The New York Times Company

All right. High energy. Yeah. Need some energy to get through 170 years. It's literally 170 years. It's crazy. Welcome to Season 8, Episode 2 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder of Pioneer Square Labs, a startup studio and venture capital firm in Seattle. And I'm David Rosenthal, and I am an angel investor based in San Francisco. And we are your hosts. For over 100 years, you would have been hard-pressed to find a better business in the world than an American newspaper. Each one had a local monopoly, an incredibly profitable advertising business, and it was one of the earliest examples of a reasonably low-marginal-cost business.

It's dirt cheap to just print another copy of the paper. The newspaper business was, for a long time, Warren Buffett's canonical example of a franchise, like the best type of business you can possibly own. Indeed. And this, today, listeners, is the story of the paper that loomed large over all the others, the New York Times. Today, we peer into what I think is the oldest company we've ever done on this show, founded over 170 years ago before the Civil War.

The Times has seen the majority of American history, and for the majority of its life, it's been controlled by a single family. And for many of you, a family you've probably never heard of. This is a family whose paper shaped the American perception of current events through World War I, World War II, Vietnam. I mean, really, their newspaper shaped your perception of America itself, and your parents' perception, and your grandparents' perception. You get it. It is probably safe to say that the five generations of the Ox-Soulsberger family has been the closest thing that America has ever seen to a dynasty.

After a century of near-continuous prosperity, the New York Times has seen an incredibly dramatic fall, and then rise just in the last 20 years. The internet, and social media on top of it, brought ruin to the entire traditional journalism industry. In the late 2000s, the New York Times got to such a low point that they even sold their office building to free up some cash while they rented it back from the buyer. Oof, indeed. Can't wait to talk about that part of the history.

And yet, somehow today, they've been accused of being a monopoly in the journalism industry, and they have more digital subscribers than they ever did in print, and they employ the former editors-in-chief of BuzzFeed, Recode, and Vox as columnists. So how do they turn it around? Who is this mysterious family? And what does the future hold for the New York Times? Today, we dig in. If you love Acquired, and you want to be a deeper part of what David and I do here, you should become an Acquired Limited Partner.

You'll get access to our library of over 50 interviews and deep dives on company-building topics, monthly Zoom calls, and this is new, live access to listen in while we record big events like emergency pods, and our book club discussions with the authors. So if you are not already an LP, you can click the link in the show notes, or go to acquired.fm slash LP, and we can't wait to see you there. And if you want to talk all things Acquired, the goings-on of the tech world, and find just a genuinely smart community to talk about all this stuff, you should join the Slack at acquired.fm slash Slack.

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So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lagora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work.

And this means that the pie can grow even as each individual task takes less time. And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And Lagora works where you already work. You can use it within Microsoft Word while redlining or drafting.

The early Lagora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Lagora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months. Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time or whether a partner trusts it before going into a conversation with a major client.

If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at lagora.com slash acquired and just tell them that Ben and David sent you. Well, David, it's time to take us in. And listeners, as always, this show is not investment advice. David and I may have investments in the companies we discuss. This show is for educational, and I sure hope entertainment purposes only. Oh boy.

Was this ever an entertaining one to research? 170 years. This is crazy. We're going to start with the founding of the company and it's going to be the farthest back in history. Other than Bitcoin, when we were talking about the banking system, I think this is going to be the second farthest back in history we've ever started. And I'm not even going back before the company. You started with like something older than this, I think with Uber, right?

Oh, actually no, because any automobile history. I think that was like 1890s. Wow. Yeah. There were no cars when the New York Times was started. Crazy. Ah, crazy. Okay. We go back to 1851 and the founding of the well-known, world-renowned New-York Daily Times, which of course- Doesn't quite have the ring. Doesn't quite have the same ring. No. New-York Daily Times. New York Daily Times. Okay. So what was going on in 1851? It was a media boom time in the US.

There was a growing population in the country, increasing literacy rates, vastly increasing literacy rates, urbanization, and of course, war on the somewhat near-term horizon in the coming civil war, US civil war. And then as now, bad news sells newspapers. And so there was hugely, hugely growing demand for news. New newspapers were sprouting up all over the country. In the year 1800, there were 200 newspapers in the US. And in the year 1860, there were 3,000 newspapers in the US.

Isn't that crazy? So did printing presses get way cheaper too? Yes. Huh. Yeah. So it got a lot cheaper to print newspapers. Must have been various forms of machinery, rudimentary automation, and just the demand, like the growing population, the demand for news, literacy. It was like the substacks of 1851. Everybody was starting a newspaper. And also because of the advances in production technology, not only could you make more newspapers and people could start them, but you could sell them cheaper.

So before this time, newspapers were selling, I think around like five, six cents a copy. But starting in the 1850s, newspapers, and in particular new newspapers, dropped in price to one cent per copy. This is going to come back later. So you could reach a whole new mass market. So here we are in September of that year of 1851, the well-known New York journalist and politician, Henry Jarvis Raymond, and his friend and former banker and merchant, George Jones, embark on a new venture, new newspaper venture, in this brave new landscape.

And they publish the first edition on September 18th, 1851 of the new hyphen York, New York Daily Times. All right, Rosenthal, you've made your point. All right, enough with the hyphens. So who were these guys? So Jones, as we said, was a former banker. He had also, though, worked as a business manager at Horace Greeley's New York Tribune, which was then the sort of premier paper in New York. And that was where he had met Raymond.

Jones had family money and lots of connections about town from his wife's family. Do you know his wife's father's name? Ben, you're not going to get this, but I had to put it in here. His wife's father's? No, I have no idea. Benjamin Gilbert, the well-known New York socialite. No way. Really? Really. Yeah, really. I saw that. I was like, we got it. We got to include this here. I got to do some research and see if we're related.

So he puts up $25,000 of his own family money to finance this new venture. They want to get to $100,000. So he goes out and he raises the other $75,000. This is a lot of money in 1851 from just, you know, some like casual family connections. He has like, you know, several members of the Morgan family end up financing this. like J. J. Pierpont Morgan. Yeah, exactly. Wow. As you do. This guy shows up in like all these old stories.

Like, I feel like everyone somehow was getting financed by J. P. Morgan in these days. Totally. So that's Jones. He's sort of the business guy. He brings, he brings the capital. But it's really Raymond who's the real force behind this. So who is, who was Henry Raymond? He was quite the interesting character. As we mentioned, he had worked at the Tribune with Jones, which is where they met. And that was the premier sort of respectable penny paper out there as they were known for the one cent papers.

He had also, though, been very involved in politics. And when I say very involved, I mean, very, very involved. Ben, do you know what other organization Henry Raymond is well known for co-founding besides what would become the New York Times? Ooh, I feel like I should remember this from AP US history, but I do not. A little organization called the Republican Party, of which he was a founder, one of five founding members. Kind of incredible. Like this is, this just blew my mind doing the research.

Literally, he's known as the godfather of the Republican Party is also the founder of the New York Times. And all of this was happening concurrently. So was it like a mouthpiece for the Republican Party in the early days? Well, not quite. Okay, so before he and Jones decided to start the Times, Raymond had actually left the newspaper business and he was a politician. He was a member of the New York state legislature where he was a member of the Whig Party at the time, sort of the precursor to the Republican Party.

But he had stepped down and then he decides to start with Jones to start the Times, which they do. But then shortly after, and so, you know, Raymond is running the Times. He is the managing editor. He's the publisher. Like, Jones is the money, but Raymond is really running it. While he's still running it, he goes back into politics leading up to Abraham Lincoln's presidential campaign. And that's when he, along with Lincoln and also along with Horace Greeley from the Tribune, they and a couple other people start the Republican Party.

And the platform, of course, is abolitionism and the abolition of slavery in the United States. That was the origin and the platform of the party. So, Raymond, while this is going on, he becomes the second chair of the Republican National Committee. So, he's like the chair of the RNC while also publishing the New York Times. He helps push Lincoln into the presidency. And then actually, after the Civil War, he goes to Congress and he becomes a congressman.

He's a member of the House of Representatives, all still while publishing the Times and serving as the managing editor, like writing all the editorials. That is so insane. I mean, it's funny. On the one hand, I was like, wow, today this would not fly. And then I'm thinking to myself, today this is what's happening. Not at the Times, but yeah. Yeah, it's crazy. So, this thread is going to come back so often throughout this history. So, that said, you know, certainly the Times is quite literally the party mouthpiece of the Republican Party.

But, Raymond is also a real journalist. Like, he, you know, he worked at the Tribune. He highly values journalism. He doesn't want the Times to be sensational. And, in fact, in the very first edition that comes out that September in 1851, he writes famously, we shall, we being the Times, shall be conservative in all cases where we think conservatism essential to the public good and we shall be radical in everything which may seem to us to require radical treatment and radical reform.

We do not believe that everything in society is either exactly right or exactly wrong. What is good we desire to preserve and improve and what is evil we want to exterminate or reform. Of course, he's talking about slavery there. I love this piece so much. I think it is just, not only is it a beautiful little piece of writing, but it is pithy. It captures so much of what their intent is in creating what would become an enduring institution and how they view it in such a pragmatic way.

I'm excited. Listeners, we will link in the sources to where we found this or if you're listening to this more than a week after it comes out, you can check it out in the transcript, but it's just like I want to have it framed and put on my wall. It's a sort of wonderful model. It really is a beautiful statement, I think. So, it's probably worth pausing here for a minute before we go too much farther in the story and explaining what exactly is it that happens at a newspaper?

Like, what are the various sort of departments here? There's really kind of two and a half pieces of any news media organization, newspapers included, cable news, television, networks, which we will talk about as we go along here and of course, internet media, news networks as well. There's the content side of the house, sometimes called editorial, which includes both news and opinion. And then there's the publishing side of the house, which is the business side of the house, the advertising, the circulation, the managing of the organization and the company.

So, where does the publisher fit into this? Right. So, then the publisher, so now back in Raymond's day, Raymond is both sort of executive editor, he's managing all this, and publisher. So, the publisher is the running of the business, managing subscription, circulation, advertising, the cost side. And in the case of the New York Times today, it's actually pretty easy to separate this out because there's the media property, the New York Times, and then there's the company, which is the New York Times company that publishes the New York Times.

And so, an easy shorthand for this for people who are familiar with tech companies would be you have someone running product and someone, you know, a CRO, someone running revenue. Exactly. Exactly. So, sometimes throughout the history of the New York Times, there has been just a publisher that is essentially like CEO and CRO. Sometimes there's also a CEO who usually reports to the publisher, as is the case now. So, today, A.G. Sulzberger is the fifth generation A.G.

Sulzberger, who is the publisher of the New York Times and chairman of the board. And Meredith Coppet-Levian is the recently appointed CEO who reports to him and the board. they sort of even further bifurcate the duties where the publisher has a little bit more of sort of like a figurehead and a sort of consistency throughout history voice and the CEO is like actually running the business. But again, neither of them are actually involved in overseeing the editorial product and overseeing the newsroom.

That has always been traditionally kept at arm's length. Yes, yes. And most of the CEOs in the New York Times company history have been COOs before becoming CEO. So, Meredith was COO until recently when she became CEO. So, we're going to cover today sort of the history of the New York Times from the business and publisher side. Of course, we'll talk about the newsroom as we go. But as always, this is a corporate history perspective that we're going to cover the New York Times from.

All right. So, David, I teased the Ox Sulzberger family in the intro and I heard you just mention that AG Sulzberger is the fifth generation publisher. These two people we're talking about here, not Ox or Sulzberger. Exactly. This is previous ownership, like founding ownership. So, what happened here? Okay. So, back to Raymond. he's wearing all these hats. Things go well for the first, you know, 20 plus years of the New York Daily Times. Within two weeks of starting, they hit 10,000 copies in circulation, which is pretty great.

26,000 in the first year. Then in September of 1857, so six years after they start, they drop the daily and shorten the name to just the New York Times. Still with the hyphen, it would be Ox who would remove the hyphen later. But things are going well. By 1858, circulation's up to 40,000. And then by the time the Civil War starts with the attack on Fort Sumter in 1861, circulation is at 75,000. That's pretty good. Like, that's, I don't know what the population of New York was at that time.

I think it was maybe about a million or so, maybe a little less. So, they're 10% plus of the city is taking the Times at this point. Totally. And at this point, too, the New York Times was a little bit highfalutin. Like, it was a newspaper for people who were tuned into business and politics and particularly more sort of politics. So, it wasn't necessarily for the every person. and in particular in the North, the abolitionists and what would become the Republican Party.

So, okay, this moment, this is like maybe the craziest founder story that we've had on this show in our five years of doing this. So, on July 13th, 1863, the Civil War has been going on for two years since Fort Sumter, but there wasn't a draft for the Army yet. And in July, the Union, the government declares a draft and there are actually draft riots in New York City about this. People are, you know, really upset.

lots of people have family in the South. They may be sympathizers with the South. This is hugely, hugely controversial. And the mobs target the newspapers that are sort of the mouthpieces of Lincoln and the Republican Party through the war. So, a mob descends on the New York Times headquarters building and Raymond, because he's buddies with Lincoln, he gets the War Department to ship a bunch of rifles and two Gatling guns to the Times, because they know this is going to happen.

And he, like, leads a defense of the building and the company. He hands out rifles to the whole staff. He's manning one of the Gatling guns himself, and he gives the order that if any of the mom tries to break into the building, you're to fire at will on these people. It's crazy. Nobody is, no shots are actually fired, but they do successfully defend the building. The mob instead ends up attacking the Tribune and storming the Tribune's building.

Totally, totally crazy. Next time we hear about, like, a tech CEO doing something that seems bold, think of Henry Raymond back in the day. And for anyone who's seen Gangs of New York, I think this is sort of that scene toward the end of the movie, where that is the scene you can kind of picture where there's the freaking publisher of the New York Times strapping a Gatling gun to the front steps and protecting the paper.

Yeah, protecting this house. completely nuts. Completely nuts. After the Civil War ends, Raymond passes away not long after, in 1869. His partner, George Jones, then takes over as publisher and, you know, continues running it in a fine fashion. I wouldn't say it grows hugely, but he's a good story to the business. However, when he dies in 1891, there's a succession crisis. Like, what's going to happen to this company? So, a group of staff, a group of reporters, end up putting together a buyout and raise about a million dollars to buy the Times from the estates of Jones and Raymond.

And, they start operating the company, but they're not, they're all like editors. They're all from the news side. They're not business people, so they don't really know how to manage the publishing or the business of the newspaper. And, in 1893, there's a financial crisis and, kind of much like 2008, which we'll get to later in the story, this is really bad for newspapers, for advertising, for circulation. And, the paper ends up going bankrupt. Circulation had fallen all the way down below 9,000.

It was up at, you know, 100,000 plus during the Raymond and Jones days. like, basically, the New York Times is gonna disappear unless somebody comes in and saves them. I mean, even just think about all the machinery that they had and all the delivery trucks that they had in order to deliver the Times and how do you downsize that fixed-cost infrastructure from shipping out, you know, 100,000 papers a day to 9,000. It's very easy to understand how this business ends up upside down quickly.

