The New York Times Company

For the entire 20th Century, you’d be hard pressed to find a better business than an American newspaper — Warren Buffett famously described them as “franchises” — and no American newspaper stood taller than the New York Times. Controlled by a single family bound by a legal oath “to maintain the editorial independence and integrity of The New York Times and to continue it as an independent newspaper, entirely fearless, free of ulterior influence and unselfishly devoted to the public welfare”, the Times served as the paper of record for generations of Americans and people around the world. But no good thing lasts forever, and the dawn of the 21st Century saw both the Times and this once-mighty industry devastated by the dual disruptive forces of the internet and the 2008 financial crisis. And yet by 2021, The Times, essentially alone of its former peers, has reemerged from the American newspaper wreckage and transformed itself into a thriving digital business with an order of magnitude more subscribers than its print heyday. Curious how it all happened? We dive into 170 years of history to find out! Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC The New York Times Company Playbook is available on our website at https://www.acquired.fm/episodes/the-new-york-times-company Links: The 2014 NYT Innovation Report: https://archive.org/details/pdfy-59s-4-I2qSvG6MnA/mode/2upMine Safety Disclosures’ NYT presentation: https://minesafetydisclosures.com/blog/newyorktimesCarve Outs: Ben: Titan by Ron Chernow: https://www.amazon.com/Titan-Life-John-Rockefeller-Sr-ebook/dp/B000XUDGHGIteratively: https://iterative.ly https://iterative.ly/David: Sabaa Tahir’s Ember in the Ashes series: https://www.amazon.com/Ember-Ashes-3-Book/dp/B074VDZB17

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ben Gilbert?

  All right. High energy.

• 0:03David Rosenthal?

  I need some energy to get through 170 years. Woo, it's literally 170 years. It's crazy.

• 0:22Ben Gilbert?

  Welcome to season eight, episode two of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder of Pioneer Square Labs, a startup studio and venture capital firm in Seattle.

• 0:37David Rosenthal?

  And I'm David Rosenthal, and I am an angel investor based in San Francisco.

• 0:43Ben Gilbert?

  And we are your hosts.

• 0:46Ben Gilbert?

  For over 100 years, you would have been hard pressed to find a better business in the world than an American newspaper. Each one had a local monopoly, an incredibly profitable advertising business, and it was one of the earliest examples of a reasonably low marginal cost business. It's dirt cheap to just print another copy of the paper.

• 1:05David Rosenthal?

  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.

• 1:15Ben Gilbert?

  Indeed. And this today, listeners, is the story of the paper that loomed large over all of the others, The New York Times. Today, we peer into what I think is the oldest company we've ever done on this show, founded over 170 years ago before the Civil War. The Times has seen the majority of American history, and for the majority of its life, it's been controlled by a single family. And for many of you, a family you've probably never heard of. This is a family whose paper shaped the American perception of current events through World War I, World War II, Vietnam. I mean, really, their newspapers

• 1:56Ben Gilbert?

  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 Ochs-Sulzberger 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.

• 2:38David Rosenthal?

  Oof, indeed. Can't wait to talk about that part of the history.

• 2:42Ben Gilbert?

  And yet, somehow today, they've been accused of being a monopoly in the journalism industry, and they have more digital subscribers than they ever did in print, and they employ the former editors-in-chief of BuzzFeed, Recode, and Vox as columnists. So how do they turn it around? Who is this mysterious family? And what does the future hold for The New York Times? Today, we dig in. If you love Acquired and you want to be a deeper part of what David and I do here, you should become an Acquired Limited Partner. You'll get access to our library of over 50 interviews and deep dives on company-building topics, monthly Zoom calls, and, this is new, live access to listen in while we record

• 3:26Ben Gilbert?

  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/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. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 4:10David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 4:31Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 4:53David Rosenthal?

  In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 5:11Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A.com/acquired for $1,000 off, and just tell them that Ben and David sent you. Well, David, it's time to take us in. And listeners, as always, this show is not investment advice. David and I may have investments in the companies we discuss. This show is for educational, and I sure hope entertainment purposes only.

• 5:53David Rosenthal?

  Oh, boy. Was this ever an entertaining one to research. 170 years. This is crazy. We're gonna, we're gonna start with the founding of the company, and it's gonna be the farthest back in history, other than Bitcoin when we were talking about the banking system. I think this is gonna be the second farthest back in history we've ever started, and I'm not even going back before the company.

• 6:13Ben Gilbert?

  You started with like, uh, something older than this, I think with Uber, right? Oh, actually, no, because any automobile history-

• 6:19David Rosenthal?

  I think that was like 1890s.

• 6:21Ben Gilbert?

  Wow.

• 6:22David Rosenthal?

  Yeah, there were, there were no cars when the New York Times was started.

• 6:26Ben Gilbert?

  Crazy.

• 6:27David Rosenthal?

  Ah, crazy. Okay, we go back to 1851 and the founding of the well-known, world-renowned New-York Daily Times, which of course

• 6:46Ben Gilbert?

  Doesn't quite have the ring.

• 6:47David Rosenthal?

  Doesn't quite have the same ring. No, New, New-York Daily Times, New York Daily Times. Okay, so what was going on in 1851? It was a media boom time in the US. There was a growing population in the country, increasing literacy rates, vastly increasing literacy rates, urbanization, and of course, war on the somewhat near-term horizon in the coming civil war, US civil war. And then, as now, bad news sells newspapers. And so there was hugely, hugely growing demand for news. New newspapers were sprouting up all over the country.

• 7:30David Rosenthal?

  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?

• 7:40Ben Gilbert?

  So did printing presses get way cheaper too?

• 7:43David Rosenthal?

  Yes.

• 7:44Ben Gilbert?

  Huh.

• 7:45David Rosenthal?

  Yeah, so it got a lot cheaper to print newspapers. Must have been various forms of machinery, rudimentary automation. And just the demand, like the growing population, the demand for news, literacy. It was like, it was like the Substacks of 1851. Everybody was starting a newspaper. And also because of the advances in production technology, not only could you make more newspapers and people could start them, but you could sell them cheaper. So before this time, newspapers were selling, I think around like five, six cents a copy. But starting in the 1850s, newspapers, and in particular, new newspapers,

• 8:30David Rosenthal?

  dropped in price to one cent per copy. This is going to come back later. So you could reach a whole new mass market. So here we are. In September of that year of 1851, the well-known New York journalist and politician, Henry Jarvis Raymond and his friend and former banker and merchant, George Jones, embark on a new venture, new newspaper venture in this brave new landscape. And they publish the first edition on September 18th, 1851 of the New hyphen New York, New York Daily Times.

• 9:06Ben Gilbert?

  All right, Rosenthal, you've made your point.

• 9:08David Rosenthal?

  All right, all right, enough with the hyphens.

• 9:11David Rosenthal?

  So who, who were these guys? So Jones, as we said, was a former banker. He had also, though, worked as a business manager at Horace Greeley's New York Tribune, which was then the sort of premier paper in New York. And that was where he had met Raymond. Jones had family money and lots of connections about town from his wife's family. Do you know his wife's father's name? Ben, you're not going to get this, but I had to put it in here.

• 9:45Ben Gilbert?

  His wife's father's? No, I have no idea.

• 9:47David Rosenthal?

  Benjamin Gilbert, the well-known New York socialite.

• 9:50Ben Gilbert?

  No way, really?

• 9:52David Rosenthal?

  Really? Yeah, really? I saw that, I was like, we got it, we got to include this here.

• 9:55Ben Gilbert?

  I gotta do some research and see if we're related.

• 9:57David Rosenthal?

  So he puts up $25,000 of his own family money to, to finance this new venture. They want to get to $100,000. So he goes out and he raises the other $75,000. It's all, this is a lot of money in 1851. From just, you know, some like casual family connections he has, like, you know, several members of the Morgan family end up financing this.

• 10:21Ben Gilbert?

  Like, like J, J P or Pott Morgan?

• 10:23David Rosenthal?

  Yeah, exactly.

• 10:25Ben Gilbert?

  Wow.

• 10:26David Rosenthal?

  As you do.

• 10:27Ben Gilbert?

  This guy shows up in like all these old stories. Like, I feel like everyone somehow was getting financed by JP Morgan in these days.

• 10:34David Rosenthal?

  Totally. So that's Jones. He's sort of the, the business guy. He brings, he brings the capital. But it's really Raymond who's the real force behind this. So who is, who was Henry Raymond? He was quite the interesting character. As we mentioned, he had worked at the Tribune with Jones, which is where they met. And that was the premier sort of respectable penny paper out there, as they were known for the one cent papers. He had also, though, been very involved in politics. And when I say very involved, I mean, very, very involved. Ben, do you know what other organization Henry Raymond is well known for co-founding besides what would become the New York Times?

• 11:20Ben Gilbert?

  Ooh, I feel like I should remember this from AP US history, but I do not.

• 11:24David Rosenthal?

  A little organization called the Republican Party, of which he was a founder, one of five founding members. Kind of incredible. Like, this is, this just blew my mind doing the research. Literally, he's known as the godfather of the Republican Party, is also the founder of the New York Times. And all of this was happening concurrently.

• 11:46Ben Gilbert?

  So was it like a mouthpiece for the Republican Party in the early days?

• 11:50David Rosenthal?

  Well, not quite. Okay, so before he and Jones decided to start the Times, Raymond had actually left the newspaper business and he was a politician. He was a member of the New York State Legislature, where he was a member of the Whig Party at the time, sort of the precursor to the Republican Party. But he had stepped down and then he decides to start with Jones to start the Times, which they do. But then shortly after, and so, you know, Raymond is running the Times. He is the managing editor, he's the publisher, like, Jones is the money, but Raymond is really running it. While he's still running it, he goes back into politics, leading up to Abraham Lincoln's presidential

• 12:35David Rosenthal?

  campaign. And that's when he, along with Lincoln, and also along with Horace Greeley from the Tribune, they and a couple other people start the Republican Party. And the platform, of course, is abolitionism and the abolition of slavery in, 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,

• 13:19David Rosenthal?

  all still while publishing the Times and serving as the managing editor, like writing all the editorials.

• 13:24Ben Gilbert?

  That is so insane. I mean, it's funny, on the one hand, I was like, wow, today, this would not fly. And then I'm thinking to myself, today, this is what's happening. Not at the Times, but yeah.

• 13:35David Rosenthal?

  Yeah, it's, it's crazy. So this thread is going to come back so often throughout this history. So that said, you know, certainly, the Times is quite literally the, the party mouthpiece of the Republican Party. But Raymond is also a real journalist. Like, he, you know, he worked at the Tribune. He highly values journalism. He doesn't want the Times to be sensational. And in fact, in the very first edition that comes out that September in 1851, he writes famously, "We shall, we being the Times, shall be conservative in all cases where we think conservatism essential to the public good, and we shall be radical

• 14:17David Rosenthal?

  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.

• 14:38Ben Gilbert?

  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 pithy. Like, it captures so much of what their intent is in creating this, this, what would become an enduring 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, the transcript. But it's just like, I want to have it framed and put on my wall. It's a sort of wonderful.

• 15:09David Rosenthal?

  It really is a beautiful statement, I think. So it's probably worth pausing here for a minute before we go too much farther in the story and explaining what exactly is it that happens at a newspaper? Like, what are the various sort of departments here? There's really kind of two and a half pieces of any news media organization. Newspapers included cable news, television networks, which we will talk about as we go along here, and of course, internet media news networks as well. There's the content side of the house, sometimes called editorial, which includes both news and opinion. And then there's the publishing side of the house, which is the business side of the

• 15:52David Rosenthal?

  house, the advertising, the circulation, the managing of the organization and the company.

• 15:57Ben Gilbert?

  So where does the publisher fit into this?

• 16:00David Rosenthal?

  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 subscriptions, 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.

• 16:31Ben Gilbert?

  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.

• 16:40David Rosenthal?

  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, AG Sulzberger is the fifth generation, Ox Sulzberger, who is the publisher of the New York Times and chairman of the board, and Meredith Kopit-Levien is the Recently appointed CEO who reports to him and the board.

• 17:10Ben Gilbert?

  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, the business. But again, neither of them are actually involved in overseeing the editorial product and overseeing the newsroom. That has always been traditionally kept at arms length.

• 17:34David Rosenthal?

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

• 18:00Ben Gilbert?

  All right. So David, I teased the Ochs-Sulzberger family in the intro and I heard you just mention that AG Sulzberger is the fifth generation publisher. These two people we're talking about here, not Ochs or Sulzberger, this is previous ownership, like founding ownership.

• 18:17David Rosenthal?

  So what happened here? Okay. So back to Raymond, he's wearing all these hats. Things go well for the first, you know, 20 plus years of the New York Daily Times. Within two weeks of starting, they hit 10,000 copies in circulation, which is pretty great. 26,000 in the first year. Then in September of 1857, so six years after they start, they dropped the daily and shortened the name to just the New York Times. Still with the hyphen, it would be Ochs who would remove the hyphen later. But things are going well. By 1858, circulation's up to 40,000. And then by the time the Civil War starts with the attack

• 19:00David Rosenthal?

  on Fort Sumter in 1861, circulation is at 75,000. That's pretty good. Like that's, I don't know what the population of New York was at that time. I think it was maybe about a million or so, maybe a little less. So they're 10% plus of the city is taking the Times at this point.

• 19:17Ben Gilbert?

  Totally. And at this point too, the New York Times was A little bit highfalutin, like it was a, 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.

• 19:33David Rosenthal?

  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 yet. And in July, the Union, the government declares a draft, and there are actually draft riots in New York City about this. People are, you know, really upset. Lots of people have family in the South. They may be sympathizers with the South. This

• 20:17David Rosenthal?

  is, this is hugely, hugely controversial. And the mobs target the newspapers that are sort of the mouthpieces of Lincoln and the Republican Party through the war. So a mob descends on the New York Times headquarters building and Raymond, because he's buddies with Lincoln, he gets the War Department to ship a bunch of rifles and two Gatling guns to, to the Times, because they, they know this is going to happen. And he like leads a defense of the building and the company. He hands out rifles to the whole staff. He's manning one of the Gatling guns himself, and he gives the order that if any of the mob

• 20:59David Rosenthal?

  tries to break into the building, you're to fire at will on these people. It's crazy. Nobody is, no shots are actually fired, but they do successfully defend the building. The mob instead ends up attacking the Tribune and storming the Tribune's building. Totally, totally crazy. Next time we hear about like a tech CEO doing something that seems bold, think of Henry Raymond back in the day.

