industry. Do newspapers and the investment community around the newspaper industry see technology that is being used to develop some of these services as overhead or as an enabler of competitive advantage going forward?

Arthur Zaczkiewicz

I am not sure who would be best to answer that question. Bruce, do you want to take it.

Bruce Eatroff

Yes sure, I mean I think, if you look it is a necessity, right. I think you are looking at industry, they need to become more efficient about how they deliver content and remember the challenges you talked about here. So, I think newspaper companies rightfully so are now saying, the folks are looking at a variety of technologies to improve their business model whether that is ways that you can improve the reach of their content without adding a lot of bodies, whether it is the way they run their print production facilities, and also the raw material, cost of paper has gone up and so I think we ourselves own the largest newspaper and I know that something we are constantly looking at, which is how can we maintain the quality of our content by doing it in a more cost effective manner and we are looking at a variety of technologies. Some come out of the newspaper industry, quite frankly some come out of other industries not always the newspaper industry that is leading the innovation progress.

Susan Lavington

This is Susan from USA. I would agree with everything that Bruce has said. Is it one of the other overhead or efficiencies? It is both. We’ve to constantly as with everything innovate and that has not changed in terms of how we produce the content and what we put on. Just constantly looking for efficiencies and how to grow the audience, and with a more efficient product. So, I will agree with Bruce.

Arthur Zaczkiewicz

I think we’ve time for one more question.

Operator

Okay. Your next question comes from Julie Kosterlitz.

Julie Kosterlitz - National Journal

Yes. I am actually with National Journal in Washington and I am a writer for the magazine. So, this is a safest self interested question, but it has to do with long-form journalism. Most of the stuff that you are talking about is little news you can use and bits of information that can be accessed with mobile technology and the like, and I am wondering how you see or if you see long-form journalism fitting into this environment. We could take The New York Times magazine as an example, where as you say print does not really have a long reading newspapers, online has not really taken off as people do not tend to sit down and are able to digest things on tiny screens. Where do you see this fitting in, that is one of the strengths of The New York Times with the long-form journalism. Where do you see that fitting in?

Michael Zimbalist

Julie, it is Michael. Just first of all, what I said before was that people do not sit at the computer while reading the print newspaper or print magazine. We do see that long-form journalism is a big part of the equation going forward. We are often surprised ourselves to see how very long stories are read a few completion online. I mean sometimes you will find 8000 words magazine is on the top of the most emailed list. So it does fit into the equation without a doubt and it falls into this one of the trends that we are looking at here in R&D is what we call intelligent content delivery, which says what is the occasion that user is requesting or accessing content and make sure we give them the right treatment for that time. So someone who has time and who wants the full story will be able to get the full story.

Arthur Zaczkiewicz

All right. Excellent. We are running out of time here, so I am going to turn the microphone over to Jason.

Jason Redlus

Okay. Well, thank you. That concludes the content portion on our session. I want to obviously thank all the speakers and Arthur for joining us today. Obviously thank all of you for taking time out to visit with us. I also want to recognize Karen Bechtel who is the producer of the event today, making sure that all logistics went smoothly. I think number of you had just asked earlier, other events that Argyle does. So on our Website we do about 40 live events a year and then between half a dozen to dozen calls like this. So you are welcomed to view the site, see anything that is of interest. Let us know if you would like to attend our next events that are coming up, mainly focused on the utilities and power and energy industry and so. If you are interested in oil, absolutely we’ve coming up in the rest of June.

Thank you very much everyone and if you in New York, please try to stay cool, as its 100 degrees and thank you all for joining us today. Thanks so much everyone.

Arthur Zaczkiewicz

Thank you. Bye-bye

Operator

This concludes today's conference call. You may now disconnect.

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