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
The New York Times (NYT) Argyle Executive Forum: The Future of The New York Times Call June 10, 1969 2:00 AM ET
Operator
Good morning. My name is Christie, and I will be yourconference operator today. At this time, I would like to welcome everyone toThe Future of The New York Times conference call presented by Argyle ExecutiveForum and paidContent. (Operator Instructions).
Thank you. Mr. Redlus, you may begin your conference.
Jason Redlus
Okay. Thank you, operator. Good morning, everyone. We aresorry 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 cannot do it. So, in his place from Spark is their Co-Founder, Santo. We justwanted 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 hasdialed in. In the meantime, we will get started. Welcome to the call. Thank youfor carving out the time to be here. Arthur Zaczkiewicz for our team is goingto lead the discussion. I am going to cut my remark short just in this periodto get this moving. Arthur, the floor is yours, let's take it away and getstarted 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 RafatAli, Editor and Publisher of paidContent, who will be offering the digitalperspective. So we will start off with him. Then we will move into theinvestors' perspective with Michael Zimbalist, Vice President of Research andDevelopment 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 theinventor 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 perspectiveon what is driving the shift in content distribution from traditional channelssuch as newspapers to other channels?
Rafat Ali
Yes, hi. This is Rafat from paidContent. I think I will tryto make this sound as if I am not resulting to clichés, but the point is that Ithink the trends are very clear. People are moving away from print to online. Ithink that nobody at this point disputes. I think the various distributionchannels are certainly being the biggest part of it.
The amount of choices that people have of news, which is atthis point all around everybody, is one of the major reasons why people arejust moving from one specific distribution channel for news which is print andthen TV news in specific instances to online, which is distributed amongthousands of different sites and channels, and further, average person readsnews on a bunch of different sites. I think the reading habits have moved fromtwo sources 5 to 10 to 15 and 20 ina lot of cases as far as the people. I mean they get news wherever they are atthis point. So I think that is one of the key things that are happening.
Arthur Zaczkiewicz
So, how is this shift in distribution impacting publicationssuch as The New York Times?
Rafat Ali
Well, I think The New York Times, keep in mind, today isamong the very few in the US,at least, left that are national newspapers and the USA Today. Susan is on thecall is from the second, meaning is among the only others that you can claim tobe national newspapers.
So, there are certain differences in that versus a lot ofother newspapers, but for New York Times on the print side, it means decliningcirculation, declining advertising. On the online site, what has managed thatis it is truly is not just a national newspaper; it is an internationalworldwide newspaper at this point.
Whether you agree or disagree with it, The New York Timesstill sets the agenda for pretty much the rest of the media. Whether it setsagenda for the rest of the country is debatable, but certainly the rest of the mediapicks up a lot of what New York Times says and reports, and then sets theagenda for it.
But for New York Times what that means is that it has togrow the online revenues at a much faster clip than its print revenues aredeclining. That probably has not happened for any major newspaper at thispoint.
I think that is what everybody is aiming for and that alsomeans that New York Times has to expand beyond its gambit of reporting news toadding a lot of other elements, which it has over the years. It’s boughtAbout.com, certainly the biggest move that it did in terms of digital. It isbeen investing in a lot of startups that are in the news media technologyspace. 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 alwaysbeen great and that is the journalist of product that they have. Its how theypresent it, how they include others in the conversation. You have to believe atthis point that news media is part of the conversation. If anything, it is bornout of the move from print to online. I think that is the big case as news isjust one part. It is the glue to all the conversations that are happeningonline.
I mean New York Times certainly has been a big part of that.I think they did a smart move moving TimesSelect, whichwas their subscription thing, from subscription to free. I think that was a bigpart of what people know New York Times Editorial for. I would say probably atthis point I would give it a B plus just in terms of their efforts. They havedone a lot online. Their site has been among the leading sites at least interms of experimentation of all kinds of stuff online, be it on the advertisingside, be it on the business model side, or be it on the editorial presentationside.
Arthur Zaczkiewicz
Michael, the industry you really look at some of thoseinnovations as being something incredible. I mean you have done a lot by addingvideo and blogs and being on the forefront. The Times has excelled in it. Somaybe you could walk us through what the newspapers R&D Department iscurrently cooking at it’s lab and what we could see in the months ahead andyears ahead?