Totally. I mean, there's the rent on the space, there's the raw materials that you need to print the paper, the ink, the pulp, the paper, there's the people, the laborers you need to employ, highly skilled laborers on the printing side and then the delivering infrastructure. You're not just scaling down your AWS usage. Yeah, totally. If only Jeff Bezos were around back then. So, this is when Adolph Ox enters the story and rescues the New York Times and this is really a second founding of the business and it's just an amazing American story.

Like, I, likewise, I knew that the Sulzberger family, you know, controlled the Times. I probably mostly only knew that because I used to be an investment, media investment banker and worked at the Wall Street Journal but I didn't know anything about this history. And I only knew about it, frankly, because when we saw all these tech CEOs starting to do this crazy dual-class structure stuff, famously Zuckerberg and I think the Google founders did it and obviously Snapchat and freaking everyone since.

Like, the New York Times is the one who has the triple-class structure. That's right. I forgot about that. Where if you own shares on the market, you get zero votes. It's hardcore. But yeah, the Times pioneered this when they went public in, what? 1969. Yeah. I mean, it sort of laid dormant there undiscovered until tech CEOs decided to do it with all their companies. Yeah. So, okay, so Adolf Ox was born in Cincinnati, Ohio in 1858, so seven years after the founding of the New York Times to Jewish immigrants from Germany and, like, pretty poor, like, he was not a Rockefeller or a Morgan.

And after the Civil War, the family moved to Tennessee where he has to, you know, work as a boy to help, you know, support the family. So he gets a paper route in Knoxville, Tennessee, and he gets a paper route for the Knoxville Chronicle, and he ends up just falling in love as a young child with the newspaper business. At the age of 11, he gets taken off the streets, so to speak, and he goes to work in the office as an assistant to the editor of the Chronicle, William Rule, who kind of becomes a mentor for him.

And then when he's a little older, his family sends him away to Rhode Island to go work in his uncle's grocery store up there. They thought he would make more money doing so, but he hates it. And at age 40... He's a newspaper man. He's a newspaper man that's in his blood. So at age 14, in 1872, he drops out of school in Rhode Island, comes back to Tennessee, restarts working at the Chronicle, this time in the printing operations as what's called a printer's devil helping out around the factory.

And then a bit over five years later, at age 20, he decides to move to Chattanooga, which is becoming an iron mining boom town in Tennessee. This is all so crazy. Imagine how far away we are from New York City and the New York Times here. And here's this kid of Jewish immigrants who started as a newspaper boy, moves to Chattanooga, Tennessee. And in Chattanooga, he knows that there's an existing newspaper called the Chattanooga Times, but it's not very well managed and he's got a hunch that he might be able, even as a 20-year-old kid with no money, to be able to take this thing over.

He's so freaking enterprising because keep in mind he's a dropout. He's trying to make money for his family to support them and he's not doing the traditional thing that you would go earn a wage. He's trying to say, well, I want to go and revive this newspaper business because I know a thing or two about papers. And he's doing it in a place, Chattanooga, that is having a moment. And it's interesting, I was sort of trying to figure out why it's not sort of like the dominant city in Tennessee today because in this postbellum era, we're here in the late 1870s, the country has started to sort of heal and rearrange itself and Chattanooga is in this interesting middle between

a northern territory and a southern territory and I think it's in this great book called The Trust, which chronicles the history of the times that I was reading to prepare. They call it a distinctly American city, neither northern nor southern and it's really this, you know, not only economically because of the iron mining but culturally becoming a boomtown. Yep. So, young Adolph, man, this kid is like so enterprising. So, he negotiates with the guys who own the times in Chattanooga to buy the paper for a down payment of $250 and then effectively for those in, you know, like small cap private equity, they'll know this term, a seller's note of $5,500.

So, he gets them to agree for this tiny down payment that he'll take over the business and he thinks he can turn it around and make it profitable enough that over, you know, the next set of years, he can generate enough profits to pay the original owners $5,500 out of the profits that the incremental profits he'll generate. Wait, so this business is in dire condition and these guys are saying, we'll take $250 and believe you that you're going to generate $5,500 worth of profits in the ensuing years to pay us.

I mean, whether they believed it or not, they were willing to do the deal. They were willing to part with $250 and the $5,500 was house money if they could get it. Yeah, exactly. And I mean, I'd say it was a good deal. They should have just kept equity in the paper instead of debt because they get the money because he does it. Within 10 years, he's completely turned around the paper. It's the premier newspaper in Chattanooga.

Chattanooga has been growing and he's pulling in, he, Ox, is pulling in $25,000 in annual profit, cash flow for himself and his family out of this paper. Just amazing. Whoa, I didn't realize he was pulling that in personally. Yep, he's moved his entire family to Chattanooga. He's got them all working in the business. His father, his uncle, his siblings, his wife, his wife's family, they're all working in the business. But, fatefully, he's so long on Chattanooga and he loves the city, he loves Tennessee, he decides to buy up a lot of land around Chattanooga.

I couldn't tell if it was for housing speculation or for the mines, but he ends up losing $100,000 on this real estate. Yeah, I think it was called the Over the River Company or something like that because it was land that was over the river from everything else. It was wildly speculative. Yep, wildly speculative. And so famously, he learns his lesson from this. He's like, I'm a newspaper man. This is in my blood. This is all I will ever do.

I will never do anything else. I could imagine him praying one night being like, I'm sorry, God, for going into real estate. I will be the greatest newspaper man ever if I can bail out my debts. Not to mention, it worked well when he bought stuff with other people's money and with leverage, and it really didn't go well when he decided to buy a bunch of land with his own personal capital. So he gets this seed planted of, huh, I should use other people's money to buy stuff from now on.

Exactly. So, okay, he's pulling in $25,000 of cash flow from the Chattanooga Times, but he needs 100k faster than four years. That's not going to cut it. He does know he can turn around newspapers though, so he starts putting out some feelers and traveling around the country looking for another newspaper that he could buy and take over just like he did with the Chattanooga Times. And we should say a key component to the success of him turning around the Chattanooga Times comes from the fact that Chattanooga was this sort of melting pot of North and South and Adolf really believed in that and he really believed in the Chattanooga Times as unbiased paper of the people representing a balanced view of the

world and Chattanooga was sort of the perfect place to pull that idea from. totally very very very much his ethos so that's when he hears he gets wind of the bankruptcy proceedings going on in New York for the New York Times and at first he's like supposedly he's like that's too big like I can't go you know I'm Adolf Ox from Chattanooga Tennessee I can't go like take over the New York Times. And at that point even though it was in dire trouble the brand of the New York Times it was the best newspaper brand in the country still it was totally definitely thought of as like the the paper.

But some mentors convince him that that he can do this. So in 1896 he packs up his bags hops on the train goes up to New York. He leaves his family behind running the Chattanooga Times and he scrapes together so the the Times is in in bankruptcy proceedings. He scrapes together a plan to the creditors and to the receivers in bankruptcy to take the paper out of bankruptcy and take it over. This is incredible. So he's like this this you know I think he was late 30s at the time from Tennessee shows up in New York kind of walks into the bankruptcy court and is like believe me I can do this and to do you know the thing about

the interbank transfer. Oh no I don't. He convinced a Chattanooga bank to wire money to a New York bank so that if in New York people check to see like are you wealthy he had a bank account with money in his name and to the Chattanooga bank who he knew well he wrote them a personal check and said look I'm good for it I promise just wire the money I don't intend to use it. That's amazing.

It's like there's some incredible huckster stuff going on that he he sort of pulls strings to he's got the entrepreneurial hustle. So yeah did you find did you read about the other thing he did to convince the creditors of his legitimacy. Oh I don't know. This is amazing. So President Grover Cleveland at the time like United States president had come through Chattanooga I think on his while he was campaigning and as the leading you know newspaper and publisher of the Chattanooga Times.

Hawks was on the welcoming committee so he got to meet Grover Cleveland like while he was campaigning. And you know he kept his address at 1600 Pennsylvania Avenue. He knew where to find him. So he writes to the president while he's going up to New York and he says he writes to Cleveland he says I am negotiating for a controlling interest in the New York Times and have fair prospects of success. I write to respectfully ask that you address by return mail a letter to Mr. Spencer Trask chairman of the New York Times publishing company giving your opinion of my qualifications as a newspaper publisher general personal character my views on public questions judged by of course the Chattanooga Times.

In other words say what you can of me as an honest industrious and capable newspaper publisher. This is incredible and he needed that support because at the time until this I apparently I did find this the Trask and the rest of the committee that was dealing with the bankruptcy of the Times was in favor of a different plan to merge it like to basically unload the assets merge it in with a different paper wipe their hands clean and say look we got something for it and instead Adolf's walking in here with like a whole different plan of like I am going to figure out how to revive this thing and make it great and of course there is some wicked

financial engineering that he promises and that he really has to make the case of like you don't just it's not a cash buy here like you're gonna have to believe in me in order to make this work yep so Cleveland writes him back with like a letter of endorsement and he walks in there with a letter of endorsement from the president of the United States incredible so the bankruptcy you know committee accepts his plan he pays $75,000 up front to the creditors which he also had scraped together with borrowed money because remember he owes $100,000 right this is the craziest thing this guy buys the New York Times he will eventually have a controlling interest in it and as it

says in the trust this is my favorite passage the yokel from Tennessee had accomplished the impossible he had bought the New York Times using none of his own money amazing this is like the minnow swallows whale from when Cap Cities bought ABC 100% so how does it work exactly there's like 75k that he in quotes puts up but actually he goes and like gets people in Tennessee to put it up right yeah he like rounded up the money from some people in New York some people in Tennessee I think he waved around the letter from Grover Cleveland to a bunch of people so that was a small part of the consideration the other part is he uses you know sellers

notes again of $600,000 in debt to owed back to the creditors that they will pay off over you know some number of the coming years from you know profits he'll generate by running this paper that has 9,000 subscribers and is bleeding I think on the order of about half a million dollars a year at this point in losses you can see why if you're Trask or the existing bankruptcy committee you're like uh I think we'll take the merger like this doesn't sound like any kind of guarantee it is this guy that no one's ever heard of he's coming in from Tennessee like you gotta sympathize with the the original plan yeah totally but somehow he gets it done so he emerges

with the New York Times and he has just like one problem which is okay how are you gonna how are you gonna turn this thing around okay so what's the grand plan what's the plan what's the plan well so the plan is basically to be really boring and really cheap so at the time people may be familiar with you know William Randolph Hearst and uh I think it was Joseph Pulitzer uh Hurst of course ran the journal in New York among many papers uh all over the country and Pulitzer ran the world uh those were the two heavy hitter publications in New York at the time they each had about half a million circulation but what they were were what

was called I remember studying about in school yellow journals sensationalism so they were super sensationalist this was right at the time of the Spanish-American war like these guys were like the I don't know if they were like the National Inquirer but like they were fast and loose with the facts and basically trying to like sell copies with any sensationalism that they could come up with do you know why it is called yellow journalism oh I feel like I did but I don't remember so both of these papers published a comic called the yellow kid and this cartoon was like you know trashy like it was like a low-brow cartoon and that coupled with it both of them were obviously doing tons of

sensational headlines it was the sort of original click bait and so you sort of couldn't trust what was in the newspaper because it was always sort of trumpeted up and you know famously around the Spanish American war they were sort of making up headlines to make the war sound even more interesting than it is and I always like knew that yellow journalism was sort of tied in with these papers tied in with the original clickbait with sort of untrustworthy headlines but I did not know until doing this research that it is because they shared the yellow kid comic interesting if I did know that I had totally forgotten it but yeah these guys are like the I don't know maybe BuzzFeed

is probably doing a disservice to BuzzFeed but they're like the I don't know like gawker of the BuzzFeed and gawker both of whose editors-in-chief now work at the New York Times as columnist I know amazing amazing so Ox lays out his plan for positioning for the New York Times which is that they're going to provide journalistic integrity and something that is quote not going to soil the breakfast linen which is really exciting because it means his plan like the thing he knows how to do from Chattanooga like that's kind of the playbook that needs to be run again just on a much bigger scale yep so he decides he needs to come up with a motto to like express this new

positioning to the New York public and he comes up with the phrase all the news that's fit to print and he's not too sure about it though I mean this is how the story goes I think probably he he's maybe more like Pulitzer and Hearst than he lets on and he wanted to run a marketing stunt so he runs a prize competition for anybody in New York who can come up with a better slogan offering a hundred dollar prize for the winner and they run it they get lots of entries they end up the winner is chosen and the the official motto of the New York Times is going to be all the world's news but not a school for scandal really rolls

off the tongue doesn't funny I like oxes a lot better yeah he did too so he's like that's nice I'll pay you a hundred bucks but I'm keeping my motto so all the news that's fit to print still shows up in the upper corner of the New York Times print edition today right and on the website which we will get to later so he also comes up with sort of an informal credo for the company and for the newsroom which is to give the news impartially without fear or favor and this is going to come up later when we get to the trust but that really is the the credo of the organization in a very fundamental way yeah and and it follows

with so it is to give the news impartially without fear or favor regardless of any party sect or interest involved and that was a deliberate call out particularly around party for the highly highly politically leaning papers of the time interesting interesting that I didn't see that because the well where I got the quote from is going to come back in a sec that must have gotten dropped at some point yeah he he specifically did that because the times which is hilarious and a 180 at this point was considered an organ of the Democratic Party so funny so it's like a little bit of like a hey I'm gonna run this a different way but I'm gonna say it kind of

softly here and I'm not gonna piss anybody off too much because it's gonna sound reasonable the way that I'm putting it here yeah okay so he's got the positioning down we're gonna report the news impartially without fear without favor no preference for party what about the price though so remember there were the penny papers back in the day that the new printing technology had enabled and that was what the New York Daily Times sold for by this time probably because of the financial difficulties they jacked the price of the paper up 300x to three cents and the world and there's inflation going on because you know this is what 40 50 years has gone by yeah exactly the world and

the journal were also selling at three cents and this is before the antitrust regulation Pulitzer and Hearst were colluding they wanted to raise the price to five cents and so they're like doing the sensationalism with the yellow journalism it's only helping themselves helping each other they're like yeah we're gonna raise the price this is gonna be great and do you know why Ox was so financially motivated to sell more copies well I assume I was gonna talk in a sec about the business model of newspaper you know as you sell more as your circulation goes up not only do you get the circulation revenue subscription revenues you also get to sell a lot more advertising too yeah there is definitely the like

classic business model dynamic going on there's one term in particular that was a part of the newspaper purchase that he cares deeply about personally oh I didn't find this this was if the newspaper is profitable for a certain number of years don't quote me on this but I think it was three years and he runs it profitably for three years then he is able to unlock a new piece of ownership it is it is shares that are held in escrow that are then transferred to him and he becomes the controlling owner right now he's just a minority owner he gets to run the business but he doesn't have control and so he desperately is trying to figure out a way how can I

make this thing profitable and keep it for 36 months straight which there was actually a funny misunderstanding where the previous owners of the times were trying to insist that it was three calendar years ox was able to get it profitable for a 36 month straight stint and I think they ended up actually bringing in lawyers to arbitrate this but yes this is an attempt by ox to say I need to pull some crazy lever and I'm going to drop the price in order to try and get circulation to the point where I can actually get this thing profitable enough to control it I love it to pull forward a playbook theme here I mean like this is such an entrepreneurial story like

when your back is against the wall and like you have to make something work and you have no resources and you're running out of money like that's when genius happens you know when you're forced into these constraints so you know probably even more than the positioning of the news this is what really makes the times he cuts the price from three cents down to one cent which would seem crazy like you're trying to make more money why would you cut the price this is huge circulation goes subscriptions go through the roof because remember the journal and the world they're now three cents they're trying to go to five cents like this is getting out of reach for your average person in New York every

day and there was some interesting criticism going on at the time of sort of that it wouldn't work that you know these there were papers that sold for one cent but I'm not but they were tabloids you know they were kind of trashy and people were saying Ox you know you're you're trying to this crazy move you're doing the people who are reading those tabloids the one cent things you're not interested in your content this business stuff stuff yeah and so what Ox did was he basically made the bet that I can steal share from my competitors there's plenty of people that want to read three cent news but they will totally go to whoever's offering the three cent news at the one cent price

and he was right and he stole a bunch of share and and the growth exploded when he dropped the price totally so grows three X in his first year back up to 30,000 circulation by 1899 it's at 76,000 so back above the 75,000 that it had been crosses a hundred thousand in 1901 200,000 in 1912 and by the 1920s after World War one he's up at over three quarters of a million circulation and is has become the dominant not just paper in New York but like the probably most prestigious most respected most widely known American journalistic organization out there that you know when we think of the New York Times this was it and it was all Ox this is the birth of the