• 21:27Ben Gilbert?

  And for anyone who's seen Gangs of New York, I think this is sort of that scene toward the end of the movie where that is the scene you can kind of picture where there's the freaking publisher of the New York Times strapping a Gatling gun to the front steps and protecting the paper.

• 21:42David Rosenthal?

  Yeah, protecting this house. 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 store 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.

• 22:28David Rosenthal?

  And they start operating the company, but they're not, they're all like editors. They're all from the news side. They're not business people, so they don't really know how to manage the publishing or the business of the newspaper. And in 1893, there's a financial crisis and kind of much like 2008, which we'll get to later in the story. This is really bad for newspapers, for advertising, for circulation. And the paper ends up going bankrupt. Circulation had fallen all the way down below 9,000. It was up at 100,000 plus during the Raymond and Jones days. So like, basically, the New York Times is gonna disappear unless somebody comes in and saves them.

• 23:13Ben Gilbert?

  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? It's very easy to understand how this business ends up upside down quickly.

• 23:33David Rosenthal?

  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, uh, the paper. There's the people, the laborers you need to employ, highly skilled laborers on the printing side and then the delivery infrastructure.

• 23:49Ben Gilbert?

  You're not just scaling down your AWS usage.

• 23:52David Rosenthal?

  Yeah, totally. If only Jeff Bezos were around back then. So this is when Adolf Ox enters the story and rescues the New York Times. And this is really a second founding of the business and is just an amazing American story. Like I likewise, I knew that the Sulzberger family, you know, controlled the Times. I probably mostly only knew that because I used to be an investment, media investment banker and worked, uh, worked at the Wall Street Journal, but I didn't know anything about this history.

• 24:27Ben Gilbert?

  And I only knew about it frankly, because, uh, when we saw all these tech CEOs starting to do this crazy dual class structure stuff, famously Zuckerberg, and I think the Google founders did it and obviously Snapchat and freaking everyone since, like the New York Times is the one who-

• 24:41David Rosenthal?

  Snapchat has the triple class structure.

• 24:43Ben Gilbert?

  That's right. I forgot about that.

• 24:45David Rosenthal?

  Where if you own shares on the market, you get zero votes.

• 24:49Ben Gilbert?

  It's hardcore. But yeah, the, the Times pioneered this when they went public in what?

• 24:54David Rosenthal?

  1969.

• 24:55Ben Gilbert?

  Yeah. I mean, it, it sort of laid dormant there, um, undiscovered until tech CEOs decided to do it with all their companies.

• 25:02David Rosenthal?

  Yeah. So, okay. So Adolf Ox was born in Cincinnati, Ohio in 1858. So seven years after the founding of the New York Times to Jewish immigrants from Germany and like pretty poor. Like he was not a Rockefeller or a Morgan. And after the civil war, the family moved to Tennessee where he has to, you know, work as a boy to help, you know, support the family. So he gets a paper route in Knoxville, Tennessee, and, uh, he gets a paper route for the Knoxville Chronicle and he ends up just-

• 25:46David Rosenthal?

  Falling in love as a young child with the newspaper business. At the age of 11, he gets taken off the streets, so to speak, and he goes to work in the office as an assistant to the editor of the Chronicle, William Rule, who kind of becomes a mentor for him. And then when he's a little older, his family sends him away to Rhode Island to go work in his uncle's grocery store up there. They thought he would make more money doing so, but he hates it.

• 26:18Ben Gilbert?

  He's a newspaper man.

• 26:20David Rosenthal?

  He's a newspaper man that's in his blood. So at age 14, in 1872, he drops out of school in Rhode Island, comes back to Tennessee, restarts working at the Chronicle, this time in the printing operations as what's called a printer's devil, helping out around the factory. And then a bit over five years later, at age 20, he decides to move to Chattanooga, which is becoming an iron mining boom town in Tennessee. This is all so crazy. 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.

• 27:03David Rosenthal?

  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.

• 27:18Ben Gilbert?

  It's, he's so freaking enterprising because like he's, keep in mind, he's a dropout. He's trying to make money for his family to support them. And he's not doing the 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

• 28:02Ben Gilbert?

  territory. And I think it's in 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 boomtown.

• 28:19David Rosenthal?

  Yep. So, young Adolf, man, this kid is like so enterprising. So he negotiates with the guys who own the Times in Chattanooga to buy the paper for a down payment of $250. And then effectively, for those in, you know, like small cap private equity, they'll 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

• 29:02David Rosenthal?

  profits to pay the original owners $5,500 out of the profits that the incremental profits he'll generate.

• 29:10Ben Gilbert?

  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.

• 29:21David Rosenthal?

  I mean, whether they believed it or not, they were willing to do the deal.

• 29:24Ben Gilbert?

  They were willing to part with 250 and the 5,500 was a house money if they could get it.

• 29:29David Rosenthal?

  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's 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.

• 30:01Ben Gilbert?

  Whoa, I didn't realize he was pulling that in personally.

• 30:03David Rosenthal?

  Yep, he's moved his entire family to Chattanooga. He's got them all working in the business. His, his father, his uncle, his siblings, his wife, his wife's family, they're all working in the business. But fatefully, he's so long on Chattanooga and he loves the city. He loves Tennessee. He decides to buy up a lot of land around Chattanooga. I couldn't tell if it was for sort of housing speculation or for the mines, but he ends up losing $100,000 on this real estate.

• 30:40Ben Gilbert?

  Yeah, this was, I think it was called like the over the river company or something like that. Cause it was land that was like over the river from everything else. It was wildly speculative.

• 30:49David Rosenthal?

  Yep, wildly speculative. And so famously, he kind of like, he learns his lesson from this. He's like, I am a newspaper man. This is in my blood. This is all I will ever do. I will never do anything else. And I could imagine him like praying one night, being like, I'm sorry, God, you know, for going into real estate. I need, I will be the greatest newspaper man ever if I can bail out my debts.

• 31:13Ben Gilbert?

  Not to mention, it worked well when he bought stuff sort of 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 sort of gets this seed planted of huh, I should use other people's money to buy stuff from now on.

• 31:28David Rosenthal?

  Exactly. So, okay, he's pulling in $25,000 of cash flow from the Chattanooga Times, but he needs 100K like faster than four years. He's, 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.

• 31:52Ben Gilbert?

  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.

• 32:14David Rosenthal?

  Totally. Very, very, very much his ethos. So that's when he hears, he gets wind of the bankruptcy proceedings going on in New York for the New York Times. And at first he's like, supposedly he's like, that's too big. Like, I can't go, you know, I'm Adolf Fox from Chattanooga, Tennessee. I can't go like, take over the New York Times.

• 32:37Ben Gilbert?

  And at that point, even though it was in dire trouble, the brand of the New York Times, it was the best newspaper brand in the country. Still, it was definitely thought of as like the, the paper.

• 32:49David Rosenthal?

  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 30s at the time from Tennessee, shows up in New York, kind of walks into the bankruptcy court and is like, believe me, I can do this. And to convince-

• 33:31Ben Gilbert?

  Do you know the thing about the, the interbank transfer?

• 33:34David Rosenthal?

  Ooh, no, I don't.

• 33:35Ben Gilbert?

  He convinced a Chattanooga bank to wire money to a New York bank so that if in New York, people checked 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, I'm good for it. I promise. Just wire the money. I don't, I don't intend to use it.

• 33:57David Rosenthal?

  That's amazing.

• 33:58Ben Gilbert?

  It's like, there's some incredible huckster stuff going on that he, he sort of pulls strings to-

• 34:04David Rosenthal?

  He's got the entrepreneurial hustle. So did you find, did you read about the other thing he did to convince the creditors of his legitimacy?

• 34:12Ben Gilbert?

  Ooh, I don't know.

• 34:13David Rosenthal?

  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 bin publisher of the Chattanooga Times, Ox was on the welcoming committee. So he got to meet Grover Cleveland, like, while he was campaigning. And, you know, he, he, 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,

• 34:57David Rosenthal?

  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."

• 35:18Ben Gilbert?

  This is incredible. And he needed that support because at the time, until this, I, I, apparently I did find this, the Trask and the rest of the committee that was dealing with the bankruptcy of the Times was in favor of a different plan to merge it. Like, to basically unload the assets, merge it in with a different paper, wipe their hands clean and say, "Look, we got something for it." And instead, Adolf's walking in here with like, a whole different plan of like, "I am going to figure out how to revive this thing and make it great." And of course, there is some wicked financial engineering that he promises and that he really has to make the case of like, you don't just, it's not a cash buy here. Like, you're gonna have to believe in me and my plan in order to make this work.

• 36:03David Rosenthal?

  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 upfront to the creditors, which he also had scraped together with borrowed money. Because remember, he owes $100,000.

• 36:27Ben Gilbert?

  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.

• 36:43David Rosenthal?

  Amazing. This is like the minnow swallows whale from when, uh, Cap Cities bought ABC.

• 36:48Ben Gilbert?

  Hundred percent. 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?

• 36:58David Rosenthal?

  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. Uh, so that was a small part of the consideration. Um, the other part is he uses, you know, seller's notes again of, um, $600,000 in debt to owed back to the creditors that they will pay off over, you know, some number of the coming years from, you know, profits he'll generate by running this paper that has 9,000 subscribers and is bleeding, I think on the order of about half a million dollars a year at this point in losses.

• 37:36Ben Gilbert?

  You can see why if you're Trask or the existing bankruptcy committee, you're like, uh, I think we'll take the merger. Like, this doesn't sound like any kind of guarantee. It is this guy that no one's ever heard of. He's coming in from Tennessee. Like, you gotta sympathize with the, the original plan.

• 37:53David Rosenthal?

  Yeah, totally. But somehow he gets it done. So he emerges with the New York Times, and he has just like one problem, which is, okay, how are you gonna, how are you gonna turn this thing around?

• 38:07Ben Gilbert?

  Okay, so what's the grand plan?

• 38:08David Rosenthal?

  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. Hearst, 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. They each had about half a million circulation. But what they were, were what was called, I remember studying about in school, yellow journalism. So they were super sensationalist. This was right at the time of the Spanish American War.

• 38:52David Rosenthal?

  Like, these guys were like the, I don't know if they were like the National Enquirer, but like, they were fast and loose with the facts and basically trying to like sell copies with any sensationalism that they could come up with.

• 39:06Ben Gilbert?

  Do you know why it is called yellow journalism?

• 39:08David Rosenthal?

  Ooh, I feel like I did, but I don't remember.

• 39:12Ben Gilbert?

  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 lowbrow cartoon. And 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 trumpeted up. And, you know, famously around the Spanish American War, they were sort of making up headlines to make the war sound even more interesting than it is. And I always like knew that yellow journalism was sort of tied in with these papers, tied in with the original clickbait, with sort of untrustworthy headlines. But I did not know until doing this research that it is because they shared the Yellow Kid comic.

• 39:58David Rosenthal?

  Interesting. If I did know that, I had totally forgotten it. But yeah, these guys are like the, I don't know, maybe BuzzFeed is probably doing a disservice to BuzzFeed, but they're like the, I don't know, like Gawker of the.

• 40:10Ben Gilbert?

  BuzzFeed and Gawker, both of whose editors in chief now work at the New York Times as columnists.

• 40:14David Rosenthal?

  I know. Amazing, amazing. So.

• 40:18David Rosenthal?

  Ox lays out his plan for positioning for the New York Times, which is that they're going to provide journalistic integrity and something that is, quote, "not going to soil the breakfast linen."

• 40:29Ben Gilbert?

  Which is great.

• 40:30David Rosenthal?

  Sounds really exciting.

• 40:31Ben Gilbert?

  Because it means his plan, like the thing he knows how to do from Chattanooga, like that's kind of the playbook that needs to be run again, just on a much bigger scale.

• 40:38David Rosenthal?

  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 Hearst than he lets on. And he wanted to run a marketing stunt. So he runs a prize competition for anybody in New York who can come up with a better slogan, offering a hundred dollar prize for the winner. And they run it, they get lots of entries, they end up, the winner is chosen. And the, the official motto of the New York Times is going to be,

• 41:21David Rosenthal?

  "all the world's news, but not a school for scandal."

• 41:27David Rosenthal?

  Really rolls off the tongue, doesn't it?

• 41:28Ben Gilbert?

  Funny, I like Ox's a lot better.

• 41:30David Rosenthal?

  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.

• 41:37Ben Gilbert?

  Still shows up in the upper corner of the New York Times print edition today, right?

• 41:41David Rosenthal?

  And on the website, which we will get to later. So he also comes up with sort of an informal credo for the company and for the newsroom, which is to give the news impartially without fear or favor. And this is going to come up later when we get to the trust. But that really is the, the credo of the organization in a very fundamental way.

• 42:05Ben Gilbert?

  Yeah. And, and it follows with, so it is to give the news impartially without fear or favor, regardless of any party, sect, or interest involved. And that was a deliberate call out, particularly around party, for the highly, highly politically leaning papers of the time.

• 42:23David Rosenthal?

  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've gotten dropped at some point.

• 42:33Ben Gilbert?

  Yeah, he specifically did that because the Times, which is hilarious in a 180, at this point was considered an organ of the Democratic Party.

• 42:42David Rosenthal?

  So funny.

• 42:43Ben Gilbert?

  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.

• 42:54David Rosenthal?

  Yep. 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 300x to three cents and the world-

• 43:22Ben Gilbert?

  And there's inflation going on because you know, this is what 40, 50 years has gone by.

• 43:26David Rosenthal?

  Yeah, exactly. The world and the journal were also selling at three cents. And this is before the antitrust regulation. Pulitzer and Hurst were colluding. They wanted to raise the price to five cents. And so they're, 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.

• 43:48Ben Gilbert?

  And do you know why OX was so financially motivated to sell more copies?

• 43:55David Rosenthal?

