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Alright, high energy. I need some energy to get through 170 years. Woo, it's literally 170 years. It's crazy. Welcome to season 8, episode 2 of Acquired. 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 a hundred 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, found it 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 newspapers 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 Oxs' Soltzberger 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. Oh, indeed. I can't wait to talk about that part of the history. And yet somehow today they've been accused of being 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. So good 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 and well, 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. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and founder. So we knew there's a natural fit. We know the host of founders. Well, David Senra. Hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how the group is together and then they say it's like the best curriculum for founders and executives. It really is. We use your show for research a lot. I listened to your episode of the story of Akio Maria before we did our Sony episodes this incredible primer. You know, he's actually a good example of why people listen to founders into acquired because all of history's greatest entrepreneurs and investors, they had deep historical knowledge about the work that came before them. Also like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research to him. But I think this is one of the reasons why people love both of our shows and there's such good compliments is on acquired. We focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of founders. Listeners, the other fun thing to note is David will hit a topic from a bunch of different angles. David, it was the third fourth time you've done Polaroid. I've read five biographies of Edwin Lann and I think I've made eight episodes of them because in my opinion, the greatest entrepreneur to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20 year old Steve Jobs, he's talking about Edwin Lann's My Hero. So the reason I did that is because I want to find out like I have my heroes who were their heroes and the beauty of this is the people may die, but the ideas never do. And so Edwin Lann had passed away way before the apex of Apple, but Steve was still able to use those ideas. And now he's gone and we can use those ideas. And so I think what requires doing what a founder trying to do as well is find the best ideas in history and push them down to generations. Make sure they're not lost history. I love that. Well, listeners, go check out the founders podcast after this episode. You can search for it in any podcast player, lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders, go check it out. 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. 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. I think that was like eight to 90s. Wow. Yeah. There were no cars when the New York Times was started. Crazy. Crazy. Okay. We go back to 1851 and the founding of the well-known world-renowned New Hyphen York Daily Times, which of course, doesn't quite have the same ring. New Hyphen 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. So it got a lot cheaper to print newspapers, must have been various forms of machinery, all rudimentary automation, and just the demand, like the growing population, the demand for news, literacy. It was like the substax 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 18, 1851 of the new hyphen New York Daily Times. All right, Rosenthal, you've made your point. All right. It was a hyphen. 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 premiere 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? You're not going to get this, but I haven't put it in here. His wife's father's, no, I have no idea. Benjamin Gilbert, the well-known New York social. Really? Really? Yeah, really. I saw that. We got to include this here. I got this in research since he was really 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. That's a lot of money in 1851. From just some casual family connections he has, several members of the Morgan family end up financing this. Like J.P. Your Pant Morgan? Yeah, exactly. Wow. As you do. This shows up in all these old stories. 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 the capital. But it's really Raymond, who's the real force behind this. So 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 been very involved in politics. And when I say very involved, I mean very, very involved. Then 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 APU's 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. This is 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 Wig Party at the time, sort of the precursor to the Republican Party. But he had stepped down and then he decided 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 of their 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. So insane. I mean, it's funny. I'm the one here. 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, certainly the Times is quite literally the party mouthpiece of the Republican Party. But Raymond is also a real journalist. Like 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 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. Like I think it is just not only is it a beautiful little piece of writing, but it is hithy, like it captures so much of what their intent is in creating this, this what would be coming in during institution and sort of how they view it in such a pragmatic way. I mean, I'm excited. Listeners, we will link in the sources to sort of 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 up my wall. It's a sort of wonderful. Wonderful. He 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? 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. Salzberger is the fifth generation, Oxelsberger who is the publisher of the New York Times and Chairman of the Board, and Meredith Koppit-Levin is the recently appointed CEO who reports to him and the board. So 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... And it falls to the... Additionally, it kept it at arms length. Yes. Yes. And most of the CEOs in the New York Times company history have been CEOs before becoming CEO. So Meredith was CEO until recently when she became CEO. So we're going to cover today sort of the history of 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 Solesberger family in the intro. And I heard you just mention that A.G. Solesberger is the fifth generation publisher. These two people we're talking about here, not Ox or Solesberger is this previous ownership. Yeah. So what happened here? Okay. So back to Raymond. He's wearing all these hats. These go well for the first 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 dropped the daily and shortened 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, circulations 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 cities taking the times at this point. Totally. And at this point, too, the New York Times was a little bit high-falutin. It was a newspaper for people who were tuned in to business and politics, and particularly more sort of politics. So it wasn't necessarily for the every person. Yep. 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's been going on for two years since Fort Sumter. But there wasn't a draft for the army. And in July, the Union, the government declares a draft. And there actually draft riots in New York City about this. People are, you know, really upset. Lots of people are 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. And 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 in 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 mob 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 taxi, 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 there, that is the scene you can kind of picture where there's just the freaking publisher of the New York Times strapping a Gatling gun to the front steps and protecting the paper. Yeah, protecting the task. Completely nuts. After the Civil War ends, Raymond passes away not long after in 1869. His partner, George Jones, then takes over as publisher and continues running it in a fine fashion. I wouldn't say it grows hugely, but he's a good story to the business. However, when he dies in 1891, there's a succession crisis 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. And it had fallen all the way down below 9,000, it was up at 100,000 plus during Raymond and Jones days. So basically, the New York Times is going to 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 100,000 papers a day to 9,000. And 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 delivery infrastructure. You're not just scale it down your AWS usage. Yeah. If only Jeff Bezos were around back then. So this is when Adolf Hock's 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. Likewise, I knew that the Salisberger family 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's sense. Like the New York Times is the one who- Well, Snapchat has the triple-class structure. That's right. I forgot about that. Where if you own shares on the market, you get zero votes. Sorry, Core. Yeah, the times pioneered this when they went public in what? 1969. Yeah. I mean, it's sort of laid dormant there undiscovered until tech CEOs decided to do it with all their companies. Yeah. So, okay. So Adolf Hock's was born in Cincinnati, Ohio in 1858. So seven years after the founding of the New York Times, to Jewish immigrants from Germany in 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 work as a boy to help 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 a assistant to the editor of the Chronicle, a 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 also crazy. Like, imagine how far away we are from New York City and the New York Times here. And here's this kid of like 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. It's, he's so freaking enterprising because like, he's, he's a drop out. He's trying to make money for his family to support them. And he's not doing the like traditional thing that you would like go earn a wage. He's trying to say, well, like, I want to go and revive this, you know, 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 post-Bellum 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, it's really this, you know, not only economically because of the iron mining, but culturally becoming a boom town. Yep. So young Adolf, 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 they, 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 a house money if they could get it. Yeah, exactly. And I mean, I'd say it was a good deal. They should have just like 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. 