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continuous now which is why Vanta automates your security your compliance and the work to earn and prove trust we're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years so you can get a thousand dollars off Vanta at Vanta dot com slash acquired that's V-A-N-T-A dot com slash acquired for a thousand dollars off and just tell them that Ben and David sent you so we alluded to the business model a little bit and why circulation is so important you know there's this dual revenue stream nature of newspapers and the media business is just beautiful it's like all the incentives are for you to make great content that gets more

readers because obviously they pay for the newspaper being delivered to them which is a nice business you know it's like relatively lower margin compared to other media business parts of the business because you got to print it and you got to deliver it right it's not all margin dollars the way that advertising is right but advertising you know you can have an ad sales department and as your circulation goes up and in particularly as your circulation goes up amongst attractive demographics for advertisers you might say like a growing expanding middle class with lots of new disposable income you're going to do very very well with no marginal costs on the advertising side yep the other crazy thing about the physical paper business

is today we kind of think about like well you can be a free website that has ads or you can be a paid website that has no ads and obviously it's oversimplifying and there's lots of ways to do both but there's nobody that's reading the paper for free everyone is either buying it on a newsstand or paying to have it delivered to their home or business so it is an era of having your cake and eating it too where you both have every single person who's reading paying shy and maybe some people who were reading in a restaurant or something and you're able to sell ads in every single one and on top of that here's sort of the like magic thing that

ox figured out that would later be sort of taken by the wall street journal was it became the business newspaper of record ox made a really big bet on we should be producing more business content and people will be willing to pay more for it because it is a you know either actually a business expense or it inspires them that they could sort of do more with their business and so they were the first big American newspaper to target businessmen you know at the time business people now as as the demographic which is just fascinating sort of reading that and being like wait that's that's the journal strategy totally I mean when I was working at the journal this was before

the times implemented their now very very successful paywall but we were the only you know of scale newspaper and news organization in the US that had a paywall digital content and it was all because most of the paid subscriptions were on expense accounts yeah so this was a super cool gem that I got from the research so it's actually you know the the famous John Wanamaker quote about 50% of the money I spend on advertising is wasted I just don't know which 50% yeah that was actually stolen from ox no way yeah Wanamaker I don't know if they were friends or something but it was originally an ox quote in in 1916 ox said I affirm that more than 50% so

more than 50% of money spent on advertising is squandered and is a sheer waste of printers ink Wanamaker got a hold of that he was an advertiser he was a retailer in Philadelphia and and he turned it around to you know I know half the money I spend on advertising is wasted I just can never find out which half so super cool but yeah ox becomes the premier newspaper man in New York if not America and if not the world before we pull too far forward from this time there's one interesting sort of fun anecdote that you're gonna talk about the headquarters yes yes go for it so this is the beginning you have more details on this than I do I'm sure but

this is the beginning of the New York Times company's obsession with real estate of sort of obsession of I want a really fancy headquarters I wanted in a really interesting place I mean they've got these big printers so like a big part of their business is actually a physical thing with distribution which at some point they would move to other parts of New York and start to sort of have a separate newsroom from there but that's not the way it started and in 1904 the newspaper moved its headquarters to a building called the Times Tower at 1475 Broadway in what was then called Longacre Square later renamed Times Square after New York Times after the New York Times so awesome

what do you know the other part of the story no keep it going okay so when Ox moved the building to Longacre Square in this new building he of course wanted to make a show of this you know it never wasped a marketing opportunity ever the entrepreneur so he had pyrotechnicists illuminate the new building with a fireworks show right around the holidays when he moved there oh is this the ball dropping yeah and so that kind of becomes the thing he does it for a couple years and then and New Year's from 1907 to 1908 he has a big electric ball installed on top of the building oh it's amazing boom dropping the ball it's the New York Times Times Square New York

Times dropping the ball on New Year's Eve it's all Adolf Fox wow wow and that's such an interesting I didn't really really like I should have known Times Square like duh but I maybe I knew that at some point in my past yeah it's just so you're like oh Times Square it's like it's like it's like air you're like oh yeah I don't know I don't know it's called Times Square because it's called Times Square like the stock the stock tickers too were originally the New York Times that implemented that on the outside of their building before I want to say Dow Jones took it over yeah yep just an incredible you know entrepreneurial story we're gonna move on to the next

chapters here okay so two years after that press release Ox does pass away in 1935 but there's a problem though which is Ox only had one child and his child which he viewed as a problem for succession was a daughter yeah I mean this is some hardcore sexism hard hardcore so if a gene his daughter was an incredible woman and if she had been born probably 30 years later which is when Catherine Graham was born she would have been Catherine Graham at the Washington Post before Catherine Graham but there was just kind of no countenancing by Adolf or anyone else involved in the company that she should take it over well Adolf also basically just shirked responsibility on this and didn't

want to be the person to explicitly say I do not give it to my daughter so he just like this is a New York magazine quote from a great article on the family says ultimately Ox punted on the decision when he died in 1935 his will essentially left it to and I'm sure you'll explain these people Arthur Julius and Iphagene to work it out amongst themselves yep yeah they each had a vote on who would become the next publisher so Arthur Sulzberger was Iphagene's husband who would become the next publisher and Julius was I believe Ox's nephew who was also working in the business that's sort of a legitimate claim to the throne so to speak and I believe the story is that Ox set it up this

way that each of the three of them had a vote because he wanted Iphagene he wanted to essentially make sure that Arthur was a good husband to her because she had the deciding vote between him and her cousin to be the publisher which is both like really weird and sexist and kind of strange but also like super crafty yeah and for all this like style building up of Ox we've done this is not the only time throughout history but it will be the first sort of part of the New York Times is history where you sort of have to look at it with a squinty eye and go oh that's a little bit of a black mark yeah so if you

like so she went to Barnard and was college educated she double majored in economics and history she was super super smart as you would expect of like the only child of Adolf Ox and it's hard to tell exactly what she wanted but some accounts say she did want to take over the Times and become the publisher unfortunately that wasn't in the cards but she remained on the board of the company for pretty much her whole life she lived to be 98 years old she didn't die until 1990 and there's some debate on this you know people might know our audience might know the sort of nickname of the Times is the gray lady and there's multiple sort of origin stories of the gray lady nickname one did

it later become the good gray lady or where does good come in maybe that's part of it so I think the origin is the Bank of England was called the good lady or something like that and so it was sort of borrowed from that some people say the gray came from like looking at the paper it's a bunch of gray newsprint it's a gray paper and so it became the gray lady alternatively though if you gene is the gray lady she was a presence on the board and sort of the you know the link to ox and the moral fiber if you will of the company for you know 90 years until 1990 it's crazy and this is really introducing the very first of many not

necessarily outwardly contentious but inwardly contentious succession decisions that happen yes the New York Magazine quote continues from earlier if a gene being the deciding vote supported her husband thus cleaving a fault line in the family that was never repaired and that you can imagine generations go by this thing really starts to compound because there starts to be you know massive numbers of cousins who are you know the same way related to Adolf that the people who end up sort of succeeding Adolf and you know five generations later they're sort of by blood the same amount related but theirs was not sort of the chosen bloodline to pass down the paper through yeah and it has always been a male heir that has become the publisher

now through five generations even though there are plenty of daughters in the family so you know ox crafty like he is he's sort of his um so gate lease a great writer from the 50s 60s 70s uh who actually worked as a reporter at the New York Times for a while he wrote sort of the definitive um book about the New York Times in in uh I think he came out in 1969 called the kingdom and the power which I don't think the family loved like this one I was reading the the trust from about right around year 2000 refers to the kingdom of the power and I think he was always after we released that kept it a little

bit of an arm's length yeah so he writes about this he says how long the times would survive would depend largely on how well ox's heirs got along in the decades ahead he knows this nothing would crumble his foundation faster than family squabbles selfish ambition or short-sighted goals his successors would have to make money but not be enticed by it would have to keep up with the trends but not be carried away by them would have to hire talented people but not people so talented or egocentric that they could become too special as writers or indispensable as editors or or else they'll go start a sub stack yeah exactly thank god sub stack didn't exist in uh in those days or what would Adolf

have done um the times would go on indefinitely he hoped towering over all individuals and groups in its employ and his family would work together repressing any personal animosity for the greater good and if possible choose mates in marriage who would also be wed to the times so how does he set this up he creates this trust that goes to if he gene and Arthur and their descendants so we don't have the details of the the legal documents of the original trust but it was recast a few times as generational transfers happen and I was able to get a hold of from the uh proxy statement I think from the 1990 maybe 10k of the new york times uh the proxy statement the sum of the language in the 1986 trusts there were then

several trusts amongst branches of the family but they were all linked together this is what it says in the organizing documents of the trust the trustees of each 1986 trust subject to limited exceptions described below are directed to retain the class b common stock held in the trust and not to sell distribute or convert such shares into class a common stock and to vote such class b common stock against any merger sale of assets or other transaction pursuant to which control of the new york times passes from the trustees unless they unanimously determine that the primary objective of the trust which is to maintain the editorial independence and integrity of the new york times and to continue it as an independent newspaper entire here it is entirely fearless free of ulterior

influence and unselfishly devoted to the public welfare can be better achieved by a sale distribution blah blah blah blah blah blah wait so it's it's primary purpose the primary purpose of the family trust is to ensure yes that it continues to own the new york times to ensure one that the family continues to own the new york times and two that the mission of the new york times to continue as an independent newspaper entirely fearless free of ulterior influence and unselfishly devoted to the public welfare that is the purpose of the trust so he sets this up so that all of his descendants in perpetuity the only way they can maintain the wealth associated with the times and their ownership of

the times and all of the you know the dividends at the time but oh you know wealth that comes with it is by not selling it and by supporting this mission and so like anything that goes against that would violate that oh that's so fascinating it's crazy that you can't i mean maybe they can and we just don't know but like that he can do that and it it survives him like that you know he can decide that my wealth and the wealth created by this thing that i started or bought and sort of restarted can only be inherited under these circumstances yeah pretty crazy and you know the family must i think support it because the trust have been redone a few times but they you know yeah i think there's

there's like eight family members who comprise a board right now and that they sort of make the decisions for the you know dozens and dozens and dozens of numbers of cousins that there are now yeah crazy so okay so salzberger takes over in 1935 uh he remains publisher until 1961 he does many things he's kind of a you know he's a great publisher and steward of the times sort of transitional from the ox period to more modern uh new york times he adds he makes it a little more readable the paper uh he adds a style section and the crossword puzzle he expands distribution but it's really during world war ii uh which is during his time as uh as publisher that i

would say probably is both like the best of the times history and also the worst all in in world war two that um we should talk about so you know the best is that plenty so the raw materials for newspaper production were rationed during the war you know ink and paper and you know material and etc um so there was only limited space that newspapers could publish most newspapers decided to cut back on reporting and keep their advertising load the times vastly cut back on advertising and upped the war reporting and really became like the foremost kind of chronicler of world war ii which this is definitely a playbook thing for them that i don't know if they have intentionally done this in modern

eras because they learned from this time when it sort of went well for them but the times now has a pattern of sort of buying low when others are are sort of selling and in particular investing in high quality journalism when the industry is going through you know terrible financial times totally totally and famously as we'll get to they did not lay off any reporting staff uh in 2008 2009 uh when every other paper did so this culminates in this is amazing um science reporter for the times william lawrence is the only journalist given access to the manhattan project uh as it's going on during the war and he ultimately writes in the times and then i believe books afterwards the sort of the

official history of the manhattan project uh and he's the only journalist uh that witnesses the dropping of the bomb in nagasaki wait he witnesses it like he was on a plane i don't know i guess he must have been in the plane i don't know for sure but whoa pretty incredible totally incredible so that's sort of like the best of the times during this period unfortunately yeah it's it's the best of the times and simultaneously kind of the worst of america you know reporting on us and our you know neither of us are actual historians and and neither of us are passing judgment on on obviously dropping the atomic bomb but like gosh that just the absolute last thing that any powerful nation wants to sort of

have to do and for the times to be the people there with literally the front row seat is just it's heavy yeah seriously speaking of heavy the times and they would say i'll quote from their own reporting here on their 150th anniversary in 2001 the holocaust was in contrast to being the foremost war reporters in america during world war ii the times basically ignored the holocaust and the reason that they did as we you know discussed the ox family and the salzberger family were jewish families that is a jewish family that controls the paper they were paranoid particularly arthur salzberger about being known as a jewish newspaper jewish family inviting you know prejudice bias discrimination against the paper and so they were rabid about not wanting to seem too parochial or biased towards jews and so they

even though you know reporters knew editors knew what was happening in the holocaust they didn't report on it and in fact you know they famously talk about 400 000 i believe they say europeans killed by the nazis those are 400 000 jews that they changed oh they reported and used the word europeans instead of wow yeah i mean how many lives could have been saved if the times had had done that sooner i mean it's a it's a really striking example of fear of anti-semitic backlash preventing speaking out about anti-semitism and obviously it doesn't just have to be anti-semitism this can be applied to all injustice but yeah the the idea that both the salzberger family would come under fire but also