  Uh, well, I assume I was going to talk in a sec about the business model of newspaper. You know, as you sell more, as your circulation goes up, not only do you get the circulation, the subscription revenues, you also get to sell a lot more advertising too.

• 44:09Ben Gilbert?

  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.

• 44:20David Rosenthal?

  Oh, I didn't find this.

• 44:21Ben Gilbert?

  This was if the newspaper is profitable for a certain number of years, don't quote me on this, but I think it was three years and he runs it profitably for three years, then he is able to unlock a new piece of ownership. It is, it is shares that are held in escrow that are then transferred to him and he becomes the controlling owner. Right now he's just a minority owner. He gets to run the business, but he doesn't have control. And so he desperately is trying to figure out a way, how can I make this thing profitable? And keep- It for 36 months straight, which there was actually a funny misunderstanding where the previous owners of the Times were trying to insist that it was three calendar years. Ox was able to get it profitable for a 36 month straight stint.

• 45:05Ben Gilbert?

  And I think they ended up actually bringing in lawyers to arbitrate this. But yes, this is an attempt by Ox to say, I need to pull some crazy lever. And I'm going to drop the price in order to try and get circulation to the point where I can actually get this thing profitable enough to control it.

• 45:20David Rosenthal?

  I love it to pull forward a playbook theme here. I mean, like, this is such an entrepreneurial story. Like, when your back is against the wall and like, you have to make something work and you have no resources and you're running out of money, like, that's when genius happens, you know, when you're forced into these constraints. So, you know, probably even more than the positioning of the news. This is what really makes the times. He cuts the price from three cents down to one cent, which would seem crazy. Like, you're trying to make more money. Why would you cut the price? This is huge. Circulation goes, subscriptions go through the roof.

• 46:01David Rosenthal?

  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.

• 46:12Ben Gilbert?

  And there was some interesting criticism going on at the time of sort of that it wouldn't work. That, you know, these, there were papers that sold for one cent, but they were tabloids. You know, they were kind of trashy and people were saying, Ox, you know, you're, you're trying to, this crazy move you're doing, the people who are reading those tabloids, the one cent things, they're not interested in your content, this business stuff, this 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.

• 46:51David Rosenthal?

  Totally. So grows 3X in his first year, back up to 30,000 circulation. By 1899, it's at 76,000, so back above the 75,000 that it had been. Crosses 100,000 in 1901, 200,000 in 1912. And by the 1920s, after World War I, he's up at over 3/4 of a million circulation and is, has become the dominant, not just paper in New York, but like the probably most prestigious, most respected, most widely known American journalistic organization out there that, you know, when we think of the New York Times, this was it. And it was all ox.

• 47:35Ben Gilbert?

  This is the birth of the modern times. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 47:51David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 48:05Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 48:15David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 48:33Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 48:49David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 49:06Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 49:15David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. 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,

• 49:57David Rosenthal?

  parts of the business, because you gotta print it and you gotta deliver it.

• 50:01Ben Gilbert?

  Right. It's not all margin dollars, the way that advertising is.

• 50:04David Rosenthal?

  Right. But advertising, you know, you can have an ad sales department and as your circulation goes up, and in particularly as your circulation goes up amongst attractive demographics for advertisers, you might say like a growing, expanding middle class with lots of new disposable income, you're going to do very, very well with no marginal costs on the advertising side.

• 50:29Ben Gilbert?

  Yep. The other crazy thing about the physical paper business is today, we kind of think about like, well, you can be a free website that has ads, or you can be a paid website that has no ads. And obviously it's oversimplifying and there's lots of ways to do both. But there's nobody that's reading the paper for free. Everyone is either buying it on a newsstand or paying to have it delivered to their home or business. So it is an era of having your cake and eating it too, where you both have every single person who's reading paying, shy at maybe some people who were reading it in a restaurant or something, and you're able to sell ads in every single one. And on top of that, here's sort of the like magic thing that Ox figured out that would later be sort of taken by the Wall Street Journal was it became the business newspaper of record. Ox made a really big bet on we should be producing

• 51:14Ben Gilbert?

  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 that time, business people now as, as the demographic, which is just fascinating, sort of reading that and being like, wait, that's, that's the journal's

• 51:37David Rosenthal?

  Totally. I mean, when I was working at the Journal, this was before the Times implemented their now very, very successful paywall. But we were the only, you know, upscale newspaper, a 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.

• 52:00Ben Gilbert?

  Yeah.

• 52:01David Rosenthal?

  So this was a super cool gem that I got from the research. So it's actually, you know, the, the famous John Wanamaker quote about 50% of the money I spend on advertising is wasted.

• 52:13Ben Gilbert?

  I just don't know which 50%.

• 52:15David Rosenthal?

  Yeah. That was actually stolen from OX.

• 52:19Ben Gilbert?

  No way.

• 52:20David Rosenthal?

  Yeah. Wanamaker, I don't know if they were friends or something, but it was originally an OX quote in, in 1916. OX said, I affirm that more than 50%, so more than 50% of money spent on advertising is squandered and is a sheer waste of printers ink. Wanamaker got a hold of that. He was an advertiser. He was a retailer in Philadelphia and, and he turned it around to, you know, I know half the money I spend on advertising is wasted. I just can never find out which half. So super cool. But yeah, OX becomes the premier newspaper man in New York, if not America, and if not the world.

• 52:57Ben Gilbert?

  Before we pull too far forward from this time, there's one interesting sort of fun anecdote that-

• 53:02David Rosenthal?

  Are you going to talk about the headquarters?

• 53:04Ben Gilbert?

  Yes.

• 53:05David Rosenthal?

  Yes, go for it.

• 53:06Ben Gilbert?

  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. Sort of obsession of, I want a really fancy headquarters. I want it 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.

• 53:46David Rosenthal?

  Square.

• 53:47Ben Gilbert?

  After the New York Times.

• 53:48David Rosenthal?

  After the New York Times. So awesome. What do you know the other part of the story?

• 53:52Ben Gilbert?

  No, keep it going.

• 53:53David Rosenthal?

  Okay. So when OX moved the building to Longacre Square in this new building, he-

• 54:01David Rosenthal?

  Of course, wanted to make a show with this, you know, never waste a marketing opportunity, ever the entrepreneur. So he had pyrotechnicists illuminate the new building with a fireworks show right around the holidays when he moved there.

• 54:16Ben Gilbert?

  Oh, is this the ball dropping?

• 54:18David Rosenthal?

  Yeah. And so that kind of becomes the thing. He does it for a couple of years. And then at New Year's, from 1907 to 1908, he has a big electric ball installed on top of the building.

• 54:31Ben Gilbert?

  Oh, it's amazing.

• 54:31David Rosenthal?

  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 Ox.

• 54:39Ben Gilbert?

  Wow. Wow. And that's such an interesting, I didn't really real, like, I should have known Times Square, like, duh, but I, I, I, maybe I knew that at some point in my past.

• 54:48David Rosenthal?

  Yeah, it's just so you're like, oh, Times Square. It's like, it's like, uh, it's like air. You're like, oh, yeah, I don't, I don't, it's called Times Square, because it's called Times Square. Like.

• 54:55Ben Gilbert?

  The, the stock, the stock tickers too, were originally the New York Times that, that implemented that on the outside of their building before, I want to say Dow Jones took it over.

• 55:03David Rosenthal?

  Yeah, yep. Just an incredible, you know, entrepreneurial story. We're going to move on to the next chapters here. Okay, so two years after that press release, Ox does pass away in 1935. But there's a problem, though, which is Ox only had one child and his child, which he viewed as a problem for succession, was a daughter.

• 55:32Ben Gilbert?

  Yeah, I mean, this is some hardcore sexism.

• 55:34David Rosenthal?

  Hard hardcore. So Ifejean, 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.

• 56:03Ben Gilbert?

  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 in the family, says, ultimately, Ox punted on the decision. When he died in 1935, his will essentially left it to, and I'm sure you'll explain these people, Arthur, Julius, and Ifejean to work it out amongst themselves.

• 56:29David Rosenthal?

  Yeah, they each had a vote on who would become the next publisher. So Arthur Solzberger was Ifejean's husband, who would become the next publisher. And Julius was, I believe, Ochs'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 Ochs set it up this way, that each of the three of them had a vote because he wanted Ifejean, he wanted to essentially make sure that Arthur was a good husband to her

• 57:08David Rosenthal?

  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.

• 57:23Ben Gilbert?

  Yeah. And for all this like

• 57:24David Rosenthal?

  Ochs style.

• 57:25Ben Gilbert?

  Building up of Ochs we've done. This is not the only time throughout history, but it will be the first sort of part of the New York Times' 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.

• 57:36David Rosenthal?

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

• 58:16David Rosenthal?

  is the Gray Lady. And there's multiple sort of origin stories of the Gray Lady nickname.

• 58:22Ben Gilbert?

  One, did it later become the Good Gray Lady? Or where does good come in?

• 58:26David Rosenthal?

  Maybe that's part of it. So I think the origin is the Bank of England was called the Good Lady or something like that. And so it was sort of borrowed from that. Some people say the gray came from like looking at the paper. It's a bunch of gray newsprint. It's a gray paper. And so it became the Gray Lady. Alternatively, though, Ifejean is the gray lady. She was a presence on the board and sort of the, you know, the link to Ochs and the moral fiber, if you will, of the company for 90 years until 1990.

• 59:03Ben Gilbert?

  It's crazy. And this is really introducing the very first of many, not necessarily outwardly contentious, but inwardly contentious succession decisions that happen.

• 59:14David Rosenthal?

  Yes.

• 59:14Ben Gilbert?

  The New York Magazine, quote, "continues," from earlier, "Ifejean, being the deciding vote, supported her husband, thus cleaving a fault line in the family that was never repaired." And that, you can imagine, generations go by, this thing really starts to compound because there starts to be, you know, massive numbers of cousins who are, you know, the same way related to Adolf that the people who end up sort of succeeding Adolf and, you know, five generations later, they're sort of by blood, the same amount related, but theirs was not sort of the chosen bloodline to pass down the paper through.

• 59:52David Rosenthal?

  Yeah. And it has always been a male heir that has become the publisher now through five generations, even though there are plenty of daughters in the family. So, you know, Ochs, crafty like he is, he's sort of, his, so Gay Talese, a 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 it came out in 1969, called The Kingdom and the Power.

• 1:00:25Ben Gilbert?

  Which I don't think the family loved. Like this one I was reading, The Trust, from about, right around year 2000, refers to the Kingdom of the Power. And I think he was always, after he released that, kept it a little bit at arm's length.

• 1:00:37David Rosenthal?

  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 shortsighted goals. His successors would have to make money but not be enticed by it, would have to keep up with the trends but not be carried away by them, would have to hire talented people but not people so talented or egocentric that they could become too special as writers or indispensable as editors."

• 1:01:07Ben Gilbert?

  Or else they'll go start a Substack.

• 1:01:09David Rosenthal?

  Yeah, exactly. Thank God Substack didn't exist in those days, or what would Adolf have 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 Ifejean and Arthur 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

• 1:01:52David Rosenthal?

  hold of from the proxy statement, I think from the 1990, maybe 10K of the New York Times.

• 1:02:00Ben Gilbert?

  Of course you did.

• 1:02:00David Rosenthal?

  The proxy statement, the, some of the language in the 1986 trusts, there were then several trusts amongst branches of the family, but they were all linked together. This is what it says in the organizing documents of the trust. "The trustees of each 1986 trust, subject to limited exceptions described below, are directed to retain the Class B common stock held in the trust and not to sell, distribute, or convert such shares into Class A common stock, and to vote such Class B common stock against any merger, sale of assets, or other transaction pursuant to which control of the New York Times passes from

• 1:02:43David Rosenthal?

  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 entirely, here it is, entirely fearless, free of ulterior influence and unselfishly devoted to the public welfare, can be better achieved by a sale, distribution, blah, blah, blah, blah, blah.

• 1:03:10Ben Gilbert?

  Wait, so it's, it's primary purpose, the primary purpose of the family trust is to ensure?

• 1:03:16David Rosenthal?

  Yes.

• 1:03:17Ben Gilbert?

  That it continues to own the New York Times.

• 1:03:19David Rosenthal?

  To ensure, one, that the family continues to own the New York Times. And two, that the mission of the New York Times to continue as an independent newspaper, entirely fearless, free of ulterior influence and unselfishly devoted to the public welfare. That is the purpose of the trust. So he sets this up so that all of his descendants in perpetuity, the only way they can maintain the wealth associated with the Times and their ownership of the Times and all of the, you know, the dividends at the time, but, you know, wealth that comes with it is by not selling it and by supporting this mission. And so like, anything that goes against that would violate that.

• 1:04:03Ben Gilbert?

  Oh, that's so fascinating. It's crazy that you can't, I mean, maybe they can, and we just don't know. But like, he can do that and it survives him, like that, you know, he can decide that my wealth and the wealth created by this thing that I started or bought and sort of restarted can only be inherited under these circumstances.

• 1:04:23David Rosenthal?

  Yeah, pretty crazy. And, you know, the family must, I think, support it because the trusts have been redone a few times, but they, you know.

• 1:04:31Ben Gilbert?

  Yeah, I think there's, there's like eight family members who comprise a board right now and that they sort of make the decisions for the, you know, dozens and dozens and dozens of numbers of cousins that there are now.

• 1:04:42David Rosenthal?

  Yeah, crazy. So, okay, so Sulzberger 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 Times, 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

• 1:05:23David Rosenthal?

  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 cut back on advertising and upped the war reporting and really became like the foremost kind of chronicler of World War II.

• 1:05:57Ben Gilbert?

  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.

• 1:06:22David Rosenthal?

  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, the sort of the official history of the Manhattan Project. And he's the only journalist that witnesses the dropping of the bomb in Nagasaki.

• 1:06:56Ben Gilbert?

  Wait, he witnesses it? Like he was on a plane?

• 1:06:59David Rosenthal?

  I don't know. I guess he must have been in the plane. I don't know for sure. But pretty incredible. Totally incredible. So that's sort of like the best of the times during this period. Unfortunately.

• 1:07:11Ben Gilbert?