Michael Zimbalist
Sure. I am happy to. So, let me just put this to a littlebit of context. About three and half years ago, The Times made a historicdecision to integrate its print and digital operations. We began thistransformation from strictly being a newspaper company to being a multi-platformnews and information company. You see that manifest throughout all theinnovations, many of which you alluded to and Rafat has alluded to. So I wantto talk about your R&D Department in that context, because the R&DDepartment was setup about two and half years ago. I think it was set up inrecognition of the fact that even as we undergo this transformation, the worldaround us continues to changeat an incredible clip.
The primary mission of the R&D Department per se, is tocontinually to look ahead, to look just beyond the current product cycle thatare being developed and rolling out across our digital properties, and to lookat two things primarily. One is, what are the changesin consumer behavior that are taking place, and secondly, what are the changesin the technological landscape that are also taking place, and how do thoseintersect with a news and information company like ours, in terms of the kindsof products that people are going to expect. So, we matrix those changesin technology and behavior against products and we prototype new approaches andnew concepts, for the kind of things that we want to put into the pipeline 18months from now.
So that is a methodology of our R&D Department per seand we stay very closely aligned line with our business units, so that ourinnovations have an impact. So we are not off on a hilltop somewhere justthinking about the things. When we do that, the kinds of things that we see arerelated actually to one other things that Rafat mentioned which is ubiquity. Oneof the trends that we are tracking is ubiquity. We used to call it “UbiquitousWireless Broadband” a year ago, and that seems like a new thing. Now, a yearlater and the world is changingfast, and it is only been a year since iPhones are out, and everybody thinks, sureubiquitous wireless broadband, I can look at multimedia wherever I am.
So we’ve expanded that view and we talked about ubiquitouscomputing, 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 goingto rapidly take hold, and the potential for news moments and news touch pointsis going to expand dramatically. So, we are looking at this trend towardsubiquity, and asking ourselves what kinds of things will be delivering news.Things like of example, the Kindle, which we were one of the first newssuppliers 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 wedto 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 mobiledevice which is as rich and appropriate a content experience as imaginable.
Arthur Zaczkiewicz
Michael, what is it? You talked about the changesin behavior and technology, which is driving which?
Michael Zimbalist
It is a great question. I mean, I think that, it tends to becyclically reinforcing in a funny way. Sometimes the technology breakthroughprecedes the behavior. We saw that with the first internet bubble, we wereplanning, we meaning the internet industry were planning for a time when peoplewere watching video online, but meanwhile 40% of the country was online, thatwas it, and most of them on dial-up connections. So often the technology - inthat case we were expecting a behavior, but the technology held it back. Othertimes, we see the picture like getting news on the mobile phone and we supplyit. We are right there to supply it, so, it depends.
Arthur Zaczkiewicz
What about the print product? Is there a future, do youcontinue to see print products of the New York Times over the next two decadesor could you put a ball on that.
Rafat Ali
Well, we do not put a time, but we see the future of theproduct as being very good and we see the print product evolving within thismedia ecosystem in interesting ways. So, for example, one of the areas that weare very interested in the R&D is how print and mobile coexist in a veryinteresting way.
So, if you think about it, print and the Web never reallyworked together in the following sense. There is no real consumer use case,where people are sitting looking at their computer and reading a magazine ornewspaper. At least it is a very rare experience.
If you think about television and the Web, that is not thecase at all. We all have our laptops open while we are watching television, sothose two media work really well together. We believe that print and the Webmay 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 callall the time with their Smartphone with their magazine or newspaper. We’ve beenexploring a lot of ways that those two reinforce and it may in fact graduallyevolve the nature of what goes into the printed newspaper. Concrete examplemight be a movie review, where you have a 2D barcode that your camera phone canlaunch into a trailer for that very movie.
Arthur Zaczkiewicz
Susan, can you give us a snapshot of circulation landscapeand maybe about the print advertising role, is it remain a worthwhileinvestment 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 mediafragments 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 andmillions every day who read newspapers, absolutely print advertising makessense. So, the audience is still there, I do not think anybody has debated thatthe audience has evaporated from print newspapers, as challenging as it mightbe.