that the newspaper would lose credibility the the sort of fear of that loss of credibility leading to him turning a blind eye at some of the most horrific events in human history totally so um in 2001 and the 150th anniversary issue former executive editor at the time max frankel wrote sort of the title article on that and uh and he says then there was failure none greater than the staggering staining failure of the new york times to depict hitler's methodical extermination of the jews of europe as a horror beyond all other horrors in world war ii a nazi war within the war crying out for illumination and that obviously the times did not chose not to illuminate so yeah heavy stuff yeah and listeners i

will say like this is something that david and i both sort of realized in the research and my initial reaction was like oh do we really want to talk about this on this episode it's heavy you know it's different than i was talking about tech multiples and it is commendable that the times albeit 50 years later like did self-reflect on this and like realize that hey we got to own up to this and maybe they did in earlier times as well but frankly reflects positively on an organization especially one that was owned by the same family and the same people and all those people were still alive to be self-critical and for us frankly to not have to go out on a limb on this episode and and criticize the times but

to be able to just quote them being critical of themselves um yeah it's meaningful yeah and you know while we're on the subject of criticism of the times too you know i think it's obvious that we also need to say here we've talked a little bit about discrimination against women within the company also against people of color um so it was not only if you didn't who who was obviously qualified to become the publisher that you know it was her husband that she was passed over for her husband the first woman reporter joined the times in 1912 jane grant to report on society um she had to fight her way into the city staff and then like the management made it clear to her like you will never

be an editor here like that's just not gonna happen she ended up leaving the organization started new york magazine and then became a leader in the women's rights movement so um you know screw you guys and then women for you know decades were relegated to basically just the society and style sections um the new york times wouldn't hire its first black reporter until 1945 that person wouldn't even last that long then in 74 women reporters filed a class action lawsuit against the times for discrimination and wage bias in 1977 minority reporters sued for the same thing the time settled on both of those cases but you know today of course dean beckay is a black man the executive editor the ceo of the times is a

woman last year they won the pulitzer for the 1619 project you know things are different now but you know we have to point out that uh and i think the times would point out too that it was not always uh not always a rosy picture yeah okay back to salzberger he presides through all of this in 1961 he becomes infirmed and he is succeeded again his oldest child uh his and if he's his oldest child is a daughter by her husband orville dreyfus this guy orville dreyfus is the timothy dalton of the new york times family succession like he is definitely for any james bond fans out there like he's the one that was kind of like in one or two movies and you're like wait that guy played james bond and then

quickly you're on to the next one like gill amelio yeah no yeah he's the gill amelio that's an even better comparison yeah dreyfus lasted two years two years unfortunately because he died unexpectedly but so his wife you know marion um salzberger and if you gene's daughter like she came up with the idea for people magazine so like all of these women involved at the times are like total ballers maybe here's an idea keep them yeah exactly so when dreyfus dies in 63 then the youngest arthur and if you gene's youngest child who is their only son arthur ox uh nicknamed punch salzberger succeeds him as publisher and because they're all a something salzberger we're just gonna call him punch the rest of the episode he's punched so far we've got like arthur or we've got adolf ox

then we've got arthur salzberger then we've got punch well i mean ria dreyfus but timothy dalton gill amelio so you got punch then we'll have punch's son who we'll call junior who is a arthur arthur salzberger junior yeah right after after him so we'll just call him junior and then there's ag who's the publisher today yes exactly all a something salzberger for everyone keeping score at home uh so punch ends up being publisher sort of like his father for um almost 30 years he would remain publisher until 1992 and he really led the times through a lot of change but it was 63 when he took over and of course like what is a huge huge change besides all the change that's happening in the 60s

in america television is out there so like not only does the times have a competitor like the whole medium has a competitor now right and they realized and i i think as best as i can tell a lot of this was was punch that the best way to differentiate from tv news was that they needed not just to sort of report the facts anymore like what the differentiation that newspapers had was they could go deeper they were like the acquired of news reporting they could interpret the facts and the meaning behind the facts and uh tell people why this is important and why this is happening and that was really a big sort of change i think for the times newsroom because you know if you think back to to ox uh it was all about

like just the facts impartial you know no uh no judgment and you know here you can't help but introduce some judgment but like there's a service of like explaining meaning as well right and and not just on the opinion page but choosing what context to put around a story in just reporting in in reporting the story you know you're you're introducing your own bias your own judgment in choosing what context to include around the facts yep so punch develops a saying that i actually uh ag the current publisher you know i read a quote from him uh that he still references uh of you that people don't come to the times for news they come for judgment so in the kingdom and the power gay talise writes of course

the trick was to do this without editorializing while there was a difference between interpreting and editorializing then executive editor uh catledge turner knew that the line between the two was sometimes thin and if the times was to achieve the new goal and yet avoid making a mockery of ox's motto about objectivity it had to have a more vigilant copy desk more unchallenged authority in new york and here again rose the problem of power who was to decide what and where so the times invest a lot more in copy editing editors this is when they introduced the op-ed page opposite the editorial page uh to bring in outside views into the times as well we we should also say classically the person leading

the newsroom at the new york times has traditionally not been a member of the family to intentionally sort of create that distance between the publisher you know the the people responsible for the times as a business and of course stewarding its mission are not actually the people making the calls on you know what stories run on our paper and which ones don't now of course in practice like the publisher family does actually own the paper and so they can sort of make a final call but that arm's length is intentionally created yep so that was great i think what was less great you know sort of like okay give like a maybe a c grade to punch during his uh tenure was from a capital allocation perspective you know what you really

want to do here is like differentiate versus this new medium but you also want to invest in the new medium and so they realized this and they along with many other newspaper families in the 60s 70s 80s start buying television stations so the company actually back in 1944 had bought two radio stations in new york but punch realizes probably with the help of an encouragement of some bankers on wall street that they should go buy some televisions and some television news properties plus like this is conglomerate times like let's diversify go go go so this is when the company goes public in 1969 on the american stock exchange with the dual class share structure where the family still retains voting

control then i think the right to elect 70 of the board but exponentially larger voting control with their shares but the reason they went public i had thought it was like a family so it was privately held all the way to this point yeah yeah so i had thought the reason they went public was probably just as there were more generations you needed to divide the wealth and ownership no the reason they went public was to get a liquid public stock to make acquisitions with oh no way yeah wow yeah i would have figured the same thing but but you're right it's always been a dividend stock and so they were always able to pay out to all the errors just with dividends so they wouldn't have needed to go public just for liquidity yep so this is

why they go public so they buy a bunch of tv stations a bunch of affiliates in alabama arkansas iowa iowa pennsylvania oklahoma and virginia they collectively named this the broadcast media group within the company unfortunately though and this is like that was fine like they end up selling the broadcast media group to um i think oak hill maybe private equity firm in uh 2007 for about 600 million dollars so like you know fine um the huge mistake they make is they don't get into cable though and as we've chronicled many times on this show an episode yeah man cable was the internet before the internet that's where the money was so punch steps down as publisher in 1992 after a almost 30 year run

and as we said his son junior succeeds him which by the way what a time to step down like 1992 the internet is starting to like transition out from arpanet to become like a little bit of a consumer thing yep like it would be nice to have a transition to someone here who's not going to get completely blindsided by what's coming that is not what they did they got completely blindsided by what's coming not to mention they were heavied up on some crazy assets like the david you mentioned tv stations but like all these newspapers there's maybe like 20 different local newspapers that they had picked up and then they would continue to pick up in the 90s there's magazines like some crazy stuff

okay all right because like they this diversification goes way too far totally so i mean i think it it's maybe unfair it probably i think it's unfair to say they were blindsided by the internet they definitely knew it was coming junior knew it was coming and they developed a whole strategy around it and so in june 1994 they partner with aol and launch at times the at times channel on on aol which is garbage um but in 1995 they hire this guy named martin niesenholtz to come in and run a whole new electronic media division within the company martin had started the ad agency ogilvy and mathers interactive marketing group and actually brian mccullough over at the internet history podcast did a great episode with uh with

martin that we'll link to in the sources you should go check out great interview with him wait let me defend my my blindsided thing so here this is like a couple couple things to know in 1983 the times decided that it was not important to have electronic rights to their yes so they saw it to lexis nexus the new york times didn't own their own rights to their content so like i is okay in 1983 you couldn't see the internet coming fine and even in the early 90s you weren't sure if you're going to make a bet on the worldwide web or if you should make a bet on compu serve or aol it was specifically the archive rights to the archives so uh they were able with some negotiation to put breaking not

breaking but like new new currents new news on the site but they couldn't have the archives until they got the rights back and they did in in 94 ultimately get the rights back and then i think in 1996 that's when ny times.com went out for the first time yep totally so when nisenholtz comes in he's like holy crap we gotta work through all these rights issues so that was part of it they also had to decide on the business model so the plan this is this is fascinating the original plan was to charge for ny times.com uh charge digital subscriptions and nisenholtz said we can't charge because this product sucks and like who's gonna pay for this so when they do launch the site in january 96 the the

real site not the aol site um so there's no cms there's no content management system what they do they literally every day they create an image like a like a like a gif and and put it out like so there's no text wait wait wait i'm sorry we have to stop the episode you're a gif person you don't say gif oh yeah i do say gif oh all right okay we can we'll still keep doing the pod i guess okay okay okay sorry sorry i just got so carried away i got carried away by the fact that they literally make a gif of an image that they like create in the art department and then put the like if you go to

ny times.com it loads a gif just as like the and it's like unbelievable read yeah that's that's the first version and i imagine like if you're using like i don't it's not page maker but whatever they're sort of like they probably use robust software to do the page layout of the physical paper and so like you know you're not necessarily gonna be super html savvy and figure out how to render in a web appropriate way so you're like well look we put all this energy into laying out the type and laying out the articles and the columns and the column width and all the stuff like let's just export from that and we'll put that on the web yep and um so he's like we can't charge for this it's

crap uh but also like the other point was like it's like we we got to build an audience like we got to train people to come to ny times.com like otherwise why would anybody come here especially if they got to pay us money so they go free and of course all sorts of long-term consequences of that would the internet have been a different place if they had decided to go paid right off the bat because for a whole decade and a half after that no one could do anything paid on the internet like no there's no such thing as paid content yeah yeah good point um and they still have a hardcore paywall but the uh but again it was all because of b2b like that was you know we right we would always pat ourselves on

the back but it's like hey the reality is these are all corporates that are paying for this stuff on right these aren't consumers who are browsing the web and deciding oh i should start paying because of this paywall it wasn't till i will get there but 2011 that the new york times sort of introduced their their sort of concept of their metered paywall but i just can't help but think that if the times and a few other early content websites had made a different decision it could have been culturally acceptable for existing media outlets to charge on the web in a way that it just it just wasn't yeah it could have been very different so why do i argue that um it's not totally right to say they

were blindsided by this so hey they they did all this work but the bigger reason i think is that look this was still so early in the internet's lifetime even with the you know the internet boom in 1989 like everything that was going on here kind of didn't matter they missed the boat big time on cable news uh that i was referring to kind of at the end of punch's tenure so while they're all this is going on just a couple blocks away over at 12 11 avenue of the americas rupert murdoch he knows news and he's looking out at everything going on this we're in the mid 90s and he's like holy crap like i see espn i see how valuable that is i see how valuable cnn is and i see a bunch of

problems with it and a bunch of opportunities to do better and different i'm gonna build and launch fox news and uh so in uh 1985 news corp had bought 20th century fox the studio they also own and run sky in the uk and so they had a 24-hour news network sky news in the uk so we can bring this to america so in 1996 they announce that they're going to start a new 24-hour cable news network fox news and rupert says is quoted the appetite for news particularly news that explains to people how it affects them is growing enormously on cable and so he sees this opportunity and then certainly the other part of what he sees which the times you know would never do given the ox uh mission to the

company as we talked about is but murdoch brilliantly sees is there's an opportunity to create a news organization targeted for conservatives out there and uh like cnn the media as a whole certainly new york times people believed were left-leaning and liberal leaning and he thought man there's this whole market out there so he hires roger ailes from cnbc to come over and be the first ceo of a long time i didn't know ailes was cnbc before yeah he was at cnbc but before he was at cnbc this is crazy i didn't know this till i looked it up i used to work in the building ailes was a republican party media strategist so part of murdoch's plan is like i'm gonna target

republicans uh and conservatives to watch my network um ailes wasn't just any media strategist for the republicans he was the guy who nixon tapped to help nixon with his television presence for the second time when he successfully ran for president because nixon when he ran against kennedy yeah got destroyed in the tv debate like he was like sweaty and like he's obviously not as handsome as jfk so he brought in roger ailes as his like fixer for the second go around to like do well on tv so that's who murdoch goes and taps to start fox news small world and then he does something even more bold he's like the anti-adoll fox he goes to the cable systems you know usually as we've chronicled

on acquired the beauty of the cable network model was you got paid a subscriber fee by the cable systems to carry you and you sold advertising kind of just like newspapers murdoch goes out to all the big cable systems and he's like hey i'll tell you what i'll pay you to carry fox no way to give me like prime placement in your channel lineup it's like the opposite of the spn's amazing cash cow business model well the idea is that over time as it becomes you know people get you know become loyal to fox news that he'll be able to flip this and of course he does so to say like this works is oh it's so brilliant pay for the distribution to start and then once people are more loyal to you

than the cable company then you can then flip it huh and start you know uh all the carriage debates and whatnot and you know hey we're gonna pull fox news from you know comcast if you don't write in and tell them you know how upset you're gonna be right etc so this is incredible i i knew this from working at news corp like that fox news was a great business it is an incredible business so by 2002 so that's eight years after launch fox news is the number one news network on tv becomes number one passes cnn it remains number one every single week from then for literally 19 straight years until january of this year after the capital riots when uh it lost a lot of viewers like literally 19

straight years it is the most watched news network on american television that is unbelievable yeah so whatever you think of fox news as an organization like we're not here to judge one way or the other it brings in so this is fox's total cable network segment of which fox news is by far the lion's share uh in 2019 generated 5.4 billion dollars in revenue and two and a half billion dollars of ebitda so that's like a 50 percent oh my god 50 percent ebitda margin that's that's facebook good yeah i just found this so interesting like because in so many ways now you know people think of the new york times on one end and fox news on the other end like even though

the new york times would absolutely assert we are in the center and we are in it on no end totally but this is like an espn level business that the times would have built something different but i think you know look they got into broadcast television they're getting into the internet missing the boat on the opportunity for cable news uh was huge here yeah it's interesting like i never if you would if you hadn't told me about all the diversification that the new york times had done and you knew of it today just the way they are sort of single brand single pseudo single product company and said should the new york times go into cable or should they have gone into cable i'd be like no like that's not

what they do is have their core competency like they barely do video on their website and their mobile app well like they definitely shouldn't do that but clearly they were trying stuff and they were willing to do stuff like this and just missed it yep yep they frankly just missed it and did they miss it like one question i have is the times doesn't have it in them to do something outwardly and intentionally partisan and so maybe they saw the opportunity but didn't believe that it was there for a centrist that could be i mean cnn uh you know existed and does very well um so i think that it could have been different and it would i think be very unlikely that the times would have said oh okay great we're