  Yeah, it's the best of the times and simultaneously kind of the worst of America, you know, reporting on us and our, you know. Neither of us are actual historians and neither of us are passing judgment on, on obviously dropping the atomic bomb, but like, gosh, that just the absolute last thing that any powerful nation wants to sort of have to do. And for the Times to be the people there with literally the front row seat is just, it's heavy.

• 1:07:38David Rosenthal?

  Yeah, seriously. Speaking of heavy, the Times, and they would say, well, 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 discussed, Doc's family and the Sulzberger family were Jewish families, that is a Jewish family that controls the paper, they were paranoid, particularly Arthur Sulzberger, about being known as a

• 1:08:21David Rosenthal?

  Jewish newspaper, Jewish family, inviting, you know, prejudice bias, discrimination against the paper. And so they were rabid about not wanting to seem too parochial or biased towards Jews. And so they, even though, you know, reporters knew, editors knew what was happening in the Holocaust, they didn't report on it. And in fact, you know, they famously talk about 400,000, I believe they say Europeans killed by the Nazis. Those were 400,000 Jews that they changed.

• 1:08:52Ben Gilbert?

  Oh, they reported and used the word Europeans.

• 1:08:55David Rosenthal?

  Instead of Jews, yeah.

• 1:08:56Ben Gilbert?

  I mean, how many lives could have been saved if the Times had done that sooner? I mean, it's a, it's a really striking example of fear of anti-Semitic backlash preventing speaking out about antisemitism. And obviously, it doesn't just have to be antisemitism, this could be applied to all injustice. But yeah, the, the idea that both the Sulzberger family would come under fire, but also that the newspaper would lose credibility, the, the sort of fear of that loss of credibility, leading to, damn, turning a blind eye at some of the most horrific events in human history.

• 1:09:30David Rosenthal?

  Totally. So in 2001, in the 150th anniversary issue, former executive editor at the time, Max Frankel, wrote sort of the. Title article on that. And, and he says, then there was failure, none greater than the staggering, staining failure of the New York Times to depict Hitler's methodical extermination of the Jews of Europe as a horror beyond all 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.

• 1:10:08Ben Gilbert?

  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 Frigley 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

• 1:10:52Ben Gilbert?

  being critical of themselves. Yeah, it's meaningful.

• 1:10:56David Rosenthal?

  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 Ify Jin, who, who was obviously qualified to become the publisher that, you know, it was her husband that she was passed over for her husband. The first woman reporter joined the Times in 1912, Jane Grant, to report on society. She had to fight her way into the city staff. And then like, the management made it clear to her, like, you will never be an editor here. Like, that's just not going to happen. She ended up leaving the organization, started New York Magazine, and then became a leader

• 1:11:41David Rosenthal?

  in the women's rights movement. So, you know, screw you guys. And then women for, you know, decades were relegated to basically just the society and 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 of those cases. But, you know, today, of course, Dean Beck 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

• 1:12:26David Rosenthal?

  the Times would point out too, that it was not always a fair and just place.

• 1:12:31Ben Gilbert?

  Not always a rosy picture. Yeah.

• 1:12:33David Rosenthal?

  Okay, back to Sulzberger. He presides through all of this. In 1961, he becomes infirmed, and he is succeeded. Again, his oldest child, and Ifejean's oldest child is a daughter by her husband, Orville Dreyfus.

• 1:12:50Ben Gilbert?

  This guy, Orville Dreyfus, is the Timothy Dalton of the New York Times family succession. Like, he is definitely, for any James Bond fans out there, like, he's the one that was kind of like, in one or two movies, and you're like, wait, that guy played James Bond, and then quickly you're on to the next one. Like, how long?

• 1:13:06David Rosenthal?

  Guillermo del Rey.

• 1:13:07Ben Gilbert?

  Yeah. No, he's the Guillermo del Rey. That's an even better comparison.

• 1:13:11David Rosenthal?

  Yeah.

• 1:13:12Ben Gilbert?

  Dreyfus lasted two years?

• 1:13:14David Rosenthal?

  Two years, unfortunately, because he died unexpectedly. But, so, his wife, you know, Marion, Sulzberger and Ifejean's daughter, like, she came up with the idea for People Magazine. So, like, all of these women involved at the Times are, like, total ballers.

• 1:13:30Ben Gilbert?

  Maybe here's an idea. Keep them. Promote them.

• 1:13:33David Rosenthal?

  So, when Dreyfus dies in 63, then the youngest, Arthur and Ifejean's youngest child, who is their only son, Arthur Ox, nicknamed Punch Sulzberger, succeeds him as publisher.

• 1:13:48Ben Gilbert?

  And because they're all a something Sulzberger, we're just gonna call him Punch the rest of the episode?

• 1:13:52David Rosenthal?

  Yeah, he's Punch. He's Punch.

• 1:13:53Ben Gilbert?

  So, so far, we've got, like, Arthur, or we've got Adolf Ox, then we've got Arthur Sulzberger, then we've got Punch. Well, I mean, we had Dreyfus, but Timothy Dalton, Guillermo del Rey, so we got Punch. Then we'll have Punch's son, who we'll call Junior, who is a

• 1:14:09David Rosenthal?

  Arthur.

• 1:14:10Ben Gilbert?

  Arthur Sulzberger Jr., right? After him. So, we'll just call him Junior. And then there's AG, who's the publisher today.

• 1:14:18David Rosenthal?

  Yes, exactly.

• 1:14:19Ben Gilbert?

  All a something Sulzberger.

• 1:14:20David Rosenthal?

  For everyone keeping score at home.

• 1:14:24David Rosenthal?

  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.

• 1:14:57Ben Gilbert?

  Right.

• 1:14:57David Rosenthal?

  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. They could interpret the facts and the meaning 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, you know, if you think back to OX, it was all about like, just the facts, impartial,

• 1:15:40David Rosenthal?

  you know, no, no judgment. And, you know, here, you can't help but introduce some judgment, but like, there's a service of like, explaining meaning as well.

• 1:15:50Ben Gilbert?

  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.

• 1:16:07David Rosenthal?

  Yep. So Punch develops a saying that I actually, AG, the current publisher, you know, I read a 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, Gay Talese writes, of course, "The trick was to do this without editorializing." While there was a difference between interpreting and editorializing, then executive editor, Catledge Turner. Knew that the line between the two was sometimes thin. And if the Times was to achieve the new goal and yet avoid making a mockery of Ox's motto about objectivity, it had to have a more vigilant copy desk, more unchallenged authority

• 1:16:50David Rosenthal?

  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.

• 1:17:09Ben Gilbert?

  We should also say, classically, the person leading the newsroom at the New York Times has traditionally not been a member of the family to intentionally sort of create that distance between the publisher, you know, the, the people responsible for the Times as a business. And of course, stewarding its mission are not actually the people making the calls on, you know, what stories run in 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.

• 1:17:43David Rosenthal?

  Yep. So that was great. I think what was less great, you know, sort of like, okay, give like a maybe a C grade to Punch during his tenure was from a capital allocation perspective, you know, what you really want to do here is like differentiate versus this new medium, but you also want to invest in the new medium. And so they realized this and they, along with many other newspaper families in the 60s, 70s, 80s, start buying television stations. So the company actually back in 1944 had bought two radio stations in New York, but Punch realizes probably with the help of an encouragement of some bankers on Wall Street, that they should go buy some televisions and some television

• 1:18:28David Rosenthal?

  news properties as well.

• 1:18:30Ben Gilbert?

  Plus, like, this is conglomerate times. Like, let's diversify.

• 1:18:34David Rosenthal?

  Go, go, go. So this is when the company goes public in 1969 on the American Stock Exchange with the dual class share structure where the family still retains voting control. Then I think the right to elect 70% of the board, but exponentially larger voting control with their shares. But the reason they went public, I had thought it was like a family

• 1:18:57Ben Gilbert?

  So it was privately held all the way to this point?

• 1:18:59David Rosenthal?

  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.

• 1:19:12Ben Gilbert?

  Oh, no way.

• 1:19:14David Rosenthal?

  Yeah.

• 1:19:14Ben Gilbert?

  Wow. Yeah, I would have figured the same thing, but, but you're right. It's always been a dividend stock. And so they were always able to pay out to all the heirs just with dividends. So they wouldn't have needed to go public just for liquidity.

• 1:19:25David Rosenthal?

  Yep. 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.

• 1:19:39Ben Gilbert?

  Ugh.

• 1:19:40David Rosenthal?

  Unfortunately, though, and this is like, that was fine. Like, they end up selling the Broadcast Media Group to, I think, Oak Hill, 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.

• 1:20:01Ben Gilbert?

  ESPN episode.

• 1:20:02David Rosenthal?

  Yeah, man. Cable was the internet before the internet. That's where the money was. So Punch steps down as publisher in 1992 after a almost 30 year run. And as we said, his son, Junior, succeeds him.

• 1:20:17Ben Gilbert?

  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.

• 1:20:25David Rosenthal?

  Yep.

• 1:20:26Ben Gilbert?

  Like, it would be nice to have a transition to someone here who's not going to get completely blindsided by what's coming. That is not what they did. They got completely blindsided by what's coming. Not to mention, they were heavied up on some crazy assets. Like, 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.

• 1:20:53David Rosenthal?

  We're gonna get into some crazy stuff.

• 1:20:55Ben Gilbert?

  Okay, all right. Because like, they, this diversification goes way too far.

• 1:21:00David Rosenthal?

  Totally. So I mean, I think it it's maybe unfair. It probably, I think it's unfair to say they were blindsided by the internet. They definitely knew it was coming. Junior knew it was coming and they developed a whole strategy around it. And so in June 1994, they partner with AOL and launch At Times, the At Times channel on AOL, which is garbage. But in 1995, they hire this guy named Martin Nezenholz to come in and run a whole new electronic media division within the company. Martin had started the ad agency Ogilvy and Mather's Interactive Marketing Group. And actually, Brian McCullough, over at the Internet History

• 1:21:45David Rosenthal?

  Podcast, did a great episode with Martin that we'll link to in the sources. You should go check out. Great interview with him.

• 1:21:53Ben Gilbert?

  Wait, let me defend my blindsided thing. So here, this is 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 sold it to LexisNexis. The New York Times didn't own the 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.

• 1:22:21David Rosenthal?

  It was specifically the archive, the rights to the archives. So they were able, with some negotiation, to put breaking, not breaking, but like, new news, current, new news on the site, but they couldn't have the archives until they got the rights back.

• 1:22:37Ben Gilbert?

  And they did in 94, ultimately get the rights back. And then I think in 1996, that's when NYTimes.com went up for the first time.

• 1:22:45David Rosenthal?

  Yep, totally. So when Nezenholz comes in, he's like, holy crap, we gotta work through all these rights issues. So that was part of it. They also had to decide on the business model. So the plan, this is, this is fascinating. The original plan was to charge for NYTimes.com, charge digital subscriptions. And Nezenholz said, we can't charge because this product sucks. And like, who's gonna pay for this? So when they do launch the site in January 96, the real site, not the AOL site. So there's no CMS, there's no content management system. What they do, they literally, every day, they create an image, like a GIF.

• 1:23:29David Rosenthal?

  And, and put it like, so there's no text.

• 1:23:30Ben Gilbert?

  Wait, wait, wait, wait, I'm sorry. We have to stop the episode. You're a GIF person? You don't say GIF?

• 1:23:37David Rosenthal?

  Oh yeah, I do say GIF.

• 1:23:38Ben Gilbert?

  Oh, all right. Okay, like we can, we'll still keep doing the pod, I guess.

• 1:23:44David Rosenthal?

  Okay, okay, okay. Sorry, sorry. I just got so carried away. I got carried away by the fact that they literally make a GIF of an image that they like create in the art department. And then put that like, if you go to nytimes.com, it loads a GIF just as like the, and it's like

• 1:24:00Ben Gilbert?

  Unbelievable.

• 1:24:01David Rosenthal?

  You read, yeah, that's, that's the first version.

• 1:24:03Ben Gilbert?

  And I imagine like, if you're using, like, I don't, it's not page maker, but whatever they're sort of like, they probably use robust software to do the page layout of the physical paper. And so like, you know, you're not necessarily 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 this stuff. Like, let's just export from that and we'll put that on the web.

• 1:24:33David Rosenthal?

  Yep. And so he's like, we can't charge for this. It's crap. But also like, the other point was like, it's like, we gotta build an audience. Like, we gotta train people to come to nytimes.com. Like, otherwise, why would anybody come here, especially if they gotta pay us money? So they go free. And of course, all sorts of long-term consequences of that.

• 1:24:57Ben Gilbert?

  Would the internet have been a different place if they had decided to go paid right off the bat? Because for a whole decade and a half after that, no one could do anything paid on the internet. Like, no, there was no such thing as paid content. Yeah, yeah, good point. And they still have a hardcore paywall, but the

• 1:25:13David Rosenthal?

  But again, it was all because of B2B. Like, that was, you know, we, we would always pat ourselves on the back, but it's like, hey, the reality is, these are all corporates that are paying for this stuff on expense.

• 1:25:22Ben Gilbert?

  Right. These aren't consumers who are browsing the web and deciding, oh, I should start paying because of this paywall. It wasn't till, I will get there, but 2011, that the New York Times sort of introduced their, their sort of concept of their metered paywall. But I just can't help but think that if the Times and a few other early content websites had made a different decision, it could have been culturally acceptable for existing media outlets to charge on the web in a way that it just, it just wasn't.

• 1:25:49David Rosenthal?

  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 hey, 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 kind of at the end of Punches tenure. So while they're, all this is going on, just a couple of blocks away, over at 1211 Avenue of the Americas, Rupert Murdoch, he knows

• 1:26:31David Rosenthal?

  news, and he's looking out at everything going on, this, we're in the mid 90s, and he's like, holy crap, like, I see ESPN, I see how valuable that is, I see how valuable CNN is, and I see a bunch of problems with it and a bunch of opportunities to do better and different. I'm going to build and launch Fox News. And 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. He said, we can bring this to America. So in 1996, they announced that they're going to start a new 24-hour cable news network,

• 1:27:16David Rosenthal?