I am a marketer, so depending on your brand, your message,your campaign, print may be the perfect answer for you. There just happens tobe a plethora of more choices these days.
So, we continue, all of us who have print entities, stillneed to continue to innovate, as Michael have talked about, not just in theonline product, but the print product to make sure that we are creatingrelevant content that is going to continue to drive circulation but alsoprovide interesting avenues for our advertisers and are competitive with the plethoraof choices out there for our advertising dollars.
Arthur Zaczkiewicz
So, from a content perspective both editorial andadvertising there is a lot of noise in the market. So, Susan, how do you cutthrough that noise? Is it a combination of a print and online, maybe could youwalk 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 allsolution for every advertiser and there never is going to be. When there werefewer choices, there were a fewer different ways you could spin a campaign. Butthe truth is that there are so many different choices now, there are so manydifferent ways to reach out and be relevant to your consumers, that there is noone size fits all.
Nobody can say they figured it out because nobody has, andit is going to be different for every campaign and every brand. Which is why anadvertiser just needs to be more in touch with, we always say the consumer isin control these days. The best advertisers are going to be really in touchwith the consumers, really know what they value, whether that is print, online,television, anything else, and make sure they are putting their messages in theappropriate place.
And that breaks through the clutter. It is sort of Marketing/Advertising101. If you are putting a relevant message in a relevant place then it is goingto work, and if it does not, that transcends the medium. That works foranybody.
Arthur Zaczkiewicz
So, how has the advertisers expectations changedobviously given this new landscape, what are they expecting for their addollars?
Susan Lavington
Yes. I think the biggest changethat we’ve seen from a print standpoint is just the accountability factor, andadvertisers have always demanded accountability. But to a certain extent thereweren’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 andcan really tie them very directly back to sales very quickly, they want thesame thing out of all their media. Perhaps that is the most challenging pieceof meeting our advertisers' needs is how do we provide those metrics and workwith our advertisers to help them know how we are driving their business.
That is I think the biggest changethat we’ve seen is just the accountability factor and the belief that we shouldbe 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 thecreative fault. We’re a team and we’ve got to figure it out together and figureout what is working and what is not working and report back to our advertisersvery quickly on that.
Arthur Zaczkiewicz
Okay. We are going to move to Bruce. Bruce, can you justgive us the investment point of view and maybe walk us through some of thechallenges?
Bruce Eatroff
Sure.
Arthur Zaczkiewicz
And opportunities facing The Times?
Bruce Eatroff
Absolutely, I think you really have to separate the two. Istrongly believe that as a subscriber and a reader of New York Times, it is notgoing 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 thecirculation revenue and advertising revenue that they historically got fromprint and online. They certainly can replace a portion of it, but whether theycan replace all of it, I think it is still to be proven. As we know, there havebeen advertiser categories that have gone away from the historical newspaperbusiness. CareerBuilder was a recovery movement in the newspaper industry afterMonster.
So many things have happened in auto and real estate, whichwere huge advertising categories for the Times and other papers as well. Ithink the Times is, as a number of the participants have mentioned, is uniqueand that it really is the premium national content. There will always be roomfor a few players who wear that moniker. The Wall Street Journal certainlywould be in that category and they are going after a very desirabledemographic.
How they charge for and if you look at just the pricingamount today for The New York Times online versus the print, it is certainly alower priced online product. I think they continue to have to find ways toreport their content in an economic models to meet challenges as has beenmentioned.
But today they are probably getting a smaller percentage ofthe media pie. If you are going to look five years forward, I think it is goingto be hard to, even when you combine digital and print together to argue that theNew York Times or other newspapers are going to actually increase their shareof the media pie. Clearly online and out-of-home and direct marketing, theseare 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 havelike one or two big national papers and then a flurry of smaller niche B2B’s andcommunity newspapers? What’s the landscape going to look like?
Bruce Eatroff
I think you will have very few national players, because Ithink it is very costly and two of the participants on the panel clearly haveleadership positions in that regard. So I don’t think you will see many othernational players. We think it’s going to be a barbell market. We think you willalso continue to see very local papers. I think there really is not anyalternative to the Little League scores and the PTA techniques and we alsobelieve that those weekly community newspapers will continue to have a role inthe marketplace and they’ll be very local advertisers, who will really to bethe most efficient way whether it is local services like plumbers orrestaurants that will still be a good place to advertise.