going to make a cable network but we're going to target liberals you know specifically right so it's certainly complicated but i just like i wanted to go dive into the research of fox news because i was like all right well like let's people compare these two organizations so often i want to find out the history and what just like hit me over the head was again whatever you think of it whether you watch it or don't watch it it is an unbelievable business so it has a 50 percent EBITDA margin how much revenue did you say it does uh close to six billion so that's over 3x the times's revenue today yep now that does include like fox business and some of the other spinoffs some fox sports i

think that they didn't spin off is still in there but like the vast majority of that is fox news i don't think if you would have asked like this shows what a bubble i'm in but like i don't think if you would have asked me what's a bigger business that i would have told you fox news yeah yeah it's a bigger business crazy so meanwhile the other side of the coin here for the new york times company missing the cable news opportunity they made some ben you alluded to this shall we say poor capital allocation decisions during the 90s and 2000s so in 1993 they purchased the boston globe for 1.1 billion billion dollars for the globe and i think they got a couple small regional papers as well

with that um in 1994 they did this is the other crazy thing they did get into the cable network industry by buying a 40 interest in the popcorn channel you ever heard of the popcorn channel ben and we all made some mistakes in the 90s oh my god do you know what it was no this is so kind of well that's what i thought like popcorn channel maybe it's like a hbo knockoff or something this is a cable network its sole reason for existence was it showed previews like movie previews and displayed local you know movie times oh my god why the new york times invest in this is beyond me then in 2001 they team up with john henry in boston to buy a 17.75 stake in the boston red socks

sox so the new york times owns close to 20 percent of the boston red socks yeah that's a good idea i think didn't they also take a minority interest in fenway park itself yeah that was also part of the the madness oh madness i think that and there was like a some kind of nascar team that they owned half of like this is when they really went ham they they um they bought golf digest golf world like a bunch of magazines like family circle snow country i mean it was like yeah what this is like a what were they thinking and and really like 15 to 20 local papers like the santa barbara news press the press democrat gainsville's paper like i it's like cap city's gone wrong the amount of fees that investment

bankers must have been making off the salzberger family at that point in time like yeah woof um in march but it was it was juicing the stock and it was juicing revenue to be to be totally fair like the times today has less revenue than it had during this gogo era 100 they also acquire about dot com for 410 million in uh march 2005 uh famed tech company about dot com yeah so i mean all of this it's easy to dunk on these things but probably the worst offense i mean i haven't modeled out exactly the financial impact of this but uh this kind of blew my mind throughout the 90s and 2000s they bought back almost three billion dollars of stock that they financed with debt so they load up the company

with debt and buy back three billion dollars of stock over the course of a decade i didn't know you could buy back stock with debt like i mean i guess all the time so mechanically what you're what you're sort of asserting if you're doing that is that my company is so undervalued right now and we are going to be so profitable in the near future that i think it's actually less dilutive for my shareholders if i take on a bunch of debt to buy back shares to sort of like undilute uh shareholders like reverse dilution anti-dilution uh well what's so such like lunacy about this is um you know a all of that and the company was of course massively cash flow positive because you know it's like this is not a

this is a long-standing business this is the idea was you could use the cash flow to pay down debt over time and finance these transactions i mean it's just a private equity play but because of the way the trust is set up the family can't sell shares so the way the family monetizes the business is through dividends so even if like you can't even make the argument that they were just doing this out of self-interest for the family because the family wasn't seeing any of the benefit of the stock buybacks like it's just madness you know like you're you're they're cutting into the amount of cash flow that they could use for dividends oh that's interesting well they're benefiting they're benefiting in an illiquid way because the value of their stock is going up because of the

buybacks yes but they can't sell the enterprise value continues to rise right right right but yeah but but ostensibly the dividend per share could go up uh but you're right but you're using money it actually isn't going to go up because you're yeah huh i mean i guess they could personally borrow against the value of their stock but anyway it's just uh somebody was smoking something around the new york times boardroom at this point in time so when does carlos slim come into the picture so this keeps going until the mid-2000s and even around like 2006 or so everybody's like this is fine you know the company's spitting off three three and a half billion dollars of revenue a couple hundred million dollars of operating cash flow we're plowing that into debt service

fine and keep in mind 2005 through 2008 they're making over three billion dollars a year in revenue like today they do 1.8 so like lots of revenue coming in lots of revenue coming in and then we talked about the headquarters building you know pride always comes before the fall anytime you see a company build a flashy new headquarters immediately your radar should go off uh in 2007 they've moved into a brand new 850 million dollar headquarters building just off times square by the port authority called the new york times building uh designed by renzo piano who designed the pompadue in paris and the shard in london okay they move in in 2007 real great time guys uh because then the financial crisis hits

the next year which of course also becomes a newspaper crisis because a advertising revenue completely dries up and b people are like losing their homes and canceling their newspaper subscriptions so it's brutal out there over the course of the next two years you know they would lose 25 of their revenue in two years yeah the rise before the fall yeah so compound this macroeconomic crisis going on with the smartphone launching exactly one year before the financial crisis the app store coming the same year of the financial crisis massive acceleration not only of internet adoption but a smartphone adoption and the new york times not only has their they've they've to give them credit they've started a digital newsroom um it is in a different building than the actual newsroom it is it is that you don't

get to be in the fancy headquarters correct and the newsroom is so separate from sort of thinking with a business mindset that they refer to anyone who is not a journalist at the times as the business side so they like think about digital product people like designers product designers who are building the mobile website business side like programmers business side everything is like if you're not a journalist you're on the business side and here you are suddenly thrust into this new era where you're in the worst financial shape you've ever been in as a company you own all these things the technology landscape is changing out from underneath you and you have basically built an internal i don't know what the right phrase is but you've got a massive chasm between what you perceive as the core competency

of business producing print journalism and everything else over on the business side and not thinking about any distribution and i'm sure they're thinking about it but not in a serious way as the sort of crisis of the business other than how do we sell more papers yep and you've now just missed not one but two technology waves with cable and the internet you know arguably so in 2009 is when the shoe drops so january 2009 they announce a 250 million dollar debt deal with carlos slim uh the billionaire the mexican billionaire one of the wealthiest uh people in the world and his primary business is telecom right telecom yep so he interestingly i didn't realize this he already owned seven percent of the company

that he had just been buying in the public markets uh they do this 250 million dollar debt deal at a 14 percent interest rate on the debt plus warrants for another 10 percent of the company so whoa 14 percent interest rate debt 10 percent equity of the company and slim exercises those warrants over the years let's unpack that a little bit so contextualize 14 for us like what would if you were going to go borrow and get some debt for your company now what would you uh you would pay like one percent like i mean we are in a zero interest rate environment yeah yeah but i mean i remember even back then so i was an immediate investment banker at the time and i remember doing junk bond deals

for like failing movie studios at like i don't know call it six seven percent you know interest rates like um you know 14 percent now granted this was the throes of the financial crisis but like that's bad and so then mechanically how does the 10 percent uh warrants to buy another 10 percent of the company work so i don't know what the strike price of those warrants were whether they were penny warrants which is effectively like free equity like stock options to employees or whether they were at the then current uh stock price of the company or some discount but they're effectively like free call options at whatever the strike price is uh on the company for the future and so how long does he wait

before then deciding i am gonna go pick up another 10 percent of the times yeah i think he i think he waits until the expiry dates which is a few years later but he he does he exercises them and um and he becomes the largest individual shareholder in the new york times owning about 17 percent he's since trimmed his stake a little bit i think he still owns 13 14 percent yeah he's right around there so kind of like it's like a warren buffett type deal that that he does uh although i would say unlike you know at this time when buffett was investing in goldman and uh uh like harley davidson and the like like those were solid companies like there were some real question marks around the times um at this point in

time february the next month they eliminate the dividend altogether so man family members must have been pissed that they're like doing buybacks for the last few years and now you just eliminated the dividend to save money um in march they announced a 225 billion dollar sale and lease back of a portion of the headquarters building so they just built this damn headquarters building and they sold it to wp carry and agreed to lease it back for 15 years with an option to buy back the portion they sold in 2019 for 250 million dollars which they exercised so they now own the building again which we should say this is actually like one of the savviest investments of all time by the times like if

you think about this think about how much new york real estate especially class a real estate appreciated between 2009 and 2019 and the new york times sold these floors for only 225 million and they said a decade later in 2019 we have the right to buy it back for 250 million like that's really not much appreciation i think i i i think i found a source that said that they essentially bought 750 000 square feet of prime new york office space at 333 a foot nothing in the market is trading around their building under 1500 a foot wow yeah they quintupled the value of their holding so that's an unbelievable like for the times this is like a win it's effectively for people who are trying to make

sense of a sale lease back here what they basically said was uh they kind of like owned their house but then they took out a mortgage on it where they said like i'm gonna keep living here you're gonna own it i'm gonna pay you every month and like it's a bummer thing to have to do especially when you have so much of your identity tied up in this great building that you you needed but you needed the 225 million you needed the cash but holy smokes to be able to get it back a decade later for you know close to the same price yeah so savvy well this is what's interesting to say you're hitting on the point here so well i'll run

through a couple other things they do and then we can discuss they in july they sell the radio stations they own to disney for 45 million dollars then in 2011 they sell off their regional media group uh which is the read all those crazy regional newspapers that they bought for 143 million dollars in 2011 and 2012 they sell off finally the red socks stake for 225 million dollars the red stocks and fenway stake august of 2012 they sell about.com to iac for 300 million and then in 2013 they took a little loss on that then uh yep so they took about a hundred and hundred hundred twenty five million dollar loss in 2013 they sell the boston globe and the other new england papers to john henry i don't

remember what the price was it was a lot less than a billion though yeah and amidst all this i think by 2013 that three and a quarter billion of revenue that i previously referenced was down to 1.4 billion like all these divestitures not to mention all these you know people who are no longer paying for newspaper subscriptions really starting to dry up that revenue yep yep yep yep so this is when you know the um narrative of like the times is effed uh is at its strongest you know the quote unquote failing new york times but you know they these all these transactions that they do they're freeing up tons of cash and they're paying off this debt and so the end of these transactions they've generated

about a billion dollars in asset sales that have all gone to pay down the debt that they had taken out primarily to do share buybacks you share buybacks yeah uh and um they're down to just the core new york times you know property but digital and print and they're kind of in an interesting position again that not a lot of people realize so then the other thing that they do during this time is they finally get their act together and introduce a paywall a metered paywall for my times.com now here's what's interesting so they announced in 2010 that they're gonna do this they give a whole year's notice to the world and then they implement it in 2011 and people are like pretty

outraged people like you're gonna charge for content on the internet like f you yep yep and uh it's very controversial but they say you get 20 articles a month for free before you have to describe it's pretty generous and the top news section on the smartphone and tablet apps will always be free but people are skeptical and so in the first year it goes like okay they get 400,000 paid digital subscribers in the first year by year two they're up to about 660,000 year three they only had 100,000 they get to 760 uh year four they're at 900,000 so it's going like and i think in year three they chopped the free articles in half from 20 to 10 that you would get yeah so they're starting to like

realize we got to pull some levers here to make more people subscribe yep more alarmingly though as they're implementing this metered paywall people are going elsewhere for news so the traffic to the site drops by over half uh during this time this is crazy and this so this is we'll talk about the innovation report in a moment but this is pulled from the this very sort of like famous or infamous innovation report in 2011 they had i think mid 2011 they had 160 million visitors a month to their website and by 2013 80 million like this paywall thing is working ish for revenue but boy is it destroying your traffic destroying the traffic so man things seem bad right then and they are bad

enter 2014 and ag the heir apparent fifth generation solzberger he is tapped by the family to figure out what's going on and he writes what becomes known as the innovation report i think it's titled the innovation report and it's internal but it gets leaked out publicly it's pretty amazing yeah so check this thing out so first of all just to wind back a bit the paywall was launched by david perpich he was sort of the person who was heading up the um the metered paywall he's a family member so he's a potential person who could take over as publisher um of the times next and it's going like pretty well so people are thinking pretty highly of him in the organization um ag at this point i'm not i'm not

sure if people already knew that he was going to be the next publisher but publishing the innovation report definitely catapulted him sort of past and and made people realize oh this is the leader that we need to bring us through this era so he was originally tasked and it was a team of i think 10 12 people to really start sort of dreaming up products that could uh you know fix up the new york times bottom line and they thought they were going to do this the new york times had released an app called nyt now so they they sort of i mentioned that um digital was sort of in a different building they had by this time brought them into one one single newsroom but the folks on the business side were sort

of in charge of uh of figuring out hey like how are we going to save the times and solsberger sort of took it upon himself and the team to treat this innovation report like a piece of investigative journalism and so as they sort of met with all the hundreds of people inside the times in the newsroom on the business side uh hundreds of people outside the organization they sort of realized oh my god that's what i think is super cool too they interviewed people at every other news organization yep you know like ceos of tech companies really interesting yeah what they sort of realized about i don't know quarter of the way into doing it is it is not a new product that we need

to launch we need to completely change the way the new york times works and that needs to happen from the place that has the most power in the organization outward so it needs to come from within the newsroom and a good example is like i think it's in the report they say something like traditionally our journalists have thought about their job ending when they click publish and then someone takes over after that on distribution we need to be thinking about that that's when the job begins and that's when you need to you need to always be authoring with distribution in mind you need to always be thinking in what properties is this going to get released in and in the newsroom

there needs to be an understanding of what content gets federated to what properties at what times is consumed by who and they completely sort of changed and um uh frankly i don't think this could have happened without a family member leading the charge here but really like reinvented the organization with pretty damning findings in this report from the inside out well it's kind of like a throwback to adolf oxx right like you can't you got to be a journalist but you also got to be a marketer and a publisher and like you got to get the positioning of what you're doing right but you also got to get the distribution right absolutely i mean there's there's even quotes in there where they say um the

new york times is winning at journalism at the same time we are falling behind in a second critical area the art and science of getting our journalism to readers and they they talk a lot about how we don't think that we need to sacrifice our core values to get this done and there's a lot of people out there are competitors who have way more traffic and they're referring to buzzfeed and vox and all these people by name who are getting unbelievable amounts of traffic and the assertion which is like at this point you're kind of head scratching because you're like how are you going to do this they basically have a throwback to the yellow journalism era and to be clear on like some of the things they

reference like good buzzfeed and others you know hawks offing your posts a lot of the traffic that they're getting is they're just taking new york times and other articles and just rewriting the headlines and posting them on their own sites in the new york times it's like that seems fine right and what they do here is there's this interesting allegory to the yellow journalism era where what solzberger and the 10 12 person team sort of assert is if we are willing to step up internally and make big change and bring the right leaders into the newsroom tech and product and distribution and marketing and growth leaders into the newsroom and adopt them as our own we think that we can hold our values and grow our subscription business and grow our reach and it