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 faithfully, 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 sort of housing speculation or for the mines, but he ends up losing $100,000 on this real estate. Yeah, this was, I think it was called like the over the river company or something like that because it was land that was like over the river from everything else. It was wildly speculative. Yep, wildly speculative. And so famously, he learns his lesson from this. He's like, I am a newspaper man. This is all I will ever do. I will never do anything else. I could imagine him like praying one night being like, I'm sorry, God, you know? 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's going to get 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 cash flow from the Chattanooga times, but he needs 100K like 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 eight off 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 of the country still it was definitely thought of as like 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 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 thirties 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 can do the thing about the 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 sort of pulls strings to. He's a entrepreneurial hustle. So did you fight? 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, Ben Publisher of the Chattanooga Times, Hucks was on the welcoming committee. So he got to meet Grover Cleveland 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 merged 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 know, just it's not a cash buy here. Like you're going to have to believe in me. He loves selling 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. Just like the minoswallows whale from when Cap City's body BC. 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 sellers notes again of $600,000 in debt to owed back to the creditors that they will pay off over some number of the coming years from profits hill 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 a trash or the existing bankruptcy committee, you're like, I think we'll take the merger. This doesn't sound like any kind of guarantee. Is this guy that no one's ever heard of? He's coming in from Tennessee. You got to sympathize with 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 going to 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 William Randolph Hearst and I think it was Joseph Pulitzer. Hurst, of course, ran the journal in New York among many papers all over the country and Pulitzer ran the world. Those were the two heavy hitter publications in New York at the time that each had about half a million circulation. But what they were, or what was called, I remember studying about in school, yellow journalism. So they were super sensationalists. This was right at the time of the Spanish-American War. These guys were like the, I don't know if they were like the national inquirer, but 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? Ooh, 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 clickbait. And so you sort of couldn't trust what was in the newspaper because it was always sort of trumpet it 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, 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 and chief network at The New York Times has columned us. I know. Amazing. So, Oxlays 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. Which is very exciting. Because it means his plan, like the thing he knows how to do from Chat Nougat, like that's kind of the playbook that needs to be run again. Just 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's maybe more like Pulitzer and Hurst 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 official motto of The New York Times is going to be all the world's news, but not a school for scandal. Really rolls up the tongue, doesn't it? Funny, I like Ox is 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 credo of the organization in a very fundamental way. Yeah, 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 specifically did that because the Times, which is hilarious at a 180 at this point, was considered an organ of the Democratic Party. So it's like a little bit of like a, hey, I'm going to run this a different way, but I'm going to say it kind of softly here. And I'm not going to piss anybody off too much because it's going to sound reasonable the way that I'm putting it here. Yeah. Okay. So he's got the positioning down. We're going to report the news impartially without fear, without favor, no preference for party. What about the price, though? 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 300 X to three cents and the world and 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. The pollutes are in her store. They're 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 going to raise the price. This is going to be great. And do you know why OX was so financially motivated to sell more copies? Well, I assume I was going to talk in a sack about the business model of newspaper as you sell more as your circulation goes up. Not only do you get the circulation, the 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 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 odor. 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 had 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. When you're back as 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 once, 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 were 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 they were tablites. 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 tablites, the one cent things, they're not interested in your content. This business stuff, political 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 the growth exploded when he dropped the price. So gross 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 crossed as 100,000 in 1901, 200,000 in 1912. And by the 1920s, after World War I, he's up at over three quarters of a million circulation and has become the dominant, not just paper in New York, but 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. It was all ox. This is the birth of the modern times. Totally. So we alluded to the business model a little bit, and why circulation's 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. 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 particular, Lee as your circulation goes up amongst attractive demographics for advertisers and 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. Another 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 new stand 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, shyness of maybe some people who were reading at a restaurant or something and you're able to sell ads to 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 of business people now as the demographic, which is just fascinating sort of reading that and being like, wait, that's the journal strategy. Totally. I mean, when I was working at the journal, this was before the times implemented there, now very, very successful paywall. But we were the only, you know, upscaled 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 famous John Wanamaker quote about 50% of the money I spent on advertising is wasted. I just don't know which 50% was actually stolen from Ox. No way. So 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. Inc. Wanamaker got a hold of that. He was an advertiser. He was a retailer in Philadelphia and he turned it around to, you know, I know half the money I spent on advertising is wasted. I just can never find out which half. So super cool. It yeah, ox becomes the premier newspaper man in New York, if not America and if not the world. Before we pull too far from this time, there's one interesting sort of fun anecdote that we can talk about the headquarters. Yes. 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. 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 with this. You know, it never waste a marketing opportunity ever, the entrepreneur. So he had pyro technicists 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 of years. And then a 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 Axe. Wow. Wow. That's such an interesting. I didn't really, like I should have known Times Square like duh, but I, I, maybe I knew that it's something in my past life. Yeah, it's just so you know, 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. The stock, the stock ticker's too, or 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. That's an incredible, you know, entrepreneurial story. We're going to move on to the next chapter here. Okay. So two years after that press release, Axe does pass away in 1935, but there's a problem though, which is Axe 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 Jean, 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. So it's ultimately, Axe 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 Ifagine to work it out amongst themselves. Yep. Yeah. They each had a vote on who would become the next publisher. So Arthur, Salisberger was if a Jean's husband, who would become the next publisher. And Julius was, I believe, Axe's nephew who was also working in the business had sort of a legitimate claim to the throne, so to speak. And I believe the story is that Axe set it up this way that each of the three of them had a vote because he wanted Ifagine, 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 Oxweep done, this is not the only time throughout history, but it will be the first sort of part of the New York Times history where you sort of have to look at it with a squinty eye and go, ooh, that's a little bit of a black mark. Yeah. So Ifagine, 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 Adolfox. 