  Fox News, and Rupert says, is quoted, "The appetite for news, particularly news that explains to people how it affects them, is growing enormously on cable." And so he sees this opportunity, and then certainly the other part of what he sees, which the Times, you know, would never do, given Doc's mission to the company, as we talked about, is, but Murdoch brilliantly sees is, there's an opportunity to create a news organization targeted for conservatives out there, and like CNN, the media as a whole, certainly New York Times, people believed were left-leaning and liberal-leaning.

• 1:27:55David Rosenthal?

  And he thought, man, there's this whole market out there. So he hires Roger Ailes from CNBC to come over and be the first CEO of a long time.

• 1:28:03Ben Gilbert?

  I didn't know Ailes was CNBC before.

• 1:28:05David Rosenthal?

  Yeah, he was at CNBC, but before he was at CNBC, this is crazy. I didn't know this till I looked it up. I used to work in the building. Ailes was a Republican Party media strategist. So part of Murdoch's plan is like, I'm going to target Republicans and conservatives to watch my network. Ailes wasn't just any media strategist for the Republicans. He was the guy who Nixon tapped to help Nixon with his television presence for the second time when he successfully ran for president. Cause Nixon, when he ran against Kennedy,

• 1:28:39Ben Gilbert?

  Yeah.

• 1:28:39David Rosenthal?

  got destroyed in the TV debates.

• 1:28:41Ben Gilbert?

  Wasn't he like, he was like sweaty and like, he's obviously not as handsome as JFK.

• 1:28:46David Rosenthal?

  So he brought in Roger Ailes as his like fixer for the second go around to like, do well on TV.

• 1:28:54David Rosenthal?

  So that's who Murdoch goes and taps to start Fox News.

• 1:28:59Ben Gilbert?

  Small world.

• 1:29:00David Rosenthal?

  And then he does something even more bold. He's like the anti Adolf Fox. He goes to the cable systems, you know, usually as we've chronicled on acquired, the beauty of the cable network model was you got paid a subscriber fee by the cable systems to carry you and you sold advertising, kind of just like newspapers. Murdoch goes out to all the big cable systems and he's like, hey, I'll tell you what, I'll pay you to carry Fox News.

• 1:29:27Ben Gilbert?

  No way.

• 1:29:28David Rosenthal?

  And to give me like prime placement in your channel lineup.

• 1:29:31Ben Gilbert?

  It's like the opposite of the ESPN's amazing cash cow business model.

• 1:29:35David Rosenthal?

  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.

• 1:29:44Ben Gilbert?

  Hmm.

• 1:29:45David Rosenthal?

  So to say like this works is.

• 1:29:48Ben Gilbert?

  Oh, it's so brilliant. Pay for the distribution to start. And then once people are more loyal to you than the cable company, then you can.

• 1:29:56David Rosenthal?

  Then flip it.

• 1:29:57Ben Gilbert?

  Huh.

• 1:29:57David Rosenthal?

  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.

• 1:30:08Ben Gilbert?

  Right.

• 1:30:08David Rosenthal?

  Et cetera. So this is incredible. I, I knew this from working at News Corp, like that. Fox News was a great business. It is an incredible business. So by 2002, so that's eight years after launch, Fox News is the number one news network on TV, becomes number one, passes CNN. It remains number one every single week from then for literally 19 straight years until January of this year, after the Capitol riots, when it lost a lot of viewers. Like literally 19 straight years, it is the most watched news network on American television.

• 1:30:49Ben Gilbert?

  That is unbelievable.

• 1:30:51David Rosenthal?

  Yeah. So whatever you think of Fox News as an organization, like we're not here to judge one way or the other. It brings in, so this is Fox's total cable network segment, of which Fox News is by far the lion's share. In 2019, generated $5.4 billion in revenue and $2.5 billion of EBITDA. So that's like a 50%

• 1:31:13Ben Gilbert?

  Oh, my God.

• 1:31:13David Rosenthal?

  near 50% EBITDA margin.

• 1:31:15Ben Gilbert?

  That's Facebook good.

• 1:31:17David Rosenthal?

  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.

• 1:31:26Ben Gilbert?

  Even though the New York Times would absolutely assert we are in the center and we are on no end.

• 1:31:32David Rosenthal?

  Totally. But this is like an ESPN level business that the Times would have built something different. But I think, you know, look, they got into broadcast television, they're getting into the internet. Missing the boat on the opportunity for cable news was huge here.

• 1:31:51Ben Gilbert?

  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.

• 1:32:23David Rosenthal?

  Yep. Yeah, they frankly just missed it.

• 1:32:25Ben Gilbert?

  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.

• 1:32:45David Rosenthal?

  That could be.

• 1:32:45Ben Gilbert?

  Cable news network?

• 1:32:46David Rosenthal?

  CNN, 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.

• 1:33:05Ben Gilbert?

  Right.

• 1:33:05David Rosenthal?

  So it's certainly complicated, but I just like, I wanted to go dive into the research of Fox News because I was like, all right, well, like, let's, people compare these two organizations so often. I want to find out the history. And what just like hit me over the head was again, whatever you think of it, whether you watch it or don't watch it, it is an unbelievable business.

• 1:33:26Ben Gilbert?

  So it has a 50% EBITDA margin. How much revenue did you say it does?

• 1:33:31David Rosenthal?

  Close to $6 billion.

• 1:33:33Ben Gilbert?

  So that's over 3X the Times' revenue today.

• 1:33:38David Rosenthal?

  Yep. Now that does include like Fox Business and some of the other spinoffs. Some Fox Sports, I think that they didn't spin off is still in there, but like the vast majority of that is Fox News.

• 1:33:48Ben Gilbert?

  I don't think if you would have, like, this shows what a bubble I'm in, but like, I don't think if you would have asked me, what's a bigger business that I would have told you Fox News?

• 1:33:56David Rosenthal?

  Yeah. Yeah. It's a bigger business. Crazy. So meanwhile, the other side of the coin here for the New York Times company, missing the cable news opportunity, they made some, Ben, you alluded to this, shall we say, poor capital allocation decisions during the 90s and 2000s. So in 1993, they purchased the Boston Globe for $1.1 billion for the Globe. And I think they got a couple of 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

• 1:34:41David Rosenthal?

  popcorn channel, Ben?

• 1:34:42Ben Gilbert?

  And we all made some mistakes in the 90s.

• 1:34:44David Rosenthal?

  Oh, my God. Do you know what it was?

• 1:34:46Ben Gilbert?

  No.

• 1:34:46David Rosenthal?

  This is so boneheaded. Well, that's, I thought like popcorn channel, maybe it's like a HBO knockoff or something.

• 1:34:54David Rosenthal?

  This is a cable network. Its sole reason for existence was it showed previews, like movie previews and displayed local, you know, movie times.

• 1:35:04Ben Gilbert?

  Oh, my God.

• 1:35:05David Rosenthal?

  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. Red Sox. Yeah, that's a good idea.

• 1:35:27Ben Gilbert?

  I think, didn't they also take a minority interest in Fenway Park itself?

• 1:35:30David Rosenthal?

  Yeah, that was also part of the.

• 1:35:32Ben Gilbert?

  The madness.

• 1:35:33David Rosenthal?

  Oh, madness.

• 1:35:34Ben Gilbert?

  I think that, and there was like a, some kind of NASCAR team that they owned half of. Like, this is when they really went ham. They, they, um, they bought Golf Digest, Golf World, like a bunch of magazines, like Family Circle, Snow Country. I mean, it was like, yeah.

• 1:35:53David Rosenthal?

  What, this is like a, what were they thinking?

• 1:35:55Ben Gilbert?

  And, and really like 15 to 20 local papers. Like the Santa Barbara News Press, the Press Democrat, Gainesville's paper, like I, it's like Cap City's gone wrong.

• 1:36:08David Rosenthal?

  The amount of fees that investment bankers must have been making off the Salzburger family at that point in time, like.

• 1:36:14Ben Gilbert?

  Yeah.

• 1:36:15David Rosenthal?

  Oof. Um, in March.

• 1:36:17Ben Gilbert?

  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.

• 1:36:28David Rosenthal?

  A hundred percent. They also acquire about.com for 410 million in March 2005.

• 1:36:36Ben Gilbert?

  Famed tech company about.com.

• 1:36:38David Rosenthal?

  Yeah. So, I mean, all of this, it's easy to dunk on these things, but probably the worst offense, I mean, I haven't modeled out exactly the financial impact of this, but, uh, this kind of blew my mind. Throughout the nineties 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.

• 1:37:09Ben Gilbert?

  I didn't know you could buy back stock with debt. Like, I, I mean, I guess.

• 1:37:13David Rosenthal?

  Do it all the time.

• 1:37:15Ben Gilbert?

  So mechanically, what you're, what you're sort of asserting if you're doing that is that my company is so undervalued right now and we are going to be so profitable in the near future that I think it's actually less dilutive for my shareholders if I take on a bunch of debt to buy back shares to sort of like undilute shareholders, like reverse dilution, anti-dilute.

• 1:37:40David Rosenthal?

  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 it's like, this is not a, this is a longstanding business. This is the idea was you could use the cash flow to pay down debt over time and finance these transactions.

• 1:37:59Ben Gilbert?

  I mean, it's just a private equity play.

• 1:38:00David Rosenthal?

  But because of the way the trust is set up, the family can't sell shares. So the way the family monetizes the business is through dividends. So even if, like, you can't even make the argument that they were just doing this out of self-interest for the family because the family wasn't seeing any of the benefit of the stock buybacks. Like, it's just madness, you know, like you're, they're cutting into the amount of cash flow that they could use for dividends.

• 1:38:26Ben Gilbert?

  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.

• 1:38:34David Rosenthal?

  Yes, but they can't sell the stock.

• 1:38:36Ben Gilbert?

  Assuming the enterprise value continues to rise. Right, right, right. But yeah, but, but ostensibly the dividend per share could go up. But you're right, but you're using money. It actually isn't going to go up because you're, yeah, huh.

• 1:38:47David Rosenthal?

  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.

• 1:39:00Ben Gilbert?

  So when does Carlos Slim come into the picture?

• 1:39:02David Rosenthal?

  So this keeps going until the mid 2000s. And even around like 2006 or so, everybody's like, this is fine, you know, the company's spitting off three, three and a half billion dollars of revenue, couple hundred million dollars of operating cash flow, we're plowing that into debt service, fine.

• 1:39:19Ben Gilbert?

  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.

• 1:39:31David Rosenthal?

  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 move 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 Pompadour in Paris and the Shard in London.

• 1:40:02David Rosenthal?

  Okay, they move 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 course of the next two years, you know, they would lose 25% of their revenue in two years.

• 1:40:30Ben Gilbert?

  Yeah, the rise before the fall.

• 1:40:32David Rosenthal?

  Yeah.

• 1:40:33Ben Gilbert?

  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 of smartphone adoption. And the New York Times, not only has their, 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 separate.

• 1:41:02David Rosenthal?

  They don't get to be in the fancy headquarters.

• 1:41:04Ben Gilbert?

  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

• 1:41:48Ben Gilbert?

  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?

• 1:42:03David Rosenthal?

  Yep. And you've now just missed not one, but two technology waves with cable and the internet, you know, arguably. So in 2009 is when the shoe drops. So January 2009, they announce a $250 million debt deal with Carlos Slim, the billionaire, the Mexican billionaire, one of the wealthiest people in the world.

• 1:42:30Ben Gilbert?

  And his primary business telecom, right?

• 1:42:32David Rosenthal?

  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

• 1:42:54Ben Gilbert?

  Whoa.

• 1:42:55David Rosenthal?

  14% interest rate debt, 10% equity of the company, and Slim exercises those warrants over the years.

• 1:43:01Ben Gilbert?

  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?

• 1:43:11David Rosenthal?

  You would pay like 1%, like.

• 1:43:13Ben Gilbert?

  I mean, we are in a zero interest rate environment.

• 1:43:15David Rosenthal?

  Yeah.

• 1:43:16Ben Gilbert?

  Yeah.

• 1:43:16David Rosenthal?

  But I mean, I remember even back then, so I was an immediate investment banker at the time, and I remember doing junk bond deals for like failing movie studios at like, I don't know, call it 6%, 7%, you know, interest rates, like, you know, 14%. Now granted, this was the throes of the financial crisis, but like, that's bad.

• 1:43:40Ben Gilbert?

  And so then mechanically, how does the 10% warrants to buy another 10% of the company work?

• 1:43:47David Rosenthal?

  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.

• 1:44:07Ben Gilbert?

  And so how long does he wait before then deciding, I am going to go pick up another 10% of the times at this attractive price?

• 1:44:13David Rosenthal?

  I think he, I think he waits until the expiry dates, which is a few years later, but he does, he exercises them and, 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 still owns 13, 14%.

• 1:44:29Ben Gilbert?

  Yeah, he's right around there.

• 1:44:31David Rosenthal?

  So kind of like, it's like a Warren Buffett type deal that, 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're 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

• 1:45:12David Rosenthal?

  building. So they just built this damn headquarters building and they sold it to WP Carey 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 exercised. So they now own the building again.

• 1:45:32Ben Gilbert?

  Which we should say, this is actually like one of the savviest investments of all time by the times. Like if you think about this, think about how much New York real estate, especially class A real estate appreciated between 2009 and 2019. And the New York Times sold these floors for only 225 million. And they said, a decade later in 2019, we have the right to buy it back for 250 million. Like that's really not much appreciation. I think, I 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.

• 1:46:14Ben Gilbert?

  Nothing in the market is trading around their building under 1,500 a foot.

• 1:46:19David Rosenthal?

  Wow.

• 1:46:20Ben Gilbert?

  Yeah. They quintupled the value of their holdings. 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. What they basically said was they kind of like owned 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.

• 1:46:52David Rosenthal?

  Yeah.

• 1:46:53Ben Gilbert?

  So savvy.

• 1:46:54David Rosenthal?

  Well, this is what it's interesting to say. 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. They, in July, they sell the radio stations they owned to Disney for $45 billion. Then in 2011, they sell off their regional media group, uh, which is the, all those crazy regional newspapers that they bought for $143 million. In 2011 and 2012, they sell off finally the Red Sox stake for $225 million, the Red Sox and Fenway stake. August of 2012, they sell about.com to IAC for 300 million. And then in 2013, they

• 1:47:31Ben Gilbert?