is this like pretty bold assertion to say like we're not going to sink to the clickbait level of everyone else we are going to continue to produce great journalism with an intense focus on integrity and also fix our business and it's a little bit you're reading it like if if we didn't know that it worked you would be reading this thing being like good luck good luck man yeah well and i think the the other thing that they do i don't know how much this was i didn't read the report as closely as as i know you did but um so i don't know how much of this was in the report versus just they do it they also kind of like learn the lesson of not missing technology waves so they launch apps so in 2014 they launched

the new york times cooking app which has become hugely successful hugely successful in 2016 they launched the crossword app which has become hugely successful yeah the crossword app on its own is like a 30 million dollar a year business with like zero marginal costs because they're just running like historical crosswords from years and years and years and i think some new ones but like the the the apps business that they have they call it like other digital is growing at 60 year over year and it's crazy high margin revenue the cooking the crosswords all that stuff and then the other thing of course that they launch which will lead into the next big tailwind that's helped the times is the daily so

they launch the daily in february i think it's february 1st 2017 and it gets a hundred million downloads in the first year in 2019 it passes a billion downloads and i think ben you may know more this than me and the right way to judge but i think it's the biggest podcast in the world it every single day receives four million downloads of its most recent episode yeah that is crazy town crazy like they're reaching people that the um print reporting could never reach too it's a completely different audience so it's something like 75 percent of people who listen to the daily are under 40 years old which is a much younger demographic frankly a much more attractive one for advertisers their podcasting

business today is a 36 million dollar revenue business just in podcast advertising which grew 7 million off of last year so you know it's not their biggest by any stretch business line but it is where a lot of their uh sort of new reach is coming from yeah well and it's super high margin all of these businesses like all this money is dropping straight to the bottom line yeah although they do have like a 20 something person team producing the daily so it's like there's material cost to producing that podcast because there's real reporting and i'm looking at you every zoom going what our cost structure is well i i'm used to running acquired type margins on things right that's right that's right

uh if the labor's zero then it's nice and uh high margin yeah we do all our all our own reporting here at acquired well so if you're going to catch us up to 2016 then there are some other things to say about the times in 2016 oh yeah namely around subscribers so like like let's let's contextualize some of the the subscriber numbers so far because i made a little timeline here so you're right year one they did like 400 000 new subscribers like 2011 not necessarily great by 2012 that's when they reduced it to 10 free articles in 2013 the times announced that for the first time in decades they made more revenue through subscriptions than advertising so that's print plus online combined but like that says

a lot about both the decline of the advertising business and the famous line is trading print dollars for digital dimes and it says quite a bit about um the fact that they're growing material revenue i think there are hundreds of millions of dollars in revenue at this point um in 2013 coming from um subscriptions but still not at a million subscribers so in 2016 uh it had taken the new york times four and a half years to get to their first million subscribers and then it only took them a year and a half to get to their second million subscribers just before the election of president donald j trump yeah so this you know when we were referring to the failing new york times narrative that you know like it was failing and was

so prevalent of course that got taken up by uh a certain presidential candidate in the 2016 election and then president thereafter the reality is that was the best thing i think that ever happened that is the new york times ultimate irony the ultimate irony the the endless news cycles of insane what's the best way to describe it the new york times while being berated by this man as being failing is skyrocketing in popularity and becoming a better business than ever on the fuel of him like it is the the the paintbrush to paint the canvas of the story is so rich and dripping with iron i know it's incredible so you may have these stats too but they grow digital subscribers 47 percent

in 2016 these are like tech company growth numbers in the first quarter of 2017 when trump takes office they add 300 000 subscribers that quarter they finished 2017 at 2.2 million by 2019 they're at 3.4 million some digital subscribers uh this is to the core news product not including the crossword and cooking app and then last year 2020 they grew 48 percent again they passed 5 million digital news subscribers plus another 1.6 million to the standalone products digital revenue surpasses print revenue for the first time they've retired all the debt they buy back their headquarters they have no debt on their balance sheet at 2019 completely debt free completely debt free they have all of this incredibly high margin uh subscription digital subscription revenue

that no other news organization in the world has you know they have multiples more subscribers than the wall street journal which is when you say that no other organization in the world has so that the new york times i think today i think it's seven and a half million new subscribers the closest one is the washington post was somewhere like two and then after that it drops real far the la times has like a half million or less and like it goes on and on down from there and when you look at the number of subscribers that they ever had in print like ever in 2002 they had i think 1.1 million the new york times was the number one print circulation newspaper at least in america only a million subscribers to the print edition

so like they figured it out and just at the right time and then had this freaking unbelievable tailwind happen with uh with the trump presidency yeah and in the meantime like you alluded to in the hook at the beginning of the show they're hiring like all the best journalistic talent in the world to come right at the times and they're paying them more than anyone else because they can afford to because they've got essentially a netflix like business model at this point did you know the new york times average salary for a journalist is over twice that of the industry average yep it's it's crazy i think the i think the average starting salary is over a hundred thousand dollars which like who would have thought in you

know 10 years ago that a news media organization a newspaper would be paying over a hundred thousand dollars starting salaries to journalists yeah it's definitely to be congratulated all right listeners now is a great time to thank our longtime friend of the show service now if you are running a large enterprise ai agents are likely spread across every team and deploying them is uh no longer the hard part yeah the hard part is knowing what permissions they have what employees are using them for or what decisions ai is making ai security for an enterprise at scale is not a small concern like the risks are real exactly and the challenge with ai is governing it securing it measuring it and making sure that it

actually delivers value that is why service now built the ai control tower yep ai control tower gives enterprises a single place to see manage govern and optimize ai across the entire business and it works with any ai not just theirs every device on your network every permission across every system every ai agent visible and secure in one place and service now can do this because they've spent more than 20 years building the operational backbone of the enterprise the workflows governance approvals security controls and institutional knowledge that power how work actually gets done across it hr customer service finance and security service now already runs more than a hundred billion workflows annually and trillions of transactions for more than 85 percent of the

fortune 500 so when companies need a place to govern ai at enterprise scale they're building on a platform at the center of how their business already operates and in a future that isn't going to be one ai it's going to be thousands of ai agents working across every function of the company but the question is who's managing them all so if you're trying to turn ai ambition into real business outcomes and make it work safely securely at scale go check out service now.com slash acquired and tell them that ben and david sent you okay so in catching us up today we have to give a huge shout out to a uh a website called mind safety disclosures that put together a deck that provides just some amazing analysis

of the times and frankly makes an amazing bull case that i think we'll cover as we go into bull and bear narratives um but definitely wanted to give a shout out uh if if you've read the mind safety deck you will recognize a lot of that thinking coming through here as we talk about the times today fun fact ben do you know it's a great blog both a blog and mind safety has great visualization tools for 13 f's for hedge funds and uh various positions that uh that famous fund managers hold uh do you know where the name mind safety disclosures come from you asked me this before the show i do not know so apparently i think i saw this on reddit or somewhere maybe it was on the site that i think this was part of the

dodd frank legislation every company now every publicly reporting company has to include a section in their regular reporting about their mine safety like mine like like like a like a gold mine or like an iron mine like in the ground like whether you have a mine or not so if you go read like the 10k for google or like alphabet or apple or whatever they're like or amazon like they have a section on mine safety they don't have any mines but they have to have this section that's so good i wonder if coinbase is going to have uh bitcoin mine oh yeah that would be amazing all right so let's talk a little bit about the times today so we we talked a lot about this uh subscriber run up we're at seven and a half million

subscribers today they've stated a goal that in 2025 they want to hit 10 million um management has since said they're going to blow by that and and set a new goal um you know this has been a heck of a year for journalism they had two quarters q2 of 2020 with the coronavirus and q4 of 2020 both of them unbelievable record um subscriber bumps something like 650 000 new subscribers in a single quarter over these two quarters it was the biggest year for news in history i mean at least in modern history and the new york times was really well positioned to sort of feel that acceleration so on on top of uh they added 2.3 million digital only subscribers this year i mean just thinking back to 2011

right when they launched and they got 338 000 in one year and it took them four and a half years to get to a million this year they got two and a half million so you're really starting to see like they're building a scale business here and i think they you know they're seizing the moment a little bit to do it uh it's not all roses and sunshine ad sales were massively down this year in a pandemic related way i think ad revenue fell 26 year over year well and also just fundamentally like the ad business for content uh for text content on the internet is nowhere near as good a business as it is in print because most of the value of ads on the internet accrue to aggregators like facebook and google

right yeah the new york times subscription business is actually now three times larger than the advertising business and it used to be the opposite right right like it's an unbelievable transition from this sort of early 2000s that was just completely flipped so that that's interesting to know about the business today it wasn't even um just the early 2000s i mean even reading the gay to lease book uh it was in the 1950s and 60s it was advertising was 3x subscription like that was always how it worked right that was the newspaper business this this comes on the back of i think the years were 2012 to 2015 when they really started to get serious about this they went to the advertising department

and they they basically rehired everybody they they decided that the entire team needed to go new people needed to come in they turned over 85 of the 400 person staff with people with digital skills which is like to have that big of a turnover like that and say actually this average like the ads that we're going to be doing in the future have nothing to do with the ads that we've sold in the past so we need completely new people to do that it's just interesting that like you would do that even when the business is declining so heavily frankly because it's still just a big business for the times and as they make this transition that needs to stay a strength like they need to be a major player in

internet advertising even though their primary business model is now a subscription yeah um other fast facts on the company today it is 4 300 employees 1700 of those are journalists and interestingly the 1700 number represents about five percent of the total journalists in the united states the total professionally employed journalists so it's not just ezra klein and kara swisher and those folks going to the times like they are just vacuuming up the best journalism talent and frankly paying them very well for it the times did we mentioned that 1.8 billion number that stayed fairly flat over the last several years and in their top line revenue they're seeing of that 250 million in operating profit again also kind of flat right now probably related to the the pandemic but the composition of that has

vastly vastly vastly changed like it's deceptive to look at the top line because it's flat while part of it is vastly declining and part of it is hugely growing yes so we should hold that for one moment and i'll just put a pin in sort of i guess articulating the scale of the times today their subscriber base so we talked about how they're killing it and it's not even close they have more digital subscribers than the wall street journal the washington post and the 250 local gannett papers combined wow and to like add another layer of icing on that stat that stat comes from an article written by ben smith a columnist for the new york times the former editor-in-chief of buzzfeed

wild right totally wild i mean that makes buzzfeed gawker recode quartz and vox on the list of publications whose editors now work at the times they have just they it has just become so clear in only six seven years that to the extent that there's sort of a i don't want to call it a monopoly because i don't think that's the right word but a scale player at the top uh and sort of no one in the middle and then a bunch of successful sort of indies and low-cost structure businesses on the in the long tail like they are pretty much the only one at the top and you've got a couple of other modestly successful publications right now toughen it through the the washington post under you know

bezos's funding um and and and there's just really not that many more yeah that that look like the times well it's such a um well we'll save this for playbook but like the nature of the internet economy winner take all businesses yeah winner take all and yet globally addressable niches for low-cost structure businesses on the other side yep so i think this is a good place to transition into narratives and the narratives for this company it's not as clearly bifurcated as it would be on an ipo episode where we're saying here's the reasons to be bullish here's the reasons to be bearish there's sort of an interesting spectrum that we're going to go across here on why would you be bullish on the times and

why would you be bearish so the first bull case meredith copet levian the new ceo articulates this regularly on their earnings calls which is hey not only is our 7.5 million person subscriber base growing and of course that includes news subscribers it includes the digital only non-news you know it includes the the print subscribers we think that there's a hundred million english-speaking people who are willing to pay for news so we think our tam is like you know 15x or something like that 13x what what uh what we're at today so it's fast growing and it's large and that's sort of like ipso facto must be the tam because you wouldn't be growing that fast at these large numbers if the market

wasn't that big like if you were starting to run out of the market you wouldn't be adding customers that fast right right yeah and uh the second one this is where we start to get into the sort of like is it a bear case it is a bull case we should have the discussion of is the new york times a tech company and i was reading a medium post by their outgoing former cto who said things like i think 150 times went through the reforge growth series like not a thing that you would expect to hear from within the new york times organization like they're taking it very seriously to think like a tech business act like a tech business nail distribution on the internet understand where they fit in there and from a cost

structure perspective this we owe wholly to mine safety disclosures uh they make the point that with newspapers the new york times costs were largely variable that is they increased in proportion with the number of papers produced and sold but with digital subscriptions most of their costs are fixed that is they don't increase as the new york times adds more subscribers so you think about this sure their revenue's flat but they're switching out their cost structure from one that's delivery trucks that's a physical paper that's printing presses to this one that actually looks a lot more like netflix where you know you acquire the content and then the whole base that you have that you can sort of amortize your content costs across it's all gravy like you you have these you've

content costs you have fixed costs you have your variable costs on top but your revenue is not actually connected to any of those your revenue is actually connected to your audience and the reason to be really excited right now is that the times is in a place where they're just about to sort of like outrun all those sort of fixed costs and be in this super high margin territory where the audience is like so large that they really don't need to grow their costs at the same rate that they're growing their expenses oh it's just like uh we'll discuss this in powers but it's just like netflix like why can the times pay a hundred thousand dollar plus starting salaries for journalists and no other organization can

afford to it's because they have the scale economies of you know millions of subscribers so like something just like netflix can pay a hundred million dollars for a piece of content amortize it across there you know many many many times more subscribers than peacock same deal same dynamics here yep and it's almost like that's like someone's been holding up a sheet in front of the business while it's been like completely reorganizing itself on behind and you're like what do you mean the sheet's still the same size it's like yeah but you don't know what's ready to run through it that's such a good analogy i love it now when we're comparing it to netflix i think there's one more interesting thing to say about the times here and that's sort of the bull case is they don't have to go

acquire content like they're not in the business of going and bargaining with someone who owns the content who's then going to say gosh you got a lot of subscribers you really have to pay a lot they create the content so they have i mean i know netflix switched to this with uh original content too but they're massively advantaged in that way where they really do create and own all the content that they're they're creating and while they're paying high salaries those salaries don't scale with audience and can't get negotiated in a way that scales with audience yep yep that's that's such a good point like nobody probably not even kara swisher as much leverage as she does have she's not going to

be able to go to uh ag and say hey you just added two million subscribers this year i need some percentage of that right no one's got a revenue share deal with the times as in their employment contract but i mentioned this was sort of a bothy a bear case bull case my verdict is still no that the new york times is not a tech company and even though the business profile and the the sort of dynamics that we just described definitely make it look that way the organization with power inside this company is still in the newsroom much like facebook has these sort of products apple has designers microsoft has pms google has engineers the new york times has journalists at its core with all

the power and they've sort of brought in lots of people to sort of be a part of the newsroom but like when we talked earlier about sort of the business side being all non-journalists there's still something to the fact that like the most important thing to the times is their brand their objectivity their ability to sort of like be discerning in this world and so where you have things where a tech company would be being like whoa we have the number one podcast let's launch 30 podcasts or like whoa like a lot of people like our cooking app let's launch like 10 other experimental apps or like huh the game the the crossword's going well for games i guess like