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 90 years old. She didn't die until 1990. And there's some debate on this. People might know, I already in spinoff, the sort of nickname of the times is the Grey Lady. And there's multiple sort of origin stories of the Grey Lady nickname one. Did it later become the good Grey Lady? 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 Grey came from like looking at the paper. It's a bunch of Grey, they had a douche parade. It's a Grey Paper. So it became the Grey Lady. Alternatively though, Ifagine is the Grey 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. The New York magazine, quote, continues from earlier, Ifagine 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, it 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 to 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, so Gaitelese, the great writer from the 50s, 60s, 70s, who actually worked as a reporter at the New York Times for a while. He wrote sort of the definitive book about the New York Times in, 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 the 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. It would have to keep up with the trends but not be carried away by them. It 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 else they'll go start a sub-stack. Yeah. Exactly. Thank God sub-stack didn't exist in those days. What Adolf had done. The times would go on indefinitely. He hoped towering over all individuals and groups in its employ and his family would work together, repressing any personal animosity for the greater good and if possible, choose mates in marriage who would also be wed to the times. So how does he set this up? He creates this trust that goes to if you're gene and are there and their descendants. So we don't have the details of 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 proxy statement, I think from the 1990 maybe 10k of the New York times. The proxy statement, the some of the language in the 1986 trusts, they 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 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. Bob, Bob, Bob, Bob. Wait, so it's primary purpose, the primary purpose of the family trust is to ensure 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 dividends at the time, but oh, the wealth that comes with it is by not selling it and by supporting this mission and so 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 he can do that and it survives him. He can decide that my wealth and the wealth created by this thing that I started or bought and restarted can only be inherited under these circumstances. Yeah, pretty crazy. The family must, I think, support it because the trust have been re-done a few times, but they, you know, they've been doing this. Yeah, I think 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 and numbers of cousins that there are now. Yeah, crazy. So, okay, so Salzburger takes over in 1935. He remains publisher until 1961. He does many things. He's kind of a, you know, he's a great publisher and stored at the time sort of transitional from the ox period to more modern New York times. He adds, he makes it a little more readable, the paper. He adds a style section and the crossword puzzle. He expands distribution, but it's really during World War II, which is during his time as publisher that I would say probably is both like the best of the times history and also the worst all in World War II that 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 material and et cetera. 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 kept 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 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 in 2008, 2009 when every other paper did. So this culminates in, this is amazing. Science reporter for the times William Lawrence is the only journalist given access to the Manhattan project as it's going on during the war and he ultimately writes in the times and then I believe books afterwards that the sort of the official history of the Manhattan project. And he's the only journalist that witnesses the driving of the bomb in Nagasaki. When 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 pretty incredible, total incredible. So that's sort of like the best of the times during this period. Unfortunately. Yeah, it's the best of the times and simultaneously kind of the worst of America, you know, reporting on us in our, you know, neither of us are actual historians and neither of us are passing judgment on, obviously, dropping the atomic bomb, but like gosh, 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 Doc's family, the Salisberger family, the Jewish families that is a Jewish family that controls the paper. They were paranoid, particularly are their Salisberger 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 bias towards Jews. And so they, even though, you know, reporters, new 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 were 400,000 Jews that they changed their way. Oh, they reported and used to wear Europeans instead of Jews. Yeah. I mean, how many lives could have been saved if the times had done that sooner? I mean, it's a really striking example of fear of anti-Semitic backlash, preventing speaking out about anti-Semitism. Obviously, it doesn't just have to be anti-Semitism. It's going to be applied to all injustice. But yeah, the idea that both the Salisberger family would come under fire, but also that the newspaper would lose credibility, the sort of fear of that loss of credibility leading to turning a blind eye at some of the most horrific events in human history. Totally. So in 2001 and the 150th anniversary issue, former executive editor at the time, Max Frankl wrote sort of the title article on that. And he says, then there was failure, non-grader, 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 of their 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, ooh, do we really want to talk about this on this episode? It's heavy. You know, it's different than us 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 criticize the times, but to be able to just quote them being critical of themselves, 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. So it was not only if you're a gin who was obviously qualified to become the publisher that, you know, it was her husband, she was the first woman reporter joined the Times in 1912, Jane Grant, to report on society. She had to fight her way into the city staff. And then like the management made it clear, like you will never be an editor here, like that's just not going to happen. She ended up leaving the organization, started New York magazine and then became a leader in the women's rights movement. No way. You know, screw you guys and then women for decades were relegated to basically just the society in style sections. The New York Times wouldn't hire its first black reporter until 1945. That person wouldn't even last that long. Then in 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 Times settled on both 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, and I think the Times would point out too, that it was not always a- Not always a rosy picture. Yeah. Okay, back to Salzberger. She presides through all of this in 1961, he becomes informed and he is succeeded. Again, his oldest child, his and if you're a child, is a daughter by her husband, Orville Drifus. This guy, Orville Drifus is the Timothy Dalton of the New York Times family succession. Like he is definitely for any James Bond fans out there. 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 onto the next one. Like, how long? Gilemelio. Yeah, he's the Gilemelio. That's a good, better comparison. Drifus lasted two years? Two years, unfortunately, because he died unexpectedly. But so his wife, you know, Marion, Salzberger and if you're a daughter, like she came up with the idea for People Magazine. So like all of these women involved at the Times are like total followers. Maybe here's an idea. Keep them. Yeah, exactly. So when Drifus dies in 63, then the youngest Arthur and if you're a youngest child who is their only son, Arthur Ocks, nicknamed Punch, Salzberger, succeeds him as publisher. And because they're all A something, Salzberger, we're just going to call him Punch the rest of the episode. Yes, he's punch. So far we've got like Arthur or we've got Adolfochs, then we've got Arthur Salzberger, then we've got Punch, well, I mean, we had Drifus, but Timothy Dalton, Gilemelio, so we've got Punch, then we'll have Punch's son who will call Junior, who is a Arthur, Arthur Salzberger, Jr. Yeah. Right? After him, so we'll just call him Junior and then there's A.G., who's the publisher today. Yes, exactly. All A something, Salzberger. For everyone keeping score at home. So Punch ends up being publisher sort of like his father for 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. And they realized and I think as best as I can tell a lot of this 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 like they could interpret the facts and the meeting behind the facts and 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 if you think back to Tox, it was all about just the facts impartial, no judgment. And here you can't help but introduce some judgment. But like there's a service of like explaining meeting as well. Right. And not just on the opinion page, but choosing what context to put around a story in just reporting, 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 actually, a G, the current publisher, you know, I read quote from him that he still references a view that people don't come to the Times for news. They come for judgment. So in the kingdom and the power, Gaitelese writes, of course, the trick was to do this without editorializing while there was a difference between interpreting and editorializing, then executive editor, a cat linch 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 invests a lot more in copy editing editors. This is when they introduced the op-ed page opposite the editorial page to bring in outside views into the Times as well. 