  They took a little loss on that then?

• 1:47:33David Rosenthal?

  Yep. So they took about a hundred, 100, 125 million dollar 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. It was a lot less than a billion though.

• 1:47:49Ben Gilbert?

  Yeah. And amidst all this, I think by 2013, that three and a quarter billion of revenue that I previously referenced was down to 1.4 billion. Like all these divestitures, not to mention all these, you know, people who are no longer paying for newspaper subscriptions, really starting to dry up that revenue.

• 1:48:05David Rosenthal?

  Yep, yep, yep, yep. So this is when, you know, the narrative of like the Times is effed, uh, is at its strongest, you know, the quote unquote failing New York Times. But, you know, they, these, all these transactions that they do, they're freeing up tons of cash and they're paying off this debt. And so the end of these transactions, they've generated about a billion dollars in asset sales that have all gone to pay down the debt.

• 1:48:40Ben Gilbert?

  That they had taken out primarily to do share buybacks.

• 1:48:43David Rosenthal?

  Do share buybacks. Yeah. Uh, and, um, they're down to just the core New York Times, you know, property, but digital and print. And they're kind of in an interesting position again, that not a lot of people realize. So then the other thing that they do during this time is they finally

• 1:49:04David Rosenthal?

  Get their act together and introduce a paywall, a metered paywall for nytimes.com. Now, here's what's interesting. So they announced in 2010 that they're gonna do this. They give a whole year's notice to the world and then they implemented in 2011.

• 1:49:20Ben Gilbert?

  And people are like, pretty outraged. People are like, you're gonna charge for content on the internet? Like, F you.

• 1:49:25David Rosenthal?

  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.

• 1:50:04Ben Gilbert?

  And I think in year three, they chopped the free articles in half from 20 to 10 that you would get.

• 1:50:10David Rosenthal?

  Yeah.

• 1:50:10Ben Gilbert?

  So they're starting to like, realize, oh, we gotta pull some levers here to make more people subscribe.

• 1:50:15David Rosenthal?

  Yep. More alarmingly, though, as they're implementing this metered paywall, people are going elsewhere for news. So the traffic to the site drops by over half during this time.

• 1:50:28Ben Gilbert?

  This is crazy. And this, so this is, we'll talk about the innovation report in a moment, but this is pulled from the, the very sort of like famous or infamous innovation report. In 2011, they had, I think mid 2011, they had 160 million visitors a month to their website. And by 2013, 80 million. Like, this paywall thing is working-ish for revenue, but boy, is it destroying your traffic.

• 1:50:53David Rosenthal?

  Destroying the traffic. So. Man, things seem bad, right? Then, and they are bad. Enter 2014 and AG, the heir apparent, fifth generation, Sulzberger. 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.

• 1:51:28Ben Gilbert?

  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 metered 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. AG, at this point, I'm not, I'm not sure if people already knew that he was going to be the next publisher, but publishing The Innovation Report definitely catapulted him sort of past and 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

• 1:52:11Ben Gilbert?

  start sort of dreaming up products that could, you know, fix up the New York Times bottom line. And they thought they were going to do this. The New York Times had released an app called NYT Now. So they, they sort of, I mentioned that 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 figuring out, hey, like, how are we going to save the Times? And Sulzberger 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 not-

• 1:52:55David Rosenthal?

  That's what I think was super cool, too. They interviewed people at every other news organization.

• 1:53:00Ben Gilbert?

  Yep.

• 1:53:01David Rosenthal?

  You know, like CEOs of tech companies. Really interesting.

• 1:53:06Ben Gilbert?

  Yeah. What they sort of realized about, I don't know, quarter of the way into doing it is, it is not a new product that we need to launch. We need to completely change the way the New York Times works. And that needs to happen from the place that has the most power in the organization outward. So it needs to come from within the newsroom. And a good example is like, I think it's in the report, they say something like, traditionally, our journalists have thought about their job ending when they click publish, and then someone takes over after that on distribution. We need to be thinking about that that's when the job begins. And that's when you need to, you need to always be authoring with distribution in mind. You need to always be thinking, in what properties is this going

• 1:53:48Ben Gilbert?

  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.

• 1:54:13David Rosenthal?

  Well, it's kind of like a throwback to Adolf Fox, right? Like, you can't, you gotta be a journalist, but you also gotta be a marketer and a publisher. And like, you gotta get the positioning of what you're doing, right? But you also gotta get the distribution, right?

• 1:54:28Ben Gilbert?

  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 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, our competitors, who have way more traffic, and they're referring to BuzzFeed and Vox and all these people by name, who are getting unbelievable amounts of traffic. And the assertion, which is like, at this point, you're kind of head scratching, because you're like, how are you going to do this? They basically have a throwback to the yellow journalism era.

• 1:55:06David Rosenthal?

  And to be clear, I'd like some of the things they reference, like BuzzFeed and others, you know, Ox, Hopping, your posts, a lot of the traffic that they're getting is they're just taking New York Times and other articles and rewriting the headlines and posting them on their own sites. And the New York Times is like, that seems fine.

• 1:55:21Ben Gilbert?

  Right. And what they do here is there's this interesting allegory to the yellow journalism era, where what Sulzberger and the 10, 12 person team sort of assert is if we are willing to step up internally and make big change and bring the right leaders into the newsroom, tech and product and distribution and marketing and growth leaders into the newsroom and adopt them as our own, we think that we can hold our values and grow our subscription business and grow our reach. And it is this like, pretty bold assertion to say like, we're not going to sink to the clickbait level of everyone else. We are going to continue to produce great journalism with an intense focus on integrity and also fix our business.

• 1:56:03Ben Gilbert?

  And it's a little bit, you're reading it like, if, if we didn't know that it worked, you would be reading this thing being like,

• 1:56:10David Rosenthal?

  Good luck.

• 1:56:10Ben Gilbert?

  Good luck, man.

• 1:56:12David Rosenthal?

  Well, and I think the, the other thing that they do, I don't know how much this was, I didn't read the report as closely as, as I know you did, but, um, so I don't know how much of this was in the report versus just they do it. They also kind of like learned the lesson of not missing technology waves. So they launch apps. So in 2014, they launched the New York Times Cooking app, which has become hugely successful, hugely successful. In 2016, they launched the crossword app, which has become hugely successful.

• 1:56:42Ben Gilbert?

  Yeah. The, 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, 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, the cooking, the crosswords, all that stuff.

• 1:57:05David Rosenthal?

  And then the other thing, of course, that they launched, which will lead into the next big tailwind that's helped the Times is the daily. So they launched 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 of this than me and the right way to judge, but I think it's the biggest podcast in the world.

• 1:57:35Ben Gilbert?

  It every single day receives 4 million downloads of its most recent episode.

• 1:57:40David Rosenthal?

  Yeah.

• 1:57:40Ben Gilbert?

  That is crazy town.

• 1:57:43David Rosenthal?

  Crazy town.

• 1:57:44Ben Gilbert?

  They're reaching people that the print reporting could never reach too. 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, you know, 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.

• 1:58:18David Rosenthal?

  Yeah, well, and it's super high margin. All of these businesses, like all this money is dropping straight to the bottom line.

• 1:58:27Ben Gilbert?

  Yeah, although they do have like a 20 something person team producing the daily. So it's like there's material cost to producing that podcast because there's real reporting. And I'm looking at you over Zoom, knowing what our cost structure is.

• 1:58:41David Rosenthal?

  Well, I'm used to running acquired type margins on things, right?

• 1:58:45Ben Gilbert?

  That's right. That's right. If the labor is zero, then it's nice and high margin.

• 1:58:51David Rosenthal?

  Do all our, all our own reporting here at acquired.

• 1:58:54Ben Gilbert?

  Well, if you're going to catch us up to 2016, then there are some other things to say about the times in 2016.

• 1:59:01David Rosenthal?

  Oh, yeah.

• 1:59:02Ben Gilbert?

  Namely around subscribers. So like, like, let's, let's contextualize some of the subscriber numbers so far because I made a little timeline here. So you're right, year one, they did like 400,000 new subscribers, like 2011, not necessarily great. By 2012, that's when they reduced it to 10 free articles. In 2013, the Times announced that for the first time in decades, they made more revenue through subscriptions than advertising. So that's print plus online combined, but like that says a lot about both the decline of the advertising business and the famous line is trading print dollars for digital dimes. And it says quite a bit about the fact that they're growing material revenue.

• 1:59:45Ben Gilbert?

  I think there are hundreds of millions of dollars in revenue at this point in 2013 coming from subscriptions, but still not at 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.

• 2:00:10David Rosenthal?

  Yeah, so this, you know, when we were referring to the failing New York Times narrative that, you know, like it was failing and was so prevalent. Of course, that got taken up by 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 to the New York Times.

• 2:00:32Ben Gilbert?

  That is the ultimate irony.

• 2:00:34David Rosenthal?

  The ultimate irony.

• 2:00:35Ben Gilbert?

  The endless news cycles of insane, what's the best way to describe it? The New York Times, while being berated by this man as being failing, is skyrocketing in popularity and becoming a better business than ever on the fuel of him. Like it is the, the, the paintbrush to paint the canvas of the story is so rich and dripping with irony.

• 2:01:01David Rosenthal?

  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 then last year, 2020.

• 2:01:43David Rosenthal?

  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.

• 2:02:03Ben Gilbert?

  At 2019, completely debt-free.

• 2:02:05David Rosenthal?

  Completely debt-free. They have all of this incredibly high-margin subscription, digital subscription revenue that no other news organization in the world has. You know, they have multiples more subscribers than the Wall Street Journal, which is the...

• 2:02:21Ben Gilbert?

  When you say that no other organization in the world has, so the New York Times, I think today, I think it's seven and a half million new subscribers. The closest one is the Washington Post, was somewhere like two. And then after that, it drops real far. The LA Times has like a half million or less. And like, it goes on and on down from there. And when you look at the number of subscribers that they ever had in print, like ever, in 2002, they had, I think, 1.1 million. The New York Times was the number one print circulation newspaper, at least in America. Only a million subscribers to the print edition. So like, they figured it out and just at the right time.

• 2:03:02Ben Gilbert?

  And then had this friggin unbelievable tailwind happen with the Trump presidency.

• 2:03:07David Rosenthal?

  Yeah. And in the meantime, like you alluded to in the hook at the beginning of the show, they're hiring like all the best journalistic talent in the world to come right at the Times. And they're paying them more than anyone else because they can afford to, because they've got essentially a Netflix-like business model at this point.

• 2:03:29Ben Gilbert?

  Did you know that New York Times' average salary for a journalist is over twice that of the industry average?

• 2:03:35David Rosenthal?

  Yep. It's crazy. I think the, 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?

• 2:03:53Ben Gilbert?

  Yeah, it's definitely to be congratulated. All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 2:04:09David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 2:04:26Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 2:04:41David Rosenthal?

  And that's how you get features that customers love, like Tabular Review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 2:05:05Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 2:05:24David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 2:05:54Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you.

• 2:06:19Ben Gilbert?

  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 some amazing analysis of the times and frankly, makes an amazing bull case that I think we'll cover as we go into bull and bear narratives. But definitely wanted to give a shout out. If you've read the Mind Safety deck, you will recognize a lot of that thinking coming through here as we talk about the times today.

• 2:06:46David Rosenthal?

  Fun fact, Ben, do you know, it's a great blog, both a blog and mind safety has great visualization tools for 13 Fs for hedge funds and various positions that famous fund managers hold. Do you know where the name Mind Safety Disclosures come from?

• 2:07:04Ben Gilbert?

  You asked me this before the show. I do not know.

• 2:07:06David Rosenthal?

  So apparently, I think I saw this on Reddit or somewhere, maybe it was on the site, that I think this was part of the Dodd-Frank legislation. Every company now, every publicly reporting company has to include a section in their regular reporting about their mine safety, like mine, like, like, like a gold mine or like an iron mine, like in the ground, like whether you have a mine or not. So if you go read like the 10K for Google or like Alphabet or Apple or whatever, they're like, they have a section on mine safety. They don't have any mines, but they have to have this section.

• 2:07:43Ben Gilbert?

  That's so good. I wonder if Coinbase is going to have Bitcoin mine.

• 2:07:47David Rosenthal?

  Oh, yeah, that would be amazing.

• 2:07:51Ben Gilbert?

  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 seven and a half million subscribers today. They've stated a goal that in 2025, they want to hit 10 million. Management has since 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 bump, 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, or at least in modern history, and the New York Times was really well positioned to sort of feel that acceleration.

• 2:08:35Ben Gilbert?

  So on, on top of, 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.

• 2:09:07David Rosenthal?

  Well, and 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 accrue to aggregators like Facebook and Google.

• 2:09:26Ben Gilbert?

  Right. Yeah. The New York Times subscription business is actually now three times larger than the advertising business.

• 2:09:32David Rosenthal?

  And it used to be the opposite.

• 2:09:33Ben Gilbert?

  Right, right. Like it's an unbelievable transition from this sort of early 2000s that was just completely flipped. So that, that's interesting to know about the business today.

• 2:09:43David Rosenthal?

  It wasn't even just the early 2000s. I mean, even reading the Gay Talese book, it was in the 1950s and 60s. It was advertising was 3X subscription. Like that was always how it worked.

• 2:09:56Ben Gilbert?

  Right. That was the newspaper business. This, this comes on the back of, I think the years were 2012 to 2015, when they really started to get serious about this. They went to the advertising department and they, they basically rehired everybody. They, they decided that the entire team needed to go, new people needed to come in. They turned over 85% of the 400 person staff with people with digital skills, which is like, to have that big of a turnover like that and say, actually this average, like the ads that we're going to be doing in the future have nothing to do with the ads that we've sold in the past. So we need completely new people to do that. It's just interesting that like, You would do that even when the business is declining so heavily, frankly, because it's still just a big business for the Times. And as they make this transition, that needs to stay a strength.

• 2:10:40Ben Gilbert?

  Like, they need to be a major player in internet advertising, even though their primary business model is now a subscription.

• 2:10:46David Rosenthal?

  Yep.

• 2:10:48Ben Gilbert?