let let's try and be zynga like let's try and like do a ton of crazy data science and launch a bunch of games and it's like it's happening over the course of years instead of months and they're not like running hard into these opportunities that i think you would sort of see for a tech company in the startup world if they were falling into the success that the new york times is and i think the thing holding them back is the very thing that made them sort of successful which is the sort of like trust in their brand that they need to maintain with this level of journalistic integrity totally i mean i think it gets back to the um literally as we told in the history baked into the immutable mission

of the trust and the company which is to continue to serve as an independent newspaper entirely fearless free of ulterior influence and unselfishly devoted to the public welfare as a news organization like that is what they are that that is undeniable right right so that's sort of the bear case side of them being a tech company like sure they've adapted well and they certainly have uh been more sort of tech internet mobile growth forward than any other news organization and they've undergone i hate to use this phrase but it literally applies here digital transformation um they're not a tech company and they they they have systematic things holding them back from behaving like a startup another bear case to make is that while subscribers are up we've talked a lot about their subscriber numbers we haven't been

talking about or nearly as much about their subscriber revenue because it is not growing as fast in fact their revenue per subscriber is going down and if you hear them talk on earnings calls they assert things like it'll be you know we'll actually start increasing it again by the second half of 2021 they'll say things like um those are promotional discounts that we use to get people in and then once they turn into second third fourth year you know paying um time subscribers you'll see that that start to meaningfully change we just don't know if that's true yet it's very plausible but right now revenue definitely is not tracking subscriber growth it's interesting right that's a tried and true old school newspaper

tactic right of like you know you subscribe to the local newspaper for x price for first year and then yeah then we'll raise get the times for only a dollar a week yep exactly um but the jury is still out about will this work in a digital environment where it's not while as we've discussed there are some monopoly like factors here in that like nobody else has a journalistic organization like the times or the number of journalists or the reach or the content that they're producing there are it's not like a geographic monopoly like the old school newspaper business where you're either getting the times or you're getting no news there are other places everyone can go on the internet yep for sure

another bear case to make because in my bull case i started painting of why this is an even better business than netflix the times has seven and a half million paying subscribers netflix has 200 million paying subscribers the times estimates that their total addressable market is half of netflix's current subscriber base like just to contextualize that i i think the new york times is current average revenue per subscriber is right around in the same ballpark this 15 to 17 dollars a month of netflix so it's an interesting comp because from a revenue perspective there or from a subscription price perspective they're they're very comparable but the times yeah estimates that it's addressable market is half of netflix's current market so when you're thinking on the scale of sort of the fang type

companies the new york times is never going to be that not that they aspire to be that but that is in no way the scale that we're talking about here even though they have these sort of tech company cost structure dynamics that they're that they're shifting to the next bear case i think that's a reasonable one to paint is this is sort of the classic ben thompson point is there's kind of a conflict here between their business model and their stated mission where if you're really going to be the paper of record and you're really going to be the paper for everyone the authoritative source your business model actually should not be to get a small number of people to subscribe to you it should be to get your content

to the largest number of people in america in the world and not limit your reach at all by your business model i mean the the argument that if you were a bear you would make here is subscriptions are for niche providers like you should be figuring out how to run a successful advertising based open publication for the internet if if what you really want to do is be the neutral sort of paper of record because what you're doing creates an incentive for you to create strong affinity with a certain group and whether that group is liberal subscribers or people who don't like the president or whoever you think they've attracted over the last few years the new york times without a doubt in this business

model has every incentive in the world to identify a sort of large niche and create high affinity among that niche and that may not necessarily align exactly with pure journalistic neutrality super interesting aside i i forgot to include in the history and facts the paper of record the new york times as the paper of record that saying and quote actually comes from a very specific business strategy from the times really they added the index to the times that they published i believe quarterly i think in the 19 teens the index was literally an index of every topic and person and institution that appeared in the times over the past quarter and the reason they started doing that and they invested in doing it was so

that librarians and researchers around the world would start using the times as their main news source because it had this index and that then they would get into schools and then they would get and uh you know and so that's where the paper of record idea comes from but to your point it's uh well actually it may be sort of counter like they were sort of specifically trying to target a niche group of like we're going to get into the elites in like of researchers and academics and schools and but yeah it's interesting yeah david it's interesting like this this really raises the point of to be subscriber only really your motivation is to create really strong affinity from someone such

that they're willing to pay for your content and you could do this by being really niche but the question is is there room for sort of one subscription in everybody's media diet where the way that you're creating that really strong affinity is by saying we are just the highest quality most neutral journalism that you could find does that stimulate a buy decision in the same way to that going to someone and saying i'm going to appeal to all of the biases that you have and say like i'm going to keep giving you more of what you love like can you actually build just as big a business if you are the one scale player to really have the subscription for everyone that's interesting i don't know i mean i my mind goes back to

the fox news discussion right like i don't think anybody would argue maybe maybe some people will maybe we'll get emails and comments in the slack but i don't think anybody would argue that fox news has a target niche demographic of political conservatives right it depends on your definition of niche it's a huge freaking niche well right that's the thing it's a huge freaking niche and um you know even with that business strategy they built a five billion dollar 50 percent ebit margin business right and i guess the question i'm i'm really driving at here is can you similarly get people to fork over their money for neutrality and as driving a way that they're willing to and again the people aren't i don't think they're

subscribing to fox news well i guess they're subscribing through their cable bundle but they don't know yeah yeah they don't they're paying for it whether they know it or not yeah yeah so it's a good question certainly yeah i think the times would probably argue and maybe believe certainly some people there i think would believe that that is what they're trying to do of like be the neutral you know highest quality news source across lots and lots of topics and that that's worth paying for you know i don't know but i suspect certainly a large portion of the gosh what five million subscribers they've added since donald trump was elected president uh have uh chosen to subscribe more for the uh niche reason

than for the uh neutral reason yeah or at least i think that if i had to sum up and try and like embody the way that a lot of people feel who have subscribed in the last few years i think i would say i feel like there's so much untrustworthy misinformation out in the world i am totally willing to fork over money for something that i know i can trust yeah and there are the the class of people who are saying that have their own bias so when they say that i know i can trust like it is inherently loaded language because you are more likely to trust something that sort of represents the point of view that you want like it is impossible to be completely unbiased in reporting anything

because you get to choose what to report not like at the very core that's that is true but yeah i just it is it is a really fascinating thing to try and understand all of the incentives of a subscription based model and figure out if that jives with the mission yeah okay so that's sort of barren bull i i i want to paint this spectrum as we come out of narratives because i think there's this interesting sort of like uh decelerating excitement on this spectrum so the first thing you realize when you look at the the times is whoa this is a killer subscription business that is growing 40 year over year in their number of of paying digital subscribers or i guess paying subscribers broadly mostly from the

digital category like that is awesome like that is like a late stage startup good oh but it's only growing like 10 year over year in revenue like i really wish that was tracking the subscriber growth and then three you sort of realize huh well total revenue has actually been flat the last few years and it's fell over 50 from their glory days in the early 2000s so in some ways it's like a high growth company by looking at just subscribers certainly not though on total revenue and geez their revenue glory days may have been behind them so like if you're only looking at the surface level like this you're going to get really disappointed unless you're sort of believing the narrative that i

mentioned earlier about you're holding up the sheet and they're fully reshuffling their cost structure underneath of it and they're sort of ready to explode in profitability coming out of this full rearrangement of the business yeah and it's totally a compelling narrative but it is wild realizing like i was someone who started paying attention to the new york times's business in the last five years and like i have been all on board in this subscriber growth story and it is just crazy to like zoom out with a little bit longer lens and be like they used to make way more money yeah yeah all right well talk about power yeah i think this is great transition to power um for anyone who's a new listener old

listeners will know this by heart by now but we are huge fans of hamilton helmer and his work seven powers which describes seven strategies by which companies can earn long-term differential profit margins higher than their competitors so basically ben as you like to say why do you strategically deserve to be a defensible winner in your space relative to your competitors and the seven are counter positioning scale economies switching costs network economies process power branding and cornered resources this is a super interesting one for the time totally this is one like i david i'm gonna let you take scale economies because i know you're just like dripping to talk about that and i'm gonna talk about branding because rarely do i think that a business actually has brand power oh i like it i like

it like most of the time because it takes so long to build up brand power and so much trust and so much repeatable years and years and years of convincing customers like hey i keep delivering on what i say i'm delivering on that rarely if you hold out you know the bottle of advil versus the the generic like advil has invested a ton of money and time into winning that battle but like most companies especially tech companies that we cover on this show just don't actually have brand power the new york times has incredible brand power they can they can print things that i wouldn't even believe if some blogger printed it but it's literally the exact same story in the times 100 i will take that as truth

yep well and it's um you know the canonical test is the same product if it had a different name on the masthead in this case would you value it differently yeah 100 there could be the exact same word for word article uh in different places and it would be valued differently yeah this is this might be the clearest i think example of brand power that we've had on the show thus far right like i pay for the new york times if it was a different masthead and it was all the same articles like i probably wouldn't be paying for it yep totally okay scale economies interestingly i i think the business has probably both iterations of the business head scale economies certainly the old school print newspaper business

did because you needed a printing press and a distribution network to get your paper out there uh no uh no scale to support that you know good luck printing a paper and sustaining it and then as we've talked about in the new school business um you know this we keep harping on it but the salaries that they pay reporters and the number of reporters and journalists they employ uh by being able to amortize that across a much larger subscriber base can certainly outgun any other organization out there yep total classic example is there anything else in here this is uh going out on a limb and maybe tenuous as so often with this power but i'm just wondering if maybe we might finally be able to make an argument for process power and my thought on this

is that there is literally 170 year tradition and institutional knowledge of how to do high quality journalism in this organization stewarded by a family by like a single sort of you know shared value set of people yep and could you say that that is so wrapped up in the organization that it can't be transferred out i think maybe i mean even if i say a group of editors were to leave the times and you know either start individual sub stacks or a competing organization i still don't think it would be the times now some of that is maybe branding but even just like the process of creating the paper that there you know what once was a physical paper and now is a continuously updated

digital masthead every day or as they would call it the daily report yep um i think there may be some process power here interesting hard to know without looking under the hood but i think it's a reasonable reasonable guess i mean i can certainly say from you know when i worked at the journal and i worked on the quote-unquote business side not on the not on the edit side but i will tell you there was absolutely a machine that had like it was a miracle that and i think anybody who works in the news business will tell you this gate to lease writes about it in the book like it's a miracle that the paper happens every day and that the website updates every day and nobody who's part of it

can kind of fully explain it but like somehow everybody comes to work every day and like stories get published and edited and like it happens yeah i felt that way about when i was at microsoft shipping office every three years like there was such an unbelievable process to get what 3 000 people to all lock their code in a bug free way and get it out the door once every three years i i completely see how it's possible for someone not to understand how the entire system works themselves yep okay cool all right i don't think there are any others no i think this is pretty clear cut all right into playbook well the very top one for me is something we've talked about already on this

episode but it's it's just this is the ultimate articulation of it and that is the the barbell media landscape that exists on the internet where you have this distribution with a very very small amount of scale players and a very long tail of niche players with incredibly low cost structures and nothing in the middle worked anymore and the new york times went from being at the they they were at the sort of head of the distribution but sort of behaved like a lost middle person until they sort of decided that what their strategy was was to be the one scale player and and sort of if you're going to publish on the internet you need to escape to one side or the other you need to either have a

dramatically dramatically lower cost structure or you need to be the big guy and there's just not that much room in the middle it's really reminiscent of the bob eiger disney strategy i think right like totally world where youtube exists you need to like the winning strategy for disney was go hard into hyper high quality expensive produced content yep and the new york times has their own version of the bob eiger three-point plan of you know what was it original content internationalization and embracing the digital strategy and i you know you you could make an argument that the times is kind of doing the same thing it's the best original content in the news world um it's you know it's the highest quality

journalism they have a very real international they're opening more international bureaus than anyone else they are frequently having dual english and chinese bylines uh they are you know i think right now they're constraining their tam to the english-speaking market but they have a clear eye on international uh and and they certainly have reoriented around being digital first and embracing technology to not only distribute the news but report the news starting with snowfall in 2014 you know the times produces some just amazing visualizations along with their pieces totally it's really interesting i think particularly the international geography point you know the times like many papers have had bureaus all around the country and around the world uh for all of its existence but i would have certainly

noticed that you know in the past five years or so as local news has uh declined like you see the times out there reporting in you know all around the country in the u.s all around the world certainly here in san francisco and silicon valley i mean in seattle right we know there are plenty of times reporters who work in seattle who work in san francisco and who report on tech even though it's the new york times like that's i think different than in a pre-internet world absolutely what do you have next you know the one that i wanted to really highlight uh that i did at the beginning of the episode it's just all the way back like the entrepreneurial

journey of um both the raymond and jones and and ox right like and particularly the moments where like it's back against the wall and you have to make something happen with no resources uh and that has happened so many times at at the new york times but particularly with ox you know that's just when the entrepreneurial magic happens and for an institution like this like we all think of it as the great lady the venerable new york times it's been around for 170 years but like it too started in the same way that so many great startups start yeah yeah i love that point there's a thing that we build as a con earlier that i think there's an interesting playbook

of it being a pro and that that is a conservatism and a lack of uh radical change as a benefit and especially under family stewardship where if the new york times was more of a startup and in 2010 to 2014 decided to do the stuff that buzzfeed was doing or any of these sort of new media companies that were all the rage and they decided not to put such an intense focus on the quality of the journalism in the daily report look at where all those companies are today like yeah none of them worked and like vox is sort of the closest in in sort of having a successful set of of um media brands underneath it but for the most part they got washed out and ag and the family's sort of insistence

on the core values that endured for 160 years before and now have endured another 10 i mean they almost got destroyed in not you know adapting for digital but in sticking to it's kind of like a government the government is intentionally supposed to not be able to adapt quickly because it's supposed to be enduring and the times is very much like that where like they did come out of this as number one because they didn't compromise on their values yep that also makes me think of um two other playbook themes that are classic media themes that this story reflects too i think which is one content is king uh and it remains true today like i think related to what you're saying is that unlike uh buzzfeed or you

know many of these other types of um new media it's funny buzzfeed is actually doing well so we keep doing well not to pick on them but as a as an example of this uh genre of rewriting headlines uh and creating clickbait it's not actually content like if you're not actually producing the content you're going to get arbitraged away whereas producing the content is if it's good quality content is going to be valuable the other one it reminds me of is you know dual revenue streams man like that was the magic of the media business was subscription and advertising revenue and all the great media businesses have that whether it's cable whether it's news and now whether it's streaming video

as well so you know we have it at acquired like podcasts have it i was gonna i was wondering if it was too cheeky to be like yeah all the great business media businesses acquired yep greatest of all media businesses well i mean to that point of revenue diversification there's definitely something here about them not quickly but getting into this non-news digital revenue they did grow the cooking and crossword apps by 60 percent last year to 1.6 million subscribers they also nestled in here a thing we didn't talk about in one of my very favorite companies which is now one of my very favorite new york times media properties is the wire cutter like yes if this were the acquired podcast in 2016