I think the challenge are the myriad of either small ordaily papers, who really do not have the staff to deliver the quality ofcontent that the bigger national organizations do, and so they’re getting someof their national content from the Associated Press. So their product looksvery similar to what you can get online for free, and I think those propertiesare at risk. If you just look at the total number of newspapers in thiscountry, the number has gone down considerably, over for any 10 or 20 yearperiod I think that number will continue to shrink.
Arthur Zaczkiewicz
Santo, can you weigh in on that perspective on theinvestment perspective, either with the New York Times or the entire newspaperindustry?
Santo Politi
I think we do two things here at Spark. One is, we try todisrupt industries that are with new technologies, and the other is we try tohelp the same industries, try to figure out a way to survive. Those are liketwo opposing investment [teams] that we have. We actually have been investingin publishing services for the last 2.5 - 3 years, because we see a lot ofopportunity there, especially with online players like Google now becoming evenless friendly to the publisher as they start aggregating news and vying for thesame ad dollars and eyeballs that are out there.
From an investment perspective, I think, specifically forNew York Times is like very, they have been very aggressive in their Websiteand are I think well ahead of a lot of people that are out there. I think in myopinion, if I were in their position, what I will try and do is I’d try tofigure out how I would leverage my position and all these technologies are builtto become the aggregator for the industry for various different things.
So, becoming for example, a vertical ad network for all othernewspapers, or trying to replace some of the players out there for some of thesmall print advertising. In fact to leverage my position of great contentcreator and great circulation, to provide these services to the rest of theindustry so that they can benefit from their overall position rather than justtrying to protect theirs.
In terms of like investing in publisher services, what we’vebeen looking at is, we’ve been looking at three things. One, publishers, theycannot afford to have as big as an editorial staff as they used to. So, whatwe’ve been looking at is ways to make the editorial staff and publisher look 10times, 20 times bigger and doing that through automated content.
So, we’ve been looking at companies that allow you togenerate automated content, so that you look a lot deeper and a lot morecomplete than you would otherwise look. You can actually allow your editors tofocus on writing stories, not putting together background pages.
The other thing that we’ve been looking at is, how do youallow the editors to interact better with their audience. How do you get theeditors to connect the audience and allow the audience to help editors to actuallymake the publishing so that is not a one-way interaction, it is amulti-interaction. If you connect your audience then your audience is going totake 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 aretraditionally not in the advertising business that they need to be, so, tryingto intermediate between a publisher and all the advertising channels that areout there in an efficient way.
So, we look at it as a three-legged stool. We haveinvestments in all these different areas simply to help publishers. We’ve hadactually pretty good success. When new medias arise then old media does notreally die, it actually remains an old shadow of its own self, but it stillsurvives and it is a big business. I think that it is what is going to happenhere in a big way, it has been accelerating, but it is still going to be a bigimportant business. So, actually there is still a lot of money to be madesupporting 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 fewthings 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 companycalled Blogrunner, which we are now beginning to deploy throughout our Website.
If you think about the evolution again of digital mediainside any big media company, but particularly here we began with walled gardenapproach as many publishers did, that we wanted to keep people in our domainsand never link from our domains and we really moved to a philosophy that isreally trying to edit the best of the Web using both the judgment of our editorsbut as a first pass-through that some of these automated tools that you talkedabout.
Also the notion of letting the editors connect with theiraudience, this has been a trend that we’ve been really staying on top of and interms of letting the audience in and we are now hosting thousands and thousandsand 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 readershipreally comes through in that space.
And lastly just on the monetization point, it was somethingI wanted to say, because I agree that new channels and new media have alwaysemerged and the old media still remained in place. I am not quite sure if they shadowthemselves but they’re big strong businesses, I agree.
Just one anecdote on monetization that gets to some of thethings that Susan was talking about as well. This morning I was riding on the stationarybicycle watching Morning Joe, and they do as they do on that show, a rundown ofthe morning papers. Of course, the Times is a star in that particular segment.