  Other fast facts on the company today. It is 4,300 employees. 1,700 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 Ezra Klein and Kara Swisher and those folks going to the Times. Like, they are just vacuuming up the best journalism talent and frankly, paying them very well for it. The Times did, we mentioned that 1.8 billion number. That stayed fairly flat over the last several years in their top line revenue. They're seeing of that 250 million in operating profit.

• 2:11:32Ben Gilbert?

  Again, also kind of flat right now, probably related to the pandemic.

• 2:11:36David Rosenthal?

  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.

• 2:11:49Ben Gilbert?

  Yes, so we should hold that for one moment. And I'll just put a pin in sort of, I guess, articulating the scale of the Times today. Their subscriber base, so we talked about how they're killing it and it's not even close. They have more digital subscribers than the Wall Street Journal, the Washington Post and the 250 local Gannett papers combined.

• 2:12:10David Rosenthal?

  Wow.

• 2:12:11Ben Gilbert?

  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.

• 2:12:27Ben Gilbert?

  Wild, right?

• 2:12:28David Rosenthal?

  Totally wild.

• 2:12:29Ben Gilbert?

  I mean, that makes BuzzFeed, Gawker, Recode, Quartz and Vox on the list of publications whose editors now work at The Times. They have just, 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 toughen it through, the, the Washington Post under, you know, Bezos's funding. And

• 2:13:11Ben Gilbert?

  there's just really not that many more that, that look like The Times.

• 2:13:16David Rosenthal?

  Well, it's such a, well, we'll save this for playbook, but like the nature of the internet economy, winner take all businesses.

• 2:13:27Ben Gilbert?

  Yeah. Winner take all and yet globally addressable niches for low cost structure businesses on the other side.

• 2:13:34David Rosenthal?

  Yep.

• 2:13:35Ben Gilbert?

  So I think this is a good place to transition into narratives and the narratives for this company, it's not as clearly bifurcated as it would be on an IPO episode where we're saying, here's the reasons to be bullish, here's the reasons to be bearish. There's sort of an interesting spectrum that we're going to go across here on why would you be bullish on The Times and why would you be bearish? So the first bull case, Meredith Kopit-Levien, 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 new subscribers, it includes the digital only, non-news, you know, it includes the, the print subscribers. We think that there's 100 million English speaking people

• 2:14:21Ben Gilbert?

  who are willing to pay for news. So we think our TAM is like, you know, 15x or something like that, 13x what, what, what we're at today. So it's fast growing and it's large.

• 2:14:32David Rosenthal?

  And that's sort of like ipso facto must be the TAM because you wouldn't be growing that fast at these large numbers if the market wasn't that big. Like if you were starting to run out of the market, you wouldn't be adding customers that fast.

• 2:14:46Ben Gilbert?

  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 mind safety disclosures. They make

• 2:15:29Ben Gilbert?

  the point that with newspapers, the New York Times costs were largely variable. That is, they increased in proportion with the number of papers produced and sold. But with digital subscriptions, most of their costs are fixed. That is, they don't increase as the New York Times adds more subscribers. So you think about this, sure, their revenue is flat, but they're switching out their cost structure from one that's delivery trucks, that's a physical paper, that's printing presses, to this one that actually looks a lot more like Netflix, where you 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,

• 2:16:11Ben Gilbert?

  you have content costs, you have fixed costs, you have your variable costs on top, but your revenue is not actually connected to any of those. Your revenue is actually connected to your audience. And the reason to be really excited right now is that the Times is in a place where they're just about to sort of like outrun all those sort of fixed costs and be in this super high margin territory where the audience is like so large that they really don't need to grow their costs at the same rate that they're growing their expenses.

• 2:16:40David Rosenthal?

  Oh, it's just like, we'll discuss this in Powers, 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, you know, millions of subscribers. So like, something just like Netflix can pay $100 million for a piece of content, amortize it across their, you know, many, many, many times more subscribers than Peacock. Same deal, same dynamics here.

• 2:17:09Ben Gilbert?

  Yep. And it's almost like that's like someone's been holding up a sheet in front of the business while it's been like completely reorganizing itself on behind. And you're like, what do you mean? The sheet's still the same size. It's like, yeah, but you don't know what's ready to run through it.

• 2:17:22David Rosenthal?

  That's such a good analogy. I love it.

• 2:17:25Ben Gilbert?

  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 the 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, 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.

• 2:18:02David Rosenthal?

  Yep. Yep. That's, that's such a good point. Like, nobody, probably not even Kara Swisher as much leverage as she does have. She's not going to be able to go to AG and say, hey, you just added 2 million subscribers this year. I need some percentage of that.

• 2:18:22Ben Gilbert?

  Right. No one's got a revenue share deal with the Times as in their employment contract. But I mentioned this was sort of a bothy, a bear case, bull case. My verdict is still no, that the New York Times is not a tech company. And even though the business profile and the, the sort of dynamics that we just described definitely make it look that way. The organization with power inside this company is still in the newsroom. Much like Facebook has sort of products, Apple has designers, Microsoft has PMs, Google has engineers, the New York Times has journalists at its core with all the power. And they've sort of brought in lots of people to sort of be a part of the newsroom. But like, when we talked earlier about sort of the business side being all non-journalists, there's still

• 2:19:06Ben Gilbert?

  something to the fact that like, the most important thing to the Times is their brand, their objectivity, their ability to sort of like be discerning in this world. And so where you have things where a tech Company would be being like, whoa, we have the number one podcast. Let's launch 30 podcasts or like, whoa, like a lot of people like our cooking app. Let's launch like 10 other experimental apps or like, huh? The game, the, the crossword's going well for games. I guess like, let, let's try and be Zynga. Like, let's try and like, do a ton of crazy data science and launch a bunch of games. And it's like, it's happening over the course of years instead of months. And they're not like, running hard into these opportunities that I think you would sort of see

• 2:19:51Ben Gilbert?

  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.

• 2:20:08David Rosenthal?

  Totally. I mean, I think it gets back to the, um, literally, as we told in the history, baked into the immutable mission of the trust and the company, which is to continue to serve as an independent newspaper, entirely fearless, free of ulterior influence, and unselfishly devoted to the public welfare as a news organization. Like, that is what they are. That, that is undeniable.

• 2:20:39Ben Gilbert?

  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, they, they have systematic things holding them back from behaving like a startup. Another bear case to make is that while subscribers are up, we've talked a lot about their subscriber numbers. We haven't been talking about or nearly as much about their subscriber revenue, because it is not growing as fast. In fact, their revenue per subscriber is going down.

• 2:21:21Ben Gilbert?

  And if you hear them talk on earnings calls, they assert things like it'll be, you know, we'll, we'll actually start increasing it again by the second half of 2021. They'll say things like, um, those are promotional discounts that we use to get people in. And then, once they turn into second, third, fourth year, you know, paying time subscribers, you'll see that that start to meaningfully change. We just don't know if that's true yet. It's, it's very plausible, but right now, revenue definitely is not tracking subscriber growth.

• 2:21:47David Rosenthal?

  It's interesting, right? That's a tried and true old school newspaper tactic, right? Of like, you know, you subscribe to the local newspaper for X price for first year and then, yeah, then we'll raise.

• 2:22:02Ben Gilbert?

  Get the Times for only a dollar a week.

• 2:22:04David Rosenthal?

  Yep, exactly. But the jury is still out about will this work in a digital environment where it's not while, as we've discussed, there are some monopoly like factors here in that like, nobody else has a journalistic organization like the Times or the number of journalists or the reach or the content that they're producing. There are, it's not like a geographic monopoly, like the old school newspaper business, where you're either getting the Times or you're getting no news. There are other places everyone can go on the internet.

• 2:22:39Ben Gilbert?

  Yep, for sure. Another bear case to make, because in my bull case, I started painting of why this is an even better business than Netflix. The Times has seven and a half million paying subscribers. Netflix has 200 million paying subscribers. The Times estimates that their total addressable market is half of Netflix's current subscriber base. Like, just to contextualize that, I 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 there, or from a subscription price perspective, they're they're very comparable. But the Times, yeah, estimates that its addressable market

• 2:23:24Ben Gilbert?

  is half of Netflix's current market. So when you're thinking on the scale of sort of the FAANG type companies, the New York Times is never going to be that. Not that they aspire to be that, but that is in no way the scale that we're talking about here, even though they have these sort of tech company cost structure dynamics that they're that they're shifting to.

• 2:23:43Ben Gilbert?

  The next bear case, I think that's a reasonable one to paint is this is sort of the classic Ben Thompson point is there's kind of a conflict here between their business model and their stated mission, where if you're really going to be the paper of record, and you're really going to be the paper for everyone, the authoritative source, your business model actually should not be to get a small number of people to subscribe to you. It should be to get your content to the largest number of people in America, in the world, and not limit your reach at all by your business model. I mean, the, the, the argument that if you were a bear, you would make here is subscriptions

• 2:24:25Ben Gilbert?

  are for niche providers. Like you should be figuring out how to run a successful advertising based, open publication for the internet. If, if what you really want to do is be the neutral sort of paper of record, because what you're doing creates an incentive for you to create strong affinity with a certain group. And whether that group is liberal subscribers, or people who don't like the president, or whoever you think they've attracted over the last few years, the New York Times, without a doubt, in this business model, has every incentive in the world to identify a sort of large niche and create high affinity among that niche. And that may not necessarily align exactly with pure journalistic neutrality.

• 2:25:10David Rosenthal?

  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.

• 2:25:27Ben Gilbert?

  Really?

• 2:25:28David Rosenthal?

  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- Using the Times as their main news source because it had this index and that then they would get into schools and then they would get, you know, 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

• 2:26:12David Rosenthal?

  the elites in like of researchers and academics and schools. And, but yeah, it's interesting.

• 2:26:19Ben Gilbert?

  Yeah, David, it's interesting. Like this, this really raises the point of to be subscriber only, really, your motivation is to create really strong affinity from someone such that they're willing to pay for your content. And you could do this by being really niche. But the question is, is there room for sort of one subscription in everybody's media diet, where the way that you're creating that really strong affinity is by saying, we are just the highest quality, most neutral journalism that you could find. Does that stimulate a buy decision in the same way to that going to someone and saying, I'm going to appeal to all of the biases

• 2:26:59Ben Gilbert?

  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?

• 2:27:14David Rosenthal?

  That's interesting. I don't know. I mean, I, my mind goes back to the Fox News discussion, right? Like, I don't think anybody would argue, maybe, maybe some people will, maybe we'll get emails and comments in the Slack. But I don't think anybody would argue that Fox News has a target niche demographic of political conservatives.

• 2:27:36Ben Gilbert?

  Right. It depends on your definition of niche. It's a huge freaking niche.

• 2:27:39David Rosenthal?

  Well, right. That's the thing. It's a huge frickin niche. And, you know, even with that business strategy, they've built a $5 billion, 50% EBIT margin business.

• 2:27:51Ben Gilbert?

  Right. And I guess the question I'm, I'm really driving at here is can you similarly get people to fork over their money for neutrality and as driving them away that they're willing to? And again, the people aren't, I don't think they're subscribing to Fox News. Well, I guess they're subscribing through their cable bundle, but they don't know.

• 2:28:07David Rosenthal?

  Yeah, they don't, well, they're paying for it, whether they know it or not. Yeah.

• 2:28:10Ben Gilbert?

  Yeah.

• 2:28:11David Rosenthal?

  So it's a good question. Certainly. Yeah, I think the.

• 2:28:16David Rosenthal?

  Times would probably argue and maybe believe certainly some people there I think would believe that that is what they're trying to do of like be the neutral, you know, highest quality news source across lots and lots of topics and that that's worth paying for. You know, I don't know, but I suspect certainly a large portion of the gosh, what'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.

• 2:28:55Ben Gilbert?

  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.

• 2:29:13David Rosenthal?

  Yep.

• 2:29:14Ben Gilbert?

  And there are the, the class of people who are saying that have their own bias. So when they say that I know I can trust, like it is inherently loaded language because you are more likely to trust something that sort of represents the point of view that you want. Like it is impossible to be completely unbiased in reporting anything because you get to choose what to report. Not like at the very core, that's, that is true. But yeah, I just, it is, it is a really fascinating thing to try and understand all of the incentives of a subscription based model and figure out if that jives with the mission.

• 2:29:48David Rosenthal?

  Yep.

• 2:29:49Ben Gilbert?

  Okay. So that's sort of barren bull. I, 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 the 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, 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

• 2:30:31Ben Gilbert?

  flat the last few years and it's fell over 50% from their glory days in the early 2000s. So in some ways, it's like a high growth company by looking at just subscribers. Certainly not, though, on total revenue and geez, their revenue glory days may have been behind them. So like, if you're only looking at the surface level like this, you're going to get really disappointed unless you're sort of believing the narrative that I mentioned earlier about you're holding up the sheet and they're fully reshuffling their cost structure underneath of it and they're sort of ready to explode in profitability coming out of this full rearrangement of the business.

• 2:31:08David Rosenthal?

  Yep.

• 2:31:09Ben Gilbert?

  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' business in the last five years. And like, I have been all on board in this subscriber growth story and it is just crazy to like zoom out with a little bit longer lens and be like, they used to make way more money.

• 2:31:26David Rosenthal?

  Yeah.

• 2:31:28David Rosenthal?

  Yeah.

• 2:31:29Ben Gilbert?

  All right. You want to talk about power?

• 2:31:30David Rosenthal?

  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.

• 2:32:14David Rosenthal?

  This is a super interesting one for the Times.

• 2:32:16Ben Gilbert?

  Totally. This is one like I, 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.

• 2:32:29David Rosenthal?

  Ooh, I like it. I like it.

• 2:32:31Ben Gilbert?

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

• 2:33:16David Rosenthal?

  Yep. Well, and it's, you know, the canonical test is the same product. If it had a different name on the masthead, in this case, would you value it differently? Yeah, 100%. There could be the exact same word for word article in different places and it would be valued differently. Yeah, this is, this might be the clearest, I think, example of brand power that we've had on the show thus far.

• 2:33:39Ben Gilbert?

  Right. Like, I pay for the New York Times. If it was a different masthead and it was all the same articles, like, I probably wouldn't be paying for it.