we would be doing an episode about how amazing it is that the new york times managed to buy the wire cutter for only 30 million dollars and now gets 50 million dollars a year of high margin revenue out of it out of the holy crap it's a great freaking acquisition and the new york times million dollars a year in affiliate revenue yes wow i mean they took it from an electronics thing called the wire cutter plus the sweet home which was for home gear and they said we're dumping the sweet home brand and the wire cutter is now the wire cutter for everything and i think they're going to try and like you know make it sort of the new consumer reports including something they foreshadowed on the earnings call

a digital subscription and i don't know what the heck that's going to look like yet because i don't know like exactly how that would work but that's an interesting business for them to be getting into too so that they've i would i would say the last five to eight years their investments and acquisitions have been much much smarter than in the previous decade yeah the wire cutter is about.com done right well whoever's doing capital allocation now is uh much better than yeah well the internet's a mature place like we understand business models on the internet better now yep uh one that i wanted to point out that we didn't point out in the history at all is this really interesting one where the

print business is only declining at like five percent per year and it's gonna eventually go to zero but for the people who are willing to continue to get the new york times every day uh the print edition they are increasingly willing to pay for it so the times is like sure we'll keep printing your paper but uh the average annual subscription is like 700 bucks and for the like 800,000 people that are still getting the times delivered that's what they're paying and so the revenue from paper subscriptions has stayed like relatively flat because the willingness to pay among the core group that's holding on keeps going up and i think that's just a great strategy by the times to like just get the

most that they possibly can out of a very large continuing revenue segment while they shift their business that's it and i um i haven't looked recently but several times over the past couple years i've looked at and wanted to add a sunday physical paper yep to my digital subscription it's wildly expensive yeah i got it for a while but i definitely after the year i was like okay yeah probably not i'm probably not one of these people that's willing to pay crazy amounts for a paper but like i could totally see like if that were a habit i would probably pay a huge amount of money for it yep well the last one at least from me is that i think you made this point a different way but the internet

created globally addressable markets and it just never seems to surprise me i i think if i had been born 10 20 years earlier i think i would be you know my default assumption would be more that your markets are geographically constrained but being someone that grew up in the 90s my assumption and my headspace is always like well you put something on the internet and then the whole world will have access to it what do you mean like what market are you launching in you just launch on the internet and i'm sure like generations below me gen z and and onward are going to be even more like that but it it just always it's just always fascinating to me that like before your total addressable

audience market whatever was confined to some geo and now it is whoever loves you know your thing anywhere in the world and it's just a magical magical thing man then it must have been so easy to make money in the 90s i mean i guess you could argue it's so easy to make money now but like literally everything was working in the 90s old school businesses were working internet businesses were working like you couldn't go wrong i mean that yeah like if i if everything seemed to be working uh i would be willing to pay the prices people were willing to pay for stocks in 99 also yeah you can totally see how that happened what does that say about today ah no kidding all right should we move on to value creation value

capture let's do it all right listeners now is a great time to talk about one of our favorite companies statzig yes long time acquired partner there is a reason why the best product teams companies like open ai and notion atlassian figma rippling bricks and more rely on statzig whether they are iterating on their core product features or shipping ai powered experiences at scale yep in the crazy speed of today's ai world shipping fast is just table stakes now it's basically trivial to build and deploy your app constantly the real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next whether it's a feature tweak a pricing change a performance improvement or an ai update like a

model change or prompt adjustment they're not relying on instinct they're measuring what actually moved engagement retention and ultimately revenue and as more teams build with ai that learning loop becomes even more important building with llms introduces non-determinism into your product experience the same input doesn't always produce the same output and behavior can shift in subtle ways in real world use so doing offline evals will give you part of the picture but you can really only understand the impact once your product is live with real users and then you can measure how their behavior actually changes it's very different than the way that you would ship features in a pre-ai world where you knew exactly what the software was going to do in production yeah exactly so this is where stats

it comes in it brings experimentation feature flags and product analytics into one unified system so teams can ship safely test rigorously and directly link what they changed to how users actually behaved the result is a tighter feedback loop and learning that compounds over time so you don't just ship more you ship better so if you want to make learning your competitive advantage whether you're building new ai experiences or just evolving your existing core product go to statsig.com acquired to get started all right value creation and value capture david two components to this the first one uh how are they capturing value compared to the value that they create in the world the second one uh how does the value they create for the world not just shareholders compared to any value destruction the second one's a

little bit of like an altruism question this first one uh if you would have asked me about this in 2014 you know this is like an f right they're creating so much value for the world they're doing all this high quality reporting and like the the dollars are falling like water through their fingers you know everyone else is managing to capture it facebook's capturing it and buzzfeed's capturing it and they just you know they're they're like not sure what to do about it and paralyzed today it's a very different story it's still not an a plus but they sort of laid the foundation for you to believe how they could be very profitable in the future yep 100 100 now this this final one like how much value

have they created for the world like this is a company when we compare it to like airbnb where there there was a lot of value created a lot of value destroyed in that company and many of the other companies that we've we've sort of um covered in how they were able to achieve the business outcome that they did and you then you look at their market cap and you're like wow this company managed to be like a hundred billion dollar company or whatever it is creating and destroying a mixed amount of value along the way the new york times is the opposite of that they are they're capturing in their market cap what is it four or five billion dollars and the amount of value they've created for the world over their

170 years is unbelievable they have been a pillar of a functioning society like the work that they've done has been i don't think it's crazy to overstate it like certainly influenced the way that our society developed and without institutions like them we probably wouldn't sort of have the functioning society like we have i mean i get no matter what you think of uh their editorial uh uh stance now or in the past two things i would point out one they've won 130 pulitzer prizes which i believe is more than 2x the number of any other organization in the world and two you know we didn't talk about things like the pentagon papers right but this organization and journalists within it throughout history have

literally put their health safety livelihood lives on the line to report on important things that are happening in the world and to call out abuses around the world pentagon paper situation was crazy like and ended up in in conjunction with watergate in a sitting president resigning you know we talked a little bit about world war ii and there was world war one and can't underscore enough what you said ben that has been created for the world by this organization existing is immense yep yep all right should we get into grading let's do it well i think the way agreed this one is forward looking what's an a plus and this of course is a business outcome what's a what's an f and then what's kind of the c scenario

to me the a plus is that they are literally at the inflection point where they don't need to hire many more journalists many more engineers many more designers i know they they are still hiring aggressively for these roles but where they they start to kind of taper in the fixed costs required to produce what they produce and they're able to just turn on a machine to continue acquiring subscribers which is a little bit of a risk to me because while we're still in a fast news cycle environment we no longer have the trump presidency hopefully we won't have the coronavirus soon like god willing 2022 is a a week can go by and i'll forget to check the news and it'll be awesome

and that won't be great for the times like it's worth calling out that is counter to their interests i've been thinking about that though i don't think that's likely to happen anytime soon look at how crazy 2021's been yeah i've been literally just like thinking about this for like my own life and sanity i think we just got to accept that we live in a world of accelerating change which means lots of frequent disruptions of all types all of which is probably good for the news business yep yeah and this turns into kind of like a b if they're not able to on this fixed cost space able to just continue the subscriber tear that they've been on but just sort of like

modestly linearly continue to to acquire subscribers i think the there's like an absolute a plus case if they do keep making investments and really turn into more of like a tech company of an experiment learn rapidly iterate um the new york times has revenue opportunities lying around all over the place that they're not taking advantage of literally all over the place yeah like if they can figure out a way to monetize those in a way that feels authentic to the times but is also like a you know a really good uh business strategy which i feel i'd give them a c on so far or maybe a b minus then there's like then i don't care about hey let's taper off the hiring like go hire you know google

levels of people and go build more and more stuff than double down on what's working even just sticking on the media side you know they've done some experimenting with video and streaming content uh and they've done deals with netflix with prime with hulu with fx um you know that's all been underwhelming it's been very underwhelming and like you know we probably beat the drum enough on this episode about the times completely whiffing on video but like an a plus would be they don't whiff on video this time around because obviously the opportunity is enormous yeah um so then you know the c case i think is is very much this like new subscriber taper off i think there's one more um

one more piece to the a plus case which is uh they have to increase our poo for subscribers certainly yeah yeah they need to prove that people year two and three are willing to make a and it's a big jump too it's not a little this introductory pricing is way cheaper than the year two and three pricing so what do you think the f case is how do they how does this not work they rebuy the red socks and what is it what is a reasonable way that this could go super south let's see i mean i'm tempted to say that they get their value aggregated arbitraged whatever you want to say by aggregators and social networks but i feel like everybody's learned that lesson like

that's unlikely to happen very unlikely to happen facebook's even paying them for content now they do have a deal yep i guess an f scenario for the future for the times could be that like the hyper partisan environment that we've been in that this is just the beginning and it gets worse and worse and worse and worse and worse and there literally is you know no room for anything in the middle even whether you think the new york times is the middle or the not it wants to be the middle right and that is just an untenable position it's so funny like even today i always thought it was a widely held belief that the new york times at least during the trump presidency was moderately that a common

perception is that it's left-leaning and this person who is left-leaning was like what do you mean like they published that terrible op-ed with that uh the cotton tom cotton op-ed and they did all the stuff with hillary's emails they got trump elected like they're not why are you kidding me and so like i think there might be more and more david exactly of what you're talking about what if the you got a pick and and there is sort of less room to be a or at least have a large addressable market as sort of a someone who's trying to be a centrist yep i hope that's not the case yeah me too for all of our sake yeah one thing i do want to point out that i thought was pretty

interesting because i i got pretty deep down a netflix rabbit hole on what do you have to believe to believe this kind of looks like netflix netflix trades around 10 times their trailing 12-month revenue and the new york times is only trading at about 4.8x trailing 12 months and certainly if you look at revenue growth the new york times doesn't deserve to be anywhere close to netflix but if you're looking at digital subscriber growth and a very similar business model albeit probably smaller tam it is interesting to see that the new york times is on a sort of relative basis definitely undervalued compared to netflix i would assume the subscriber growth rate is higher than netflix it's a good question i think if i remember right netflix tries to grow revenue 30 year over year

and so that probably charts exactly to subscribers and the times grew this past year they grew subs like 48 yeah so if you really believe that like you just ignore the rest of the business and you believe that revenue will catch up it's a much faster growing business than than netflix with a very similar cost structure yeah interesting so just just thought that was an interesting one to point out all right carve outs yeah carve outs we haven't done carve outs in a while and we had we we were worried you know we're doing these such super long episodes now we're like god people don't want to listen to carve outs at the end but uh we've been surprised people got a lot of

pushback yeah yeah and i mean i guess it makes sense if you make it this far why not have some fun now we're all just like whatever um so my carve out is a really great fantasy series uh book series that i read recently uh saba tahir's ember in the ashes series it's really cool it starts out the first book ember in the ashes uh i thought was a little slow and felt a little hunger games knockoffy but uh my wife jenny had read the series and she's like no no no like stick with it and um by the end of the first book and then into the second and beyond it gets gets really good i thought really good world

building very cool sort of like uh it was um kind of like game of thrones meets lord of the rings meets like the middle east like uh it was uh it was good highly recommend all right man i haven't it's funny i haven't read fantasy in so long oh it's so fun i find it like a really good way fantasy and sci-fi just last couple years i found like the best way to unwind at night and on the weekends because like yeah just get away all right well my my first carve out is gonna be the opposite of a way to unwind uh it is the book titan by ron churnow um it actually felt a lot like researching this episode

it is the history uh sort of the the most recent i think biography of john d rockefeller and the entire story behind standard oil the book was nothing like i expected it to be i heard it recommended uh by dax shepherd on an episode of the tim ferris show and uh rockefeller is such a fascinating human because he is both the most egregious penny-pinching capitalist of all time and also probably the biggest philanthropist in global history maybe except for bill gates and he was able to square the and not in two chapters of his life simultaneously during his entire life being just ruthless in the business practices and being puritanical in his religious beliefs and and absolute devotion to god

and to he he somehow thought it was his god-given right and something that he needed to do to make the most money possible and then give it away in the way that he saw fit and he did like the we modern medicine no chance that it would be where he is today absent the absolute monopoly and absolute anti uh anti-competitive practices of standard oil and the railroads it's just so interesting he started rockefeller university right which is a yep research institution in manhattan that has uh developed many i think it's all phds and postdocs right sounds right he also is the founder of the university of chicago and left his name completely off of it yeah i didn't know that and he put it there specifically

because he was like i don't want this to be intermixed with my business practices and everyone you know if i if i put it in manhattan or cleveland people will think i'm using it for influence oh interesting that's totally totally fascinating that's wild it's a long book it's really good ron churnow for folks who don't know also wrote the book that uh hamilton the musical is based on and uh actually when i referenced jp morgan earlier and i say he shows up in all these stories i was just reading about him showing up in titan as well so can't can't recommend it uh strongly enough i also have one more carve out that i want to throw in which is carve out alert

great great company that uh we invested in from psl ventures called iteratively launched and announced their funding and everything this week and uh it's a product that i'm like so pumped about because i wanted it so bad when i was at microsoft and if you're a data team um you know a pm an engineer or sort of an analyst who's ever had to work with analytics and had an analytics outage or had like hey i swear we created an analytics event in the spreadsheet that was supposed to be tracked in the code here and like it's not firing or it's like sending us like one character different uh it's an uppercase u and user logged in instead of a lowercase u so it didn't come up in my query their

product uh it solves all of that and the cool sort of philosophy behind it is we take software testing really seriously like you can't ship a bug you can't you can't check in something to the um the code repository that has a that basically that won't build so why should you be able to check in a bug in your analytics and if we can sort of enforce that then let's take our analytics as seriously as we take you know bugs and it leads to all types of cool stuff like well i i'm i can go on forever super excited about this company check it out iterative.ly awesome super cool i know you've been uh you've been pumped about this investment for a while jumping at the bit to be able to talk about it

publicly so yep a year and a half under my hat yeah man well let's see uh listeners i think that brings us to a close of uh definitely do another hour just to be sure the longest uh number of years we've ever covered i mean i think if you want to keep talking about this i think we're getting increasingly interested in the sort of like rockefeller era and new york times you know early history if you want to talk about this kind of stuff um you should come join us in the acquired slack it's where we talk about you know the most recent episode future episodes we want to do um and and a place to just talk to great smart folks about everything going on in tech uh that's

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go to acquired.fm slash lp can't wait to see you it's pretty cool we've got uh we've got some like mafias forming of acquired lps and community members at different uh pretty hot startups around uh i was gonna say around the bay area and seattle around the world yeah around the internet absolutely absolutely well if if you aren't subscribed this is maybe your first episode and you like what you hear you should if this is you know something that you've liked for a long time and you've been waiting for that right episode to share with someone for example i'm sharing this episode with my grandma she expressed interest in uh in listening anybody who cares about journalism the times uh you know the media landscape please share and uh you know of course of course one-to-one is great

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