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 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. Yeah. So that was great. I think what was less great, you know, it was sort of like, okay, give like maybe a C grade to punch during his 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 realize 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 rate 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 probably 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 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. Yeah. So this is why they go public. So they buy a bunch of TV stations, a bunch of affiliates in Alabama, Arkansas, Iowa, Pennsylvania, Oklahoma, and Virginia. They collectively named this the broadcast media group within the company. Unfortunately, though, and this is like, that was fine. Like they end up selling the broadcast media group to, I think, oh, kill maybe private equity firm in 2007 for about $600 million. So like, you know, fine. The huge mistake they make is they don't get into cable though. And as we've chronicled many times on this show. Yes, the end 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 almost 30 year run. And as we said, his son, Jr. 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. Yeah. 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 heavy 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 this diversification goes way too far. Totally. So, I mean, I think 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. Jr. knew it was coming and they developed a whole strategy around it. And so in June 1994, they partnered with AOL and launched ATTIMS, the ATTIMS channel on AOL, which is garbage. In 1985, they hire this guy named Martin Kneesenholz to come in and run a whole new electronic media division within the company. Martin had started the ad agency Ogovian Mathers Interactive Marketing Group and actually Brian McCullough over at the Internet History Podcast did a great episode with Martin that we'll link to in the sources. You should go check out great interview with him. Wait, let me defend my blindsided thing. Okay. Like a couple of things to know. In 1983, the times decided that it was not important to have electronic rights to their content. So they saw it to Lexus, Nexus. The New York Times didn't own their own rights to their content. So like, 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 World Wide Web or if you should make a bet on copy-server AOL. It was specifically the archives, the rights to the archives. So they were able with some negotiation to put breaking, not break up, but like current new news on the site for they couldn't have the archives until they got the rights back. And they did in 94 ultimately get the rights back. And then I think in 1996, that's when and why times.com went for the first time. Yep, totally. So when Nezenholds comes in, he's like, holy crap, we've got to work through all these rights issues. So that was part of it. They also had to decide on the business model. So the plan, this is fascinating. The original plan was to charge for ny times.com, charge digital subscriptions. And Nezenholds said, we can't charge because this product sucks. And like, who's going to pay for this? So when they do launch the site in January 96, the real site, not the AOL site. So there's no CMS, there's no content management system. But they do. They literally every day, they create an image, like a, like a, like a gif. And put it at like so. Wait, wait, wait, wait, 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. Let me have me. Okay. Well, we can, we'll still keep doing the pod, I guess. Okay, okay, sorry, 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 really create in the art department and then put it like if you go to new, mytimes.com, it loads a gif just as like the end, it's like the, yeah, that's, that's the first version. And I imagine like if you're using like, I don't, it's not PageMaker, 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 going to 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. Yeah. And so he's like, we can't charge for this. It's crap. But also like the other point was like, we got to build an audience. Like we got to train people to come to nwytimes.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. With the internet a bit of 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 those things paid content. Yeah, good point. And they still have a hardcore paywall. But the, but again, it was all because of B2B. Like that was, you know, we would always pat ourselves on the back. And it's like, hey, the reality is these are all corporates that are paying for this stuff on expense. Right. These aren't consumers who are browsing the web and deciding, oh, I should start paying because of this paywall. It wasn't until 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 it's not totally right to say they were blindsided by this. So they did all this work. But the bigger reason I think is that like 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 that I was referring to you kind of at the end of bunches 10 year. So while there all this is going on, it's 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 were in the mid 90s and he's like holy crap like ICSPN. 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 going to build and launch Fox News. So in 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. We can bring this to America. So in 1996 they announced 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 would never do given docs. The question to the company is what we talked about is but Murdoch brilliantly sees is there's an opportunity to create a news organization targeted for conservatives out there. And 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 ails from CNBC to come over and be the first CEO of London. I don't know. CNBC before yeah, he was at CNBC, but before he was at CNBC. This is crazy. I didn't know this time. I looked up. I used to work in the building. Ails was a Republican party media strategist. So part of Murdoch's plan is like, okay, I'm going to target Republicans and conservatives to watch my network. Ails 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 got destroyed in the TV. He was like sweaty and like he's obviously not as handsome as JFK. So he brought in Roger ails 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-Aid off-ox. He goes to the cable systems, you know, usually as we've chronicle done acquired, the beauty of the cable network model was you got paid to subscribe or fee by the cable systems to carry you and you sold advertising kind of just like newspapers. That goes out to all the big cable systems and he's like, hey, I tell you what, I'll pay you to carry Fox News and to give me like prime placement in your channel line. That'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 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 and start, you know, all the carriage debates and whatnot and you know, hey, we're going to pull Fox News from, you know, Comcast, if you don't write in and tell them, you know, how upset you're going to be, etc. So this is incredible. I knew this from working at news court. Like that Fox News was a great business. It is an incredible business. So by 2002, so it's eight years after launch, Fox News is the number one news network on TV. It 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 Capitol riots when it lost a lot of years. Like literally 19 years. It is the most watched news network. What American television that is unbelievable. Yeah. So whatever you think of Fox News as an organization and like, well, we're not here to judge one wear the other. It brings in. So this is Fox's total cable network segment of which Fox News is by far the lion share. In 2019 generated 5.4 billion dollars in revenue and two and a half billion dollars of EBITDA. So that's like a 50% near 50% EBITDA margin. 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 that the New York Times would absolutely assert we are in the center and we are in 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 a cable news 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. Yeah. Yeah. 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, see it and, you know, existed and does very well. 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. 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% EBITDA margin. How much revenue did you say it does? Uh, close to six billion. So that's over three X, the Times is revenue today. Yep. Now that does include like Fox business and some of the other spin-offs, 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, I, 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. Well, the other side of the coin here for the New York Times company missing the cable news opportunity, they made some venue 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 for the Globe. And I think they got a couple small regional papers as well with that. 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. Have you ever heard of the popcorn channel, Ben? We all made some mistakes in the 90s. Oh my God. Do you know what it was? No. This is so fun. I think popcorn channel, maybe it's like a HBO knockoff or something. This is a cable network. The 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 Sox. So the New York Times owns close to 20% of the Boston Red Sox. 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 madness. Madness. Oh, madness. I think there was like some kind of NASCAR team that they owned half of. Oh, you have to find a way. This is when they really went ham. They bought golf digest, golf world, like a bunch of magazines, like family circle, snow country. I mean, it was like, yeah. This is like a what were they thinking and really like 15 to 20 local papers? Yeah. Like the Santa Barbara news press, the press Democrat, Gainesville's paper, like it's like Cap City's gone wrong. The amount of fees that investment bankers must have been making off the sales breaker family at that point in time. 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 go go era. 100%. They also acquire about.com for 410 million in March, 2005. Famed tech company at about.com. Yeah. So I mean, all of this, it's easy to dunk on these things. But probably the worst offense. I'm going to have a modeled out exactly the financial impact of this, but it's kind of blew my mind throughout the 90s and 2000s. They bought back almost $3 billion of stock that they financed with debt. So they load up the company with debt and buy back $3 billion of stock over the course of a decade. I didn't know you could buy back stock with debt. Like I mean, I guess. 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 undelute shareholders, I guess. Yeah. Anti-dolute. Well, what's so such like lunacy about this is, 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 longstanding business. This is the idea is you could use the cash flow to pay down debt over time at financiers 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 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. Right. You know, like you're they're cutting into their 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 the cancel the price value continues to rise. Right, right, right. But yeah, but but ostensibly the dividend per share could go up. 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 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 $3.3 and a half billion 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 $3 billion 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. In 2007, they've moved into a brand new $850 million headquarters building, just off Times Square by the port authority called the New York Times Building, designed by Renzo Piano, who designed the Pompadue in Paris and the Shard in London. Okay. They moved in in 2007, real great time, guys, 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 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. It is in a different building than the actual newsroom. It is, it is that. It's got 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? Yeah. And you've now just missed not one, but two technology waves with cable and the internet, arguably. So in 2009 is when the shoe drops. So January 2009, they announced a $250 million debt deal with Carlos Slim, the Mexican billionaire, one of the wealthiest people in the world. And his primary business is Telecom, right? Telecom, yep. So he interestingly, I didn't realize this, he already owned 7% of the company that he had just been buying in the public markets. They do this $250 million debt deal at a 14% interest rate on the debt plus warrants for another 10% of the company. So 14% interest rate debt. 10% equity of the company and Slim exercises those warrants over the years. 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 do? You would pay like 1%. I mean, we are in a zero interest rate environment. Yeah. But I mean, I remember even back then, so I was an media 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 interest rates. Like, you know, 14%. Now granted, this was the throws of the financial crisis, but that's bad. And so then mechanically, how does the 10% warrants to buy another 10% 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 stock price of the company or some discount. But they're effectively like free call options at whatever the strike price is on the company for the future. And so how long does he wait before then deciding, I am going to go pick up another 10% of the time. So just to track the price. Yeah. I think he waits until the expiry dates, which is a few years later, but he does. He exercises them and he becomes the largest individual shareholder in the New York times, owning about 17%. He's since trimmed his stake a little bit. I think he's still owned 13, 14%. Yeah, he's right around there. So kind of like, it's like a Warren Buffett type deal that he does. Although I would say unlike, you know, at this time when Buffett was investing in Goldman and like Harley Davidson and the like, like, those were solid companies. Like, there were some real question marks around the times at this point in time. February, the next month, they eliminate the dividend altogether. So man, family members must have been pissed that they were like doing buybacks for the last few years. And now you just eliminated the dividend to save money. In March, they announced a $225 billion sale and leaseback 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, which they exercise. 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. That's really not much appreciation. I think 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 leaseback here. But they basically said was they kind of like own their house, but then they took out a mortgage on it where they said like, I'm going to keep living here. You're going to own it. I'm going to 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 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 close to the same price. Yeah. So savvy. Well, this is what's interesting. You're hitting on the point here. So well, I'll run through a couple of other things they do and then we can discuss the in July, they sell the radio stations they own to Disney for $45 million. Then in 2011, they sell off their regional media group, which is the reads all those crazy regional newspapers that they bought for $143 million in 2011 and 2012. They sell off finally the Red Sox steak for $225 million. The Red Sox and Fenway steak. On August of 2012, they sell about.com to IC for $300 million. And then in 2013, they sell. It took a little loss on that then. Yep. So they took about $100 and $125 million a loss. In 2013, they sell the Boston Globe and the other New England papers to John Henry. I don't know. Remember what the price was. There's a lot less than a billion though. Yeah. And amidst all this, I think by 2013, that three and a quarter billion revenue that I previously referenced was down to $1.4 billion. Like all these divestitures, not to mention all these people who were no longer paying for newspaper subscriptions, really starting to dry up that revenue. Yep. Yep. So this is when the narrative of the Times's F is at its strongest, the quote-unquote failing New York Times. But 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 by Vax. You share by Vax, yeah. And they're down to just the core New York Times, property, the 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 ny times.com. Now here's what's interesting. They announce in 2010 that they're going to do this, they give a whole years notice to the world and then they implemented in 2011. And people are like pretty outraged. People are like, you're going to charge for content on the internet, like FU. Yep. Yep. And 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, year four, they're at 900,000. So it's going like, okay. And I think in year three, they chop the free articles in half from 20 to 10 that you would get. And 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 meter paywall, people are going elsewhere for news. So the traffic to the site drops by over half 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 very sort of like famous 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? And they are bad, enter 2014 and AG, the heir apparent fifth generation, Soltzberger. 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 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 Purpich. He was sort of the person who was heading up the, the, the meter paywall. He's a family member. So he's a potential person who could take over as publisher of the times next. And it's going like pretty well. So people are thinking pretty highly of him in the organization. A, G 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 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 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 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, of figuring out, hey, like how, how are we going to save the times? And SoulSpurger 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, like hundreds of people inside the times in the newsroom on the business side, hundreds of people outside the organization, they sort of realized, oh my God, it's super cool, too. They interviewed people at every other news organization. And, you know, like CEOs of tech companies, really interesting. Yeah. And 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. 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 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 Oax, right? 