• 2:33:46David Rosenthal?

  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 and 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.

• 2:34:31Ben Gilbert?

  Yep. Total classic example. Is there anything else in here?

• 2:34:38David Rosenthal?

  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.

• 2:35:03Ben Gilbert?

  Stewarded by a family, by like a single sort of, you know, shared value set of people.

• 2:35:09David Rosenthal?

  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 either start individual sub stacks or a competing organization, I still don't think it would be the Times. Now, some of that is maybe branding, but even just like the process of creating the paper that there you know, what once was a physical paper and now is a continuously updated digital masthead every day.

• 2:35:46Ben Gilbert?

  Or as they would call it, the daily report.

• 2:35:48David Rosenthal?

  Yep. I think there may be some process power here.

• 2:35:52Ben Gilbert?

  Interesting. Hard to know without looking under the hood, but I think it's a reasonable, reasonable guess.

• 2:35:57David Rosenthal?

  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, Gay Talese writes about it in the book. Like it's a miracle that the paper happens every day and that the website updates every day and nobody who's part of it can kind of fully explain it, but like somehow, everybody comes to work every day and like stories get published and edited and like it happens.

• 2:36:30Ben Gilbert?

  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 3,000 people to all lock their code in 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.

• 2:36:51David Rosenthal?

  Yep. Okay, cool.

• 2:36:54Ben Gilbert?

  All right.

• 2:36:54David Rosenthal?

  I don't think there are any others.

• 2:36:56Ben Gilbert?

  No, I think this is pretty clear cut. All right, into playbook. Well, the very top one for me is something we've talked about already on this episode, but is 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.

• 2:37:39Ben Gilbert?

  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.

• 2:37:53David Rosenthal?

  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.

• 2:38:12Ben Gilbert?

  Yep. And the New York Times has their own version of the Bob Iger three-point plan of, what was it, original content, internationalization, and then embracing the digital strategy. And, you know, you, you could make an argument that the Times is kind of doing the same thing. It's the best original content in the news world. 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 that right now they're constraining their TAM to the English-speaking market, but they have a clear eye on international. And, and they certainly have reoriented around being digital first and embracing technology to not only distribute the news, but report the news.

• 2:38:56Ben Gilbert?

  Starting with Snowfall in 2014, you know, the Times produces some just amazing visualizations along with their pieces.

• 2:39:05David Rosenthal?

  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, in the US, all around the world, certainly here in San Francisco and Silicon Valley, in Seattle, right? We know there are

• 2:39:45David Rosenthal?

  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.

• 2:39:59Ben Gilbert?

  Absolutely. What do you have next?

• 2:40:02David Rosenthal?

  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 OX, right? Like, and particularly the moments where, like, it's back against the wall and you have to make something happen with no resources. And that has happened so many times at the New York Times, but particularly with OX, you know, that's just when the entrepreneurial magic happens. And for an institution like this, like, we all think of it as the great lady, the venerable New York Times, it's been around

• 2:40:45David Rosenthal?

  for 170 years, but like, it too started in the same way that so many great startups start.

• 2:40:52Ben Gilbert?

  Yeah. Yeah, I love that point.

• 2:40:56Ben Gilbert?

  There's a thing that we built 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 in the Daily Report, look at where all those

• 2:41:35Ben Gilbert?

  companies are today. Like, none of them worked. And Vox is sort of the closest in having a successful set of media brands underneath it. But for the most part, they got washed out. And AG and the family's insistence on the core values that endured for 160 years before, and now have endured another 10, I mean, they almost got destroyed in not 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

• 2:42:15Ben Gilbert?

  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.

• 2:42:26David Rosenthal?

  Yep. 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 organizations.

• 2:42:54Ben Gilbert?

  It's funny, BuzzFeed is actually doing well, so we keep throwing them under the bus.

• 2:42:57David Rosenthal?

  Not to pick on them, but as a, 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 arbitrage away. Whereas producing the content is, if it's good quality content, is going to be valuable. The other one it reminds me of is, you know, dual revenue streams, man. Like, that was the magic of the media business was subscription and advertising revenue. And all the great media businesses have that, whether it's cable, whether it's news, and now whether it's streaming video as well. So, you know, we have it at acquired, like podcasts have it.

• 2:43:40Ben Gilbert?

  I was gonna, I was wondering if it was too cheeky to be like, yeah, all the great business, media businesses acquired.

• 2:43:45David Rosenthal?

  Yep. Greatest of all media businesses.

• 2:43:50Ben Gilbert?

  Well, I mean, to that point of revenue diversification, there's definitely something here about them, not quickly, but getting into this non-news digital revenue. They did grow the cooking and crossword apps by 60% last year to 1.6 million subscribers. They also nestled in here, a thing we didn't talk about, in one of my very favorite companies, which is now one of my very favorite New York Times media properties, is The Wirecutter.

• 2:44:13David Rosenthal?

  Yes.

• 2:44:14Ben Gilbert?

  Like, 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 Wirecutter for only $30 million and now gets $50 million a year of high-margin revenue out of it, out of the affiliate legs.

• 2:44:27David Rosenthal?

  Holy crap.

• 2:44:28Ben Gilbert?

  It's a great freaking acquisition. And the New York Times-

• 2:44:31David Rosenthal?

  $50 million a year in affiliate revenue?

• 2:44:34Ben Gilbert?

  Yes.

• 2:44:34David Rosenthal?

  Wow.

• 2:44:35Ben Gilbert?

  I mean, they took it from an electronics thing called The Wirecutter, plus The Sweet Home, which was for home gear, and they said, we're dumping the Sweet Home brand, and The Wirecutter is now The Wirecutter for everything. And I think they're going to try and, like, you know, make it sort of the new Consumer Reports, including something they foreshadowed on the earnings call, a digital subscription. And I don't know what the heck that's going to look like yet, because I don't know, like, exactly how that would work. But that's an interesting business for them to be getting into, too. So they've, I would say the last five to eight years, their investments and acquisitions have been much, much smarter than in the previous decade.

• 2:45:12David Rosenthal?

  Yeah, The Wirecutter is about.com done right.

• 2:45:16David Rosenthal?

  Whoever's doing capital allocation now is much better than

• 2:45:22Ben Gilbert?

  Yeah, well, the internet's a mature place. Like, we understand business models on the internet better now.

• 2:45:26David Rosenthal?

  Yep.

• 2:45:27Ben Gilbert?

  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. And 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. So the Times is like, sure, we'll keep printing your paper, but the average annual subscription is like 700 bucks. And for the like 800,000 people that are still getting the Times delivered, that's what they're paying. And so the revenue from paper subscriptions has stayed like relatively flat because the willingness to pay among the core group that's holding on keeps going up. And I think that's just a great strategy by the Times to like, just

• 2:46:12Ben Gilbert?

  get the most that they possibly can out of a very large continuing revenue segment while they shift their business.

• 2:46:18David Rosenthal?

  That's interesting. 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

• 2:46:28Ben Gilbert?

  Yep.

• 2:46:29David Rosenthal?

  to my digital subscription. It's wildly expensive.

• 2:46:31Ben Gilbert?

  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.

• 2:46:40David Rosenthal?

  But like, I could totally see like, if that were a habit, I would probably pay a huge amount of money for it.

• 2:46:47Ben Gilbert?

  Yep. Well, the last one, at least from me, is that I think you made this point in 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

• 2:47:33Ben Gilbert?

  like before your total addressable audience, market, whatever, was confined to some geo. And now it is whoever loves.

• 2:47:43Ben Gilbert?

  You know, your thing anywhere in the world and it's just a magical, magical thing.

• 2:47:47David Rosenthal?

  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.

• 2:48:05Ben Gilbert?

  I mean, that, 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.

• 2:48:14David Rosenthal?

  Yeah.

• 2:48:14Ben Gilbert?

  You can totally see how that happened.

• 2:48:18David Rosenthal?

  What does that say about today?

• 2:48:20Ben Gilbert?

  Ah, no kidding.

• 2:48:22David Rosenthal?

  All right. Should we move on to value creation, value capture?

• 2:48:25Ben Gilbert?

  Let's do it.

• 2:48:26David Rosenthal?

  All right, listeners, now is a great time to talk about one of our favorite companies, Statsig.

• 2:48:33Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig. Whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 2:48:44David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 2:49:04Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags and product analytics into one unified system. So teams can ship safely, test rigorously and directly link what they changed to how users actually behaved.

• 2:49:16David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 2:49:27Ben Gilbert?

  All right. Value creation and value capture, 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 like 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

• 2:50:11Ben Gilbert?

  to do about it and paralyzed. Today, it's a very different story. It's still not an A+, but they've sort of laid the foundation for you to believe how they could be very profitable in the future.

• 2:50:21David Rosenthal?

  Yep. 100%, 100%.

• 2:50:25Ben Gilbert?

  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 you then you look at their market cap and you're like, wow, this company managed to be like a hundred billion dollar company or whatever it is, creating and destroying a mixed amount of value along the way. The New York Times is the opposite of that. They are, they're capturing in their market cap, what is it, four or five billion dollars? And the amount of value they've created for the world over their 170 years is unbelievable.

• 2:51:09Ben Gilbert?

  They have been a pillar of a functioning society. Like, the work that they've done has been, I don't think it's crazy to overstate it, like, certainly influenced the way that our society developed and without institutions like them, we probably wouldn't sort of have the functioning society like we have today.

• 2:51:27David Rosenthal?

  I mean, again, 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 2X the number of any other organization in the world. And two, you know, we didn't talk about things like the Pentagon Papers.

• 2:51:49Ben Gilbert?

  Right.

• 2:51:50David Rosenthal?

  But this organization and journalists within it throughout history have literally put their health, safety, livelihood, lives on the line to report on important things that are happening in the world and to call out abuses around the world. Pentagon Papers situation was crazy, like and ended up in conjunction 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.

• 2:52:29Ben Gilbert?

  Yep. Yep. All right. Should we get into grading?

• 2:52:32David Rosenthal?

  Let's do it.

• 2:52:34Ben Gilbert?

  Well, I think the way I agree, this one is forward looking. What's an A plus? And this of course is a business outcome. What's a, what's an F? And then what's kind of the C scenario? To me, the A plus is that they are literally at the inflection point where they don't need to hire many more journalists, many more engineers, many more designers. I know they, they are still hiring aggressively for these roles, but where they, they start to kind of taper in the fixed costs required to produce what they produce. And they're able to just turn on a machine to continue acquiring subscribers, which is a little bit of a risk to me because while we're still in a fast news cycle environment, we no longer

• 2:53:19Ben Gilbert?

  have the Trump presidency. Hopefully we won't have the coronavirus soon. Like God willing, 2022 is a, a week can go by and I'll forget to check the news and it'll be awesome. And that will be great for the times. Like it's worth calling out that is counter to their interests.

• 2:53:33David Rosenthal?

  I've been thinking about that though. I don't think that's likely to happen anytime soon.

• 2:53:39David Rosenthal?

  Look at how crazy 2021's been.

• 2:53:41Ben Gilbert?

  Yeah.

• 2:53:42David Rosenthal?

  I've been literally just like thinking about this for like my own life and sanity. I think we just got to accept that we live in a world of accelerating change, which means lots of frequent disruptions of all types, all of which is probably good for the news business.

• 2:54:01Ben Gilbert?

  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.

• 2:54:32David Rosenthal?

  Literally all over the place.

• 2:54:34Ben Gilbert?

  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, you know, 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 hire, you know, Google levels of people and go build more and more stuff than double down on what's working.

• 2:55:01David Rosenthal?

  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. You know, that's all.

• 2:55:16Ben Gilbert?

  It's been underwhelming.

• 2:55:17David Rosenthal?

  It's been very underwhelming and like, you know, we've 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.

• 2:55:34Ben Gilbert?

  Yeah. So then, you know, the C case, I think is, is very much this like new subscriber taper off.

• 2:55:40David Rosenthal?

  I think there's one more, one more piece to the A plus case, which is they have to increase ARPU for subscribers.

• 2:55:49Ben Gilbert?

  Certainly. Yeah. Yeah. They need to prove that people year two and three are willing to make a, and it's a big jump too. It's not a little, this introductory pricing is way cheaper than your two and three pricing. So what do you think the F case is? How do they, how does this not work?

• 2:56:08David Rosenthal?

  They rebuy the Red Sox?

• 2:56:12Ben Gilbert?

  And what is a reasonable way that this could go super south?

• 2:56:16David Rosenthal?

  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. Like that's unlikely to happen, very unlikely to happen.

• 2:56:38Ben Gilbert?

  Facebook's even paying them for content now. They do have a deal.

• 2:56:42David Rosenthal?

  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.

• 2:57:10Ben Gilbert?

  Right.

• 2:57:10David Rosenthal?

  And that is just an untenable position.

• 2:57:14Ben Gilbert?

  It's so funny. Like even today, I always thought it was a widely held belief that the New York Times, at least during the Trump presidency was moderately, that a common perception is that it's left leaning. And this person who is left leaning was like, what do you mean? Like they published that terrible op ed with that.

• 2:57:31David Rosenthal?

  The Cotton.

• 2:57:32Ben Gilbert?

  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 of what you're talking about. What if the, you got to pick and, and there is sort of less room to be a, or at least have a large addressable market as sort of a, someone who's trying to be a centrist.

• 2:57:52David Rosenthal?

  Yep. I hope that's not the case.

• 2:57:55Ben Gilbert?

  Yeah, me too, for all of our sake.

• 2:57:57David Rosenthal?

  Yeah.

• 2:57:59Ben Gilbert?

  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 10x their trailing 12-month revenue. And the New York Times is only trading at about 4.8x, trailing 12 months. And certainly, if you look at revenue growth, the New York Times doesn't deserve to be anywhere close to Netflix. But if you're looking at digital subscriber growth and a very similar business model, albeit probably smaller TAM, it is interesting to see that the New York Times is on a sort of relative basis, definitely undervalued compared to Netflix.

• 2:58:38David Rosenthal?

  I would assume the subscriber growth rate is higher than Netflix.

• 2:58:42Ben Gilbert?

  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...

• 2:58:56David Rosