New York Times Newsroom 'Skeptical' Of New CEO Mark Thompson

Known as a cost-cutter, not a digital innovator

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(Reuters)
(Reuters)

Mark Thompson, the new CEO of the New York Times Co. (NYSE: NYT), faces numerous challenges at the newspaper -- including skepticism from his new employees.

The skepticism arises, in part, from a sense that the financially ailing newspaper group's future lies in being a digital property, something Thompson, former CEO of the BBC, is not known as being an expert in.

"He's done a decent job with the BBC's site, but nothing that any other adequate media executive wouldn't do, and certainly nothing exceptional," said a Times staffer. "The newsroom is skeptical because he is known less as a media innovator than a hatchet man for a legacy brand, and the BBC's business model is nothing like ours."

During Thompson's eight years as head of the BBC, he oversaw deep cost cuts at the BBC, which wasn't immune to the economic downturn, despite mandatory financial support from Britons who buy televisions. The company also launched its iPlayer application for Apple Inc. (Nasdaq: AAPL) devices, but Paid Content notes that the innovation was developed by two BBC employees, Ashley Highfield and Anthony Rose, not by Thompson himself. 

Wall Street sees the Times' future as a digital media company, an area where its success has been mixed, at best. Recently it reported more than a million subscribers to its flagship newspaper's paywall last quarter. However, other efforts, such as the acquisition of information site About.com, have been disastrous.

"Their biggest opportunity is getting the digital paywall right at their flagship paper and continuing to grow it," said independent media analyst Craig Huber of Huber Research Partners. "Investing in anything else of any significance in the near term would be foolish and distracting, like the About.com acquisition became."

Despite the importance of digital, the Times' daily print product remains the company's crown jewel and financial center.

“They're trying to nurse along the print side as much as they can. They've got to keep that cash cow going as long as possible while they try to transition to digital," said Huber.

But the constant decline of print advertising has led to a gloomy forecast. And in contrast to former Times CEO Janet Robinson, who cut her teeth on advertising, Thompson's experience as a marketer is much less apparent.

The good news for the Times is that it is in far better financial shape than during the height of the financial crisis, when it took a high-interest loan from Mexican billionaire Carlos Slim and essentially mortgaged its midtown Manhattan headquarters under a sale-leaseback deal. After selling its regional media group and stake in the Boston Red Sox, the Times has around $840 million in cash and $800 debt, and it has repaid Slim, although he is still a major stakeholder.

The company's cash will likely go towards paying off more debt and paying for its expensive news production, said analysts. Thompson could potentially explore a digital acquisition that would help it expand on other platforms, but the digital environment is tricky and all moves would ultimately be approved by the Sulzberger family, the long-time stewards of the company.

Thompson's appointment resolves a major question mark for the Times, which had been without a permanent CEO since last December. But it is still grappling with the local newspaper guild over pensions and reporters continue to depart for competitors or take buyouts -- a trend that was unthinkable just a decade ago. Thus, while Thompson's appointment might be the biggest personnel change at the company, it likely won't be the last.

Shares of the Times rose nine cents to $9.18 in afternoon trading.

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