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, 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, 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 Fox and all these people by name who are getting unbelievable amounts of traffic and the assertion, which is like, at this point, you 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, I'd like some of the things they reference like a BuzzFeed and others, you know, Oax, Huffing, you post a lot of the traffic that they're getting is they're just taking New York Times and other articles and just re-packaging, writing the headlines and posting them on their own sites in the New York Times is like, that seems fine. Right. And what they do here is there's this interesting allegory to the yellow journalism era where what Sultzberger 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 click late 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, they are reading it like if if we didn't know that it worked, you would be reading this thing being like, good luck. Yeah. Well, and I think the other thing that they do, I don't know how much this was, I didn't read that report as closely as I know you did, but 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. Yep. So they're really 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 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 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 100 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 print reporting could never reach to. It's a completely different audience. So it's something like 75% of people who listen to the daily are under 40 years old, which is a much younger demographic, frankly, a much more attractive one for advertisers. Their podcasting business today is a $36 million revenue business just in podcast advertising, which grew 7 million off of last year. So it's not their biggest by any stretch business line, but it is where a lot of their sort of new reach is coming from. Yeah. Well, and it's super high margin. All of these businesses, like all this money is dropped in 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 it was real reporting. And I'm looking at you. I'm like, what are cost structures? Well, I'm I'm used to writing a acquired tape margins on things, right? That's right. That's right. Of the labor zero, then it's nice and high margins. Yeah. Dewey all are all are in reporting here at acquired. Well, if you're going to catch us up to 2016, then there are some other things to say about the time 2016. Oh, yeah. Namely around subscribers. So like, let's let's contextualize some of the subscriber number 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 the fact that they're growing material revenue. I think there are hundreds of millions of dollars in revenue at this point in 2013 coming from subscriptions, but still not a million subscribers. So in 2016, 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. And this, when we were referring to the failing New York Times narrative, that it was failing and was so prevalent. Of course, that got taken up by a certain presidential candidate in the 2016 election and then President thereafter. The reality is that was the best thing I think that ever happened. That is the New York Times. Ultimate irony. Ultimate irony. The endless news cycles of insane, what's the best way to describe it? The New York Times, while being berated by this man as being failing is skyrocketing in popularity and becoming a better business than ever on the fuel of him. Like it is the paintbrush to paint the canvas of the story is so rich and dripping with eye. I know. It's incredible. So you may have these stats too, but they grow digital subscribers. 47% 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. This is to the core news product, not including the crossword and the cooking app. And last year at 2020, they grow 48% again. They pass 5 million digital news subscribers plus another 1.6 million to the standalone products. Digital revenue surpasses print revenue for the first time ever. They've retired all the debt. They buy back their headquarters. They have no debt on their balance sheet. They're at 2019 completely debt free. Completely debt free. They have all of this incredibly high margin subscription, digital subscription revenue that no other news organization in the world has. They have multiples more subscribers than the Wall Street Journal, which is the... Yeah, when you say that no other organization in the world has, so that the New York Times, I think today I think is 7.5 million new subscribers. The closest one is the Washington Post was somewhere like 2. And then after that, it drops real far. The LA Times has like a half million or less and 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 they figured it out and just at the right time and then had this friggin unbelievable tailwind happen 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 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 crazy. I think the average starting salary is over $100,000, which like who would have thought in you know, 10 years ago that a news media organization, a newspaper would be paying over $100,000 starting salaries to journalists. Yeah, it's definitely to be congratulated. Okay. So in catching us up today, we have to give a huge shout out to a website called Mind Safety Disclosures that put together a deck that provides just an amazing analysis of the Times. And frankly, makes an amazing bull case that I think we'll cover as we go into bull and bear narratives. But definitely wanted to give a shout out. If you've read the Mind Safety Deck, you'll 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 13Fs for hedge funds and various positions that famous fund managers hold. 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 Dowd Frank legislation. Every company now, every publicly reporting company has to include a section in their regular reporting about their Mind Safety, like a gold miner, like an iron mine, like in the ground, whether you have a mine or not. So if you go read the 10K for Google or like Alphabet or Apple or whatever, they have a section on Mind Safety. They don't have any minds, but they have to have this section. That's so good. I wonder if Coinbase is going to have Bitcoin mind safety. Oh, yeah, that would be amazing. All right. So let's talk a little bit about the Times today. So we talked a lot about this subscriber run up where it's 7.5 million subscribers today. They've stated a goal that in 2025, they want to hit 10 million. Management has said they're going to blow by that and set a new goal. 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 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 top of that, 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. 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, it also just fundamentally like the ad business for content for text content on the internet is nowhere near as good a business as it is in print because most of the value of ads on the internet accrued aggregators like Facebook and Google. 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's interesting to know about the business today. It wasn't even just the early 2000s. I mean, even reading the gay to lease book, it was in the 1950s and 60s. It was advertising was three X subscription. Like that was always how it worked. Right. That was the newspaper business. 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 basically rehired everybody. They decided that the entire team needed to go new people and 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. 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. Other fast facts on the company today. It is 4,300 employees. 1,300 of those are journalists. And interestingly, the 1,700 number represents about 5% of the total journalists in the United States, the total professionally employed journalists. So it's not just as reclined and Cara Swisher and those folks go into 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 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 pandemic. But the composition of that has 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 Gennett 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, Ricode, Quartz and Vox on the list of publications whose editors now work at the times. They have just, 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 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, toughened it through the Washington Post under, you know, Bayzos' funding and there's just really not that many more that look like the times. Well, such a, 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 when 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 Copat Levin, 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 print subscribers. We think that there's 100 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 we're at today. It's fast growing and it's large. And that sort of like episode 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 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 timesians 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. 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, there are revenues flat. 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 look a lot more like Netflix, where 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 have these, you've content cost, you have fixed cost, 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, we'll discuss this in power. But it's just like Netflix, like why can the Times pay $100,000 plus starting salaries for journalists and no other organization can afford to? It's because they have the scale economies of millions of subscribers. So like something just like Netflix can pay $100 million for a piece of content, amortize it across their many, many, many, many times more subscribers than peacock, same deal, same dynamics here. Yep. And it's almost like that 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. There'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 original content too, but they're massively advantaged in that way where they really do create and own all the content that they're creating. 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 such a good point. Like nobody, probably not even Cara Swaycher as much leverage as she does have. She's not going to be able to go to AG and say, hey, you just added two million subscribers this year. I need some percentage of that. 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 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 sort of product, Apple has designers, Microsoft has PMs, Google has engineers, the New York Times has journalists at its core with all the power. 