They were holding up this morning’s Times and said, talkingabout Barak Obama, and Joe Scarborough did something extraordinary that I havenever seen. He actually sort of said, “I can’t believe that I’m about to dothis”, and he flipped the paper over and showed on the back side of A book, afull-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 relevantmessage in the right place at the right time, and print still gets the job donein those kinds of situations in a very positive strong way.
Arthur Zaczkiewicz
So this question is for the entire panel. Would you say thedemand for content is greater or is it less or is it more or the same as it wasmaybe five years ago and why?
Susan Lavington
Yes, this is Susan from USA Today. I think the demand forcontent is just ever increasing, and to a certain extent, this contentoverload. 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 NewYork City and you’ve got tickers going across all the various differentbillboards up there with just news and content assaulting you everywhere yougo.
So, I think consumers are consuming more content than everbecause it is simply more available than ever. That is going to continue to bethe challenge for any content producer as well as a marketer.
That is why I think one thing that we haven't touched uponnecessarily is obviously content is an extremely important piece, butmaintaining the relevance of the brand, we have to have these incredibly strongbrands if you want to break through the clutter. That goes back to figuring outwhat the New York Times or USA Today or Wall Street Journal, what the brandstands for, and then just making sure that we continue to deliver on that anddeliver the expectations of our consumers. That can be in a whole bunch ofdifferent formats and making sure that we know our audiences and we are gettingto the right audiences.
The New York Times is not trying to be USA Today and USAToday is not trying to be The New York Times. We are very, very differentbrands trying to do very, very different things. Even though we may all beinnovating on similar platforms and have print products and mobile products andonline products, ultimately it is the brand that is going to break through anddrive 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 newspapershave to decide what their brand stands for. For instance, example of here, itsaid the movie section of New York Times back when print used to be one of theoptions people used to read that and decide their movie-viewing habits.
And had that been replaced by movies at newyorktimes.com or hadto be replaced by movies At yahoo.com, and I think that is one of the keyquestions that papers like New York Times have to answer. Are they the sourcefor every activity, leisure activity, leisure or otherwise activity that usersare doing or are they an additional layer on top of, let’s say, any Yahoo orany other movie forum has built?
I think the key is to make sure that, that is the questionthey have to figure out. Are they the resource for anything that happens inthe, 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 mediacompanies. That probably is what is going to drive a lot of growth in theshort-term. That actual news part which is reporting from Iraqand everywhere else is still and will probably always be a [lost] leader inmost of the cases. The key is how do you sustain part while continuing to growthe others and hope you can subsidize one using the other.
Arthur Zaczkiewicz
Michael, I just want to circle back, real quick on what youhad said before, about blogs and user-generated content. Is there a fine linebetween creating good content and having user-generated content that diminishesthe brand?
Michael Zimbalist
We’ve all seen situations online where the user-generatedcontent is not up to the quality of the brand. But we have been very carefulabout making sure that ours is partially where, thankfully, we have anincredibly articulate, affluent, influential audience and we also do moderate.
We are careful to make sure that the environments aremaintained in the user-generated area. However, the user generated area canbecome quite lively and interesting and valuable editorially in their ownright, and particularly users submitting photos from the scenes when things arehappening. We saw that recently with a crane collapse. We saw this come in fromthe field and we run them.
Arthur Zaczkiewicz
I want to switch gears real quick, but I want to send thisover to Bruce. Bruce, what is your take on Times as a takeover target for anacquisition? Is it still worthwhile as a target and why?
Bruce Eatroff
Well, that is obviously a complex question. We are notpublic equity investors, but obviously, there are a couple issues you have,obviously in a family controlled business. The Times is one of many media andother companies that are controlled by a family who have been under pressure tomaximize shareholder value, and obviously they have got some new Directors onBoard.
I think, quite frankly the real question is, is the publicmarket ultimately the right place to maximize shareholder value for newspaperbusinesses, given that they are unlikely to be growth vehicles. Even thoughthey are, I think going to be good sustainable businesses, they are going togenerate a ton of free cash flow, and I think there are some good arguments tobe made that, they may be should not be public and that various privateconstituents would put higher value on them. That is a questions obviously thatis largely in the case of The New York Times which is controlled by theSulzberger family.