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 nonjournalists, 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 crosswords going well for games, I guess. Like let's try and be Zinga, 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 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 for your list, free of ulterior influence and unselfishably devoted to the public welfare as a news organization. And like that is what they are. That is undeniable. Right. 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 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. They're not a tech company and they have systematic things holding them back from behaving like a startup. Another bear case to make is that well 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, actually starting increasing it again by the second half of 2021, they'll say things like those are promotional discounts that we used to get people in. And then once they turn into second, third, fourth year, you know, paying 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? It's a tried and true old school newspaper tactic, right? Subscribe to the local newspaper for X price for first year and then, yeah, then we'll raise it in the... Get the times for only a dollar a week. Yeah, exactly. But the jury is still out about will this work in a digital environment where it's not 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 of 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 isn't 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 think the New York Times's current average revenue per subscriber is right around in the same ballpark, this $15 to $17 a month of Netflix. So it's an interesting comp because from a revenue perspective, they're from a subscription price perspective. They're very comparable. But the Times 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 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 state admission 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 argument that if you were a bear you would make here is subscriptions are for niche providers. You should be figuring out how to run a successful advertising based open publication for the internet. If what you really want to do is be the neutral 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 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, 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 new source because it had this index and that then they would get into schools and then they would get it. And so that's where the paper of record idea comes from. But to your point, it's 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 it's 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, my mind goes back to the Fox News discussion, right? Like I don't think anybody would argue, 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 even with that business strategy, they built a $5 billion, 50% EBIT margin business. Right. And I guess the question I'm really driving at here is, can you similarly get people to fork over their money for neutrality in a driving up way that they're willing to? And again, the people, 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 what they're paying for it. They're paying for it. Was it they know it or not? Yeah. So it's a good question. Certainly, 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 high 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's five million subscribers they've added since Donald Trump was elected president have chosen to subscribe more for the niche reason than for the neutral reason. 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. And there are 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. 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 is true. But yeah, I just 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 bear in bowl. I want to paint this spectrum as we come out of narratives because I think there's this interesting sort of like decelerating excitement on this spectrum. So the first thing you realize when you look at the times is, whoa, this is a killer subscription business that is growing 40% year over year in their number 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 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 in less, 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 as business in the last five years. Like I have been all on board in the 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. We'll talk about power. Yeah. I think this is great transition to power 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. Yeah. This is one like, David, I'm going to let you take scale economies because I know you're just like dripping to talk about that. And I'm going to talk about branding because rarely do I think that a business actually has brand power. Ooh, 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. But rarely if you hold out, you know, the bottle of Advil versus 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 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. Yeah. Well, and it's, you know, the canonical tests is the same product if it had a different name on the NASTED in this case, would you value it differently? Yeah, 100%. There could be the exact same word from word article 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 this far. Right. Like I pay for the New York Times. If it was a different NASTED and it was all the same articles, like I probably wouldn't be paying for it. Yep. Totally. Okay. Scale economies. Interestingly, I think the business has probably both iterations of the business had scale economies. Certainly the old school print newspaper business did because you needed a printing press in a distribution network to get your paper out there. No, 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, you know, this, we keep harping on it, but the salaries that they pay reporters and the number of reporters and journalists they employ by being able to amortize that across a much larger subscriber base can certainly outgun any other organization out there. Yep. Total classic example. Is there anything else in here? This is 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. And some of that is maybe branding, but even just like the process of creating the paper that there we go. 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. 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 rights about it in the book, it gets 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, 3000 people to all lock their code and a bug freeway and get it out the door once every three years. I completely see how it's possible for someone not to understand how the entire system works themselves. Yep. Okay. Cool. All right. 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 in this episode, but 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 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 Iger Disney strategy, I think, right? Like, in a world where YouTube exists, you need to like the winning strategy for Disney was go hard into hyper high quality, expensive, produced content. Yeah. And the New York Times has their own version of the Bob Iger 3.plant of, you know, what was it? It's a very important internationalization and embracing the digital strategy. 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. 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. They are, you know, I think the right now they're constraining their tam to the English speaking market, but they have a clear eye on international 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 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 declined, like you see the Times out there reporting in, you know, all around the country and the US 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 that I did at the beginning of the episode, it's just all the way back like the entrepreneurial journey of both Raymond and Jones and and Hawks, right? And particularly the moments where like it's back against the wall and you have to make something happen with no resources. And that has happened so many times at the New York Times, but particularly with Hawks, 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 is a conservatism and a lack of radical change as a benefit and especially under family stewardship where if the New York Times was more of a startup and in 2010 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 and the daily report. Look at where all those companies are today. Like none of them worked. And like Vox is sort of the closest in sort of having a successful set of 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 and not 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. That also makes me think of two other playbook themes that are classic media themes that this story reflects too, I think, which is one content is king. And it remains true today. Like, I think related to what you're saying is that unlike Buzzfeed or you know, many of these other types of new media or a conversation. Buzzfeed is actually doing well, so we keep doing well. Not to pick on them, but as an example of this genre of rewriting headlines and creating clickbait, it's not actually content. Like if you're not actually producing the content, you're going to get arbitraraged away. Whereas producing the content is if it's good quality content is going to be valuable. The other one that 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 we have it acquired like that gas habit. I was going to I was wondering if it was too cheeky to be like, yeah, all the great media businesses acquired. To that point of revenue diversification, there's definitely something here about them not quickly, but getting into this non news digital revenue. They did grow the cooking and crossword apps by 60% last year to a 1.6 million subscribers. They also nestled in here. I think 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 and now gets $50 million a year of high margin revenue out of it out of the holy crap. It's a great freaking acquisition and the York Times million dollars a year in affiliate revenue. Yes. Wow. We took it from an electronics thing called the wire cutter plus the sweet home, which was for home gear. They said we're dumping the sweet home brand and the wire cutter is now the wire cutter for everything. I think they're going to try and make it sort of the new consumer reports, including something they foreshadowed on the earnings call a digital subscription. I don't know what the heck that's going to look like yet because I don't know exactly how that would work, but that's an interesting business for them to be getting into too. I would say the last 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, we just doing capital allocation now is much better than the internet's mature place. We understand business models on the internet better now. One that I wanted to point out that we didn't point out in the history at all is this really interesting one where the print business is only declining at like 5% per year. It's going to eventually go to zero, but for the people who are willing to continue to get the New York Times every day, the print edition, they are increasingly willing to pay for it. The times is like, sure, we'll keep printing your paper, but the average annual subscription is like 700 bucks. Wow. For the like 800,000 people that are still getting the times delivered, that's what they're paying. 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 haven't looked recently, but several times over the past couple of years, I've looked at and wanted to add a Sunday physical paper 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 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 in 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 onward are going to be even more like that. But 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, yeah, like if I, if everything seemed to be working, 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? Oh, no kidding. All right. Should we move on to value creation value capture? Let's do it. All right. Value creation and value captured, David. Two components to this. The first one, how are they capturing value compared to the value that they create in the world? The second one, how does the value they create for the world? Not just shareholders compared to any value destruction. The second one's a little bit of like an altruism question. This first one, 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 likes 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 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 covered in how they were able to achieve the business outcome that they did. And 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 had to mean. I mean, no matter what you think of their editorial 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 two X, the number of any other organization in the world. And two, you know, we didn't talk about things like the Pentagon papers, but this organization and journalists within it throughout history have literally put their health, safety, livelihood lives on the line to report on important things that are happening in the world and to call out abuses around the world. The Pentagon paper situation was crazy. Like it ended up in conjection with Watergate and a sitting president resigning. You know, we talked a little bit about World War II and there was World War I 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 I agreed this one is forward looking, what's an A plus and this, of course, is a business outcome. 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 are still hiring aggressively for these roles, but where 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 new cycle environment, we no longer have the Trump presidency. Hopefully we won't have the coronavirus soon. Like God willing, 2022 is a week and go buy an off-fricate to check the news and it'll be awesome. That won't be great for the time. 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 thinking about this for 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 base, able to just continue the subscriber tear that they've been on, but just sort of like modestly, linearly continue 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 learned rapidly iterate. 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 really good 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 higher, 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. And they've done deals with Netflix, with Prime, with Hulu, with FX. Yeah. You know, that's all. 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. So then, you know, the C case, I think is very much this like new subscriber tape roster. Oh, I think there's one more piece to the A plus case, which is they have to increase R2 for subscribers. Certainly. Yeah. Yeah. They need to prove that people, you're 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 you're two and three pricing. So we think the F cases, how do they, how does this not work? They read by the red socks. And 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 arbitrage, whatever you want to say by aggregators and social networks. But I feel like everybody's learned that lesson. That's unlikely to happen. Not to mention. 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 in this person who is left leaning was like, what do you mean? Like they published that terrible op-ed with that, the cotton, the 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 what you're talking about. What if you got a pick and there is sort of less room to be a, or at least have a large addressable market as sort of 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 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, I'll be at 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. Yeah, 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 got some 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 Netflix with a very similar cost structure. Yeah. Interesting. So just thought that was an interesting one to point out. All right, car vats. Yeah. Car vats. We haven't done car vats in a while and we had, we were worried, you know, we do these such super long episodes now. I like, people don't want to listen to car vats at the end. But we've been surprised. People have 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. So my car vat is a really great fantasy series book series that I read recently. Sabah to hear is Ember in the Ashes series. It's really cool. It starts out the first book Ember in the Ashes. I thought was a little slow and felt a little hunger games knockoffy, but my wife Jenny had read the series and she's like, no, no, no, like stick with it. And 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 it was kind of like game of thrones, meets Lord of the Rings, meets like the Middle East. Like it was, it was good. Really recommend. All right. Man, I haven't, that's funny. I haven't read fantasy in so long. Oh, so far. I think it's 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 first car was going to be the opposite of a way to unwind. It is the book Titan by Ron Churnow. It actually felt a lot like researching this episode. It is the history, sort of the most recent, I think, biography of John D. Rockefeller and the entire story behind Standard Oil. The book was nothing like I expected it to be. I heard it recommended by Dax Shepard on an episode of the Tim Ferriss show. And 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, 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 absolute devotion to God and to, 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 modern medicine, no chance that it would be. He is today absent the absolute monopoly and absolute anti-competitive practices of Standard Oil in the railroads. He started Rockefeller University, right, which is a research institution in Manhattan because developed many, I think it's all PhDs in post-docs, right? Sounds right. He also is the founder of the University of Chicago and left his name completely off of it. 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 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 Chernau, for folks who don't know, also wrote the book that Hamilton, The Musical, is based on. And actually, when I referenced J.P. Morgan earlier and I said he shows up in all these stories, I was just reading about him showing up in Titan as well. So I can't recommend it strongly enough. I also have one more carve out that I want to throw away. And this carve out alert. Great company that we invested in from PSL Ventures called iteratively launched and announced their funding in everything this week. And 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, 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. It's an uppercase you and user logged in instead of a lowercase you. So it didn't come up in my query. Their product 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 code repository that has a 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'm I can go on forever. Super excited about this company. Check it out iteratively.ly. Awesome. Super cool. I know you've been you've been pumped about this investment for a while, jumping at the bit to be able to talk about it publicly. So yeah, you're in the half under my hat. Yeah, man. Well, let's see. Listeners, I think that brings us to a close of. I don't know if we do another hour just to be sure. The longest 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 this sort of like Rockefeller era and New York Times, you know, early history. If you want to talk about this kind of stuff, you should come join us in the acquired Slack. It's where we talk about, you know, the most recent episode, future episodes we want to do. And a place to just talk to great smart folks about everything going on in tech. That's at acquired.fm slash slack. 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