However, clearly I think the market is evaluating all thecomponents and again you can make that analogy to a new or the larger mediabusinesses.
Arthur Zaczkiewicz
Santo, would you agree or?
Santo Politi
Yes, let me answer your previousquestion and then, as I think both answers would work really well. So, I lookedfrom New York Times standpoint and the two things that I dealt with was my NewYork 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 thelast 10 years, simply because of factors, it used to be that I skimmed thepaper in the morning, while traveling to work and then I favored the SundayTimes.
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 upreading a lot more on New York Times, a lot of the articles that I actually donot have time to read because of accessibility. I think that is true for a lotof different people there are more of content out there, but royalty contentstill stands out because its edited properly, it actually conveys point ofview. If you are interested in what they are trying to say, what the brandreally represents, you want to associate with it and you want to be a part ofit and you read all that stuff.
The good thing about that is,advertisers want to be associated with good brands, want to be presented withgood brands at the same price and at the same level and the same places. So, ifyou look at, like there are lots of blogs out there, but you look at themonetization of those blogs. The sources are great, but the monetization doesnot even compare to the levels of monetization that good media brands gettoday. As far as I know, the New York Times always have lots of their onlineadvertising, if they had more inventory, they would be able to sell out thatinventory as well, which brings me to the answer to your question.
I think New York Times is a greatasset and is one of the big brands and big brands always retain value as theymove forward. They have been doing a great job, transforming themselves. So ourbuyout target, I can not really answer that question, because I do not know ifanyone, who is going to go in there, is going to do a better job than what theyare doing already, reinventing themselves. So, like they are doing the basicblocking and tackling that a smart investor would go do if they were in theirplace, like for example I was involved with one of these things very recentlyand our target was not, given the basic blocking and tackling properly, but ifyou look at New York Times, they are doing great in online monetization. Theyhave one of the best experts in the industry, they are in every kind of mediumthat could be imagined and they are very aggressive in all these mediums. Theyhave really good people working for them. So, from that perspective, I do notthink anyone knew that goes in there, it is next to anything better, so thereis a lot additional value to be gained after what is already there. I thinkwhat has a lot of value is the brand itself, and what is going to add a lot ofvalue is by being in the middle of all these things that are happening. Howthey are going to reinvent themselves? If the people are as good as I thinkthey are, they will figure out a lot of things ahead of everybody else. Theywill become a major player going forward. So, I would consider them to be asvital target for those reasons not because of the fact that they are not beingvalued properly by the market.
Arthur Zaczkiewicz
I have a one question for thepanelist and will stop with Rafat. In your opinion you think newspapers cansuccessfully enter the social media arena, why or why not?
Rafat Ali
This is Rafat. I think social media is about peopleconnecting over some various context. If the context happens to be news at TheNew York Times and other newspapers that are covering the specific deepscenarios and specialties are certainly going to be a big part of that ofenabling that conversation. To expect that to be a huge part of revenue isplacing too much burden on that. I think that will certainly be an incidentalpart of revenues that probably helps enable some of those discussions that ithelps keep people longer on their sites, but in terms of direct monetizationfrom The New York Times perspective with USA Today' perspective.
I mean USA Today was among the first newspaper sites torelaunch their sites and people are using a lot of social media tools. Usingsocial 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 NewYork 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 indirectmonetization for the newspaper than direct monetization. I think it is the userattention 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 wouldsay that, yes, we can enter the social media space we’ve, and we will continueto innovate and grow our presence in that space with new features and newfunctionality as it develops. It is a great way to keep our audience engagedand 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. AsRafat mentioned, we launched a site well over a year ago now where we enabledthe social media on our site and commenting on every article on the site, andas well as sharing content back and forth. So, to that end, I would say weenabled social media on our site and when it narrowly defines social media justto the likes of MySpace or Facebook. By its nature, the Internet is a socialmedia organism.
How are we going to leverage the audiences on MySpace andFacebook? Absolutely I think there is a place for us to play. Do we knowcompletely what that is yet? No. We continue to innovate. It is just what arethe 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 drivesconversation, news will always be a part of the social fabric. On MySpace andFacebook specifically we will continue to figure out how we want to play inthat social fabric. However, I would say we are a social media site as we existnow.
Arthur Zaczkiewicz
Okay, Bruce.
Bruce Eatroff
Look, I personally think social media is going to be a partof the fabric of everyone's online experience. I do not think the newspapercompanies will likely to be the center of it. Yes, certainly based on thedemographic, I think most people are using social networking site asconnectors. So, it is unlikely to flow. If you look at the demographics whetherit is Facebook as the younger or MySpace as you grow older or I do think someof that higher-end content can build more focused communities around particulartopics, whether that be travel or some of the other areas. Thinking aboutwhether 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, butI do not think from a mass market appeal that is where the traffic is going befrom the newspaper perspective?
Arthur Zaczkiewicz
Santo, what yourthoughts on this?
Santo Politi
Again I might quote the same stuff. The question is what youmean by social media. I think if you are asking if The New York Times will be acompetitive Facebook, I think the answer is no. I think they are already asocial media site, and I think all the open idea, open social, all those thingsare going to have New York Times monetize their content better, which is whatsome of the media really helps you with. You know your audience is a little bitbetter in addition to the context of whatever content you are giving them.However, I think more interestingly there are new forms social media that areemerging. I think things like Twitter, which is going to have an impact on newsand how it is gathered in our people, our quality and content or differentthings like social browsing or social shopping or things that have the socialmonitor that would have an impact on our people rather than news, how news isbroken, how people call us around topics. I think those things are interestingto 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 newdifferent social network, you want to call them that, that are happening as we seeand how those things are going to impact newspaper, I think that is a littlebit more to think about, then just social media.
Michael Zimbalist
Santo this is Michael. Just in case you do not, already doit, you should follow us on Twitter.
Santo Politi
I actuallydo.
Michael Zimbalist
Okay.
Santo Politi
We had invested in Twitter. So it is a very interesting newmedia and how that takes shape and what impact it has, that is going to be allyet 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 toquestions from the listeners. So operator can you assist in that, and may be wecan get some questions in if anybody has any?
Question-and-AnswerSession
Operator
Thank you. (Operator Instructions).
Arthur Zaczkiewicz
While we are waiting for people to dial-in, I am noticingthat, like in The New York Times, The New York Post or The Journal, and mylocal newspaper where I live, they seem to be shrinking and getting smaller. Iwas just wondering, anything that you can weigh in on the incredible shrinkingnewspaper and how far that could go, and what a newspaper will look like downthe road?
Rafat Ali
This is Rafat, I can weigh in. I think a lot of theregulation data, in a lot of instances is moving online and New York Times hascertainly started doing some of the business section. I think a lot of thingslike beyond the weekly movies, the movie reviews, beyond some of the generaltravel stuff, most of it will move online. I think it will keep shrinking tosome extent until there is an economic tradeoff in terms of how much can shrinkversus the fall-off in advertising that will result, as a result of it.
Because I think a lot ofregulation stuff that people are used to seeing, the charts and data and stuffwill 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, andthen move them online or in the mobile. I think that is one of the keys thatwill happen. The continuum from print to mobile and then online anything thatwill 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 needto go into it. I think you will keep seeing that.
Arthur Zaczkiewicz
Operator, do you have anyquestions?
Operator
Yes, your first question comesfrom Kate Kaye.
Kate Kaye - The ClickZ
Hi, this is Kate Kaye, fromClickZ. I was hoping that someone could and I hope that I did not miss this, ifyou chatted about it, really early on in the call. However, I am hoping thatyou can talk a little bit about the self-served ad product that you launchedtoday with AdReady and with a little bit also some of the broader publishing relatedtopics that we’ve been discussing. If you can just share a little bit aboutwhat the goals are behind that and if there is any connection with trying tocounteract the depletion of classified dollars, if this helps provide anincentive for local and small advertisers, who have in the past boughtclassifieds and maybe now are gravitating towards the free stuff online thatthis gives an incentive come back to the New York Times through moreinteresting types than ad?
Michael Zimbalist
Hi Kate, it is Michael.
Kate Kaye - The ClickZ
Hey, Michael.
Michael Zimbalist
We can actually set you upspecifically with the needs in subsequent to this call to talk more, but let mejust speak generally about it. We created this self-service opportunity,particularly to service more advertisers, who are easily addressed by our salesforce directly. I think it is part of the growing trend to expand theadvertiser base and to diversify the advertiser base and to provide them anentry point into our brands and into our environment in a way that makes it aseasy as possible?
Kate Kaye - The ClickZ
Okay.
Arthur Zaczkiewicz
Do you have another follow-up?
Kate Kaye - The ClickZ
Just wondering, if anybody wantsto talk a little bit about just the local advertising perspective of theirassent, when it comes to monetization and, there was some mention of SEO andthings like that and how obviously there could be a connection between what TheNew York Times does to promote its own content through SEO and just optimizationfor 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 wehaven't talked about this at all. I think if you look at Google and everybodyelse, like reaching the small business is the very high thing and there arevery few channels that have access to those local businesses. I think it is thetwo channels I can think off is like the Yellow Pages and the newspapers. I think the newspapers have to resolve insuch a way to take advantage of the large percentage of local onlineadvertising. Not too many people are doing a great job there. There is a theYellow Pages company in New York called Ambassador Yellow Pages that does avery good job with search engine marketing efforts. They have their sales forcefocused 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 locallocksmith is going to advertise online without the help of anybody. I thinkwould be wrong to think that way. I think if you look at how papers are goingto evolve; this is a very clear direction in my mind that they could go towhere 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. Santosmentioned that his company is investing in services for the newspaper industry.Do newspapers and the investment community around the newspaper industry seetechnology that is being used to develop some of these services as overhead oras 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 efficientabout how they deliver content and remember the challenges you talked abouthere. So, I think newspaper companies rightfully so are now saying, the folksare looking at a variety of technologies to improve their business modelwhether that is ways that you can improve the reach of their content withoutadding a lot of bodies, whether it is the way they run their print productionfacilities, and also the raw material, cost of paper has gone up and so I thinkwe ourselves own the largest newspaper and I know that something we areconstantly looking at, which is how can we maintain the quality of our contentby doing it in a more cost effective manner and we are looking at a variety oftechnologies. Some come out of the newspaper industry, quite frankly some come outof other industries not always the newspaper industry that is leading theinnovation progress.
Susan Lavington
This is Susan from USA.I would agree with everything that Bruce has said. Is it one of the otheroverhead or efficiencies? It is both. We’ve to constantly as with everythinginnovate and that has not changedin terms of how we produce the content and what we put on. Just constantlylooking for efficiencies and how to grow the audience, and with a moreefficient 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 Washingtonand I am a writer for the magazine. So, this is a safest self interestedquestion, but it has to do with long-form journalism. Most of the stuff thatyou are talking about is little news you can use and bits of information thatcan be accessed with mobile technology and the like, and I am wondering how yousee or if you see long-form journalism fitting into this environment. We couldtake The New York Times magazine as an example, where as you say print does notreally have a long reading newspapers, online has not really taken off aspeople 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 YorkTimes with the long-form journalism. Where do you see that fitting in?
Michael Zimbalist
Julie, it isMichael. Just first of all, what I said before was that people do notsit at the computer while reading the print newspaper or print magazine. We dosee that long-form journalism is a big part of the equation going forward. Weare often surprised ourselves to see how very long stories are read a fewcompletion online. I mean sometimes you will find 8000 words magazine is on thetop of the most emailed list. So it does fit into the equation without a doubtand it falls into this one of the trends that we are looking at here in R&Dis what we call intelligent content delivery, which says what is the occasionthat user is requesting or accessing content and make sure we give them theright treatment for that time. So someone who has time and who wants the fullstory will be able to get the full story.
Arthur Zaczkiewicz
All right. Excellent. We are running out of time here, so Iam going to turn the microphone over to Jason.
Jason Redlus
Okay. Well, thank you. That concludes the content portion onour session. I want to obviously thank all the speakers and Arthur for joiningus today. Obviously thank all of you for taking time out to visit with us. Ialso 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 justasked earlier, other events that Argyle does. So on our Website we do about 40live events a year and then between half a dozen to dozen calls like this. Soyou are welcomed to view the site, see anything that is of interest. Let usknow if you would like to attend our next events that are coming up, mainlyfocused on the utilities and power and energy industry and so. If you areinterested 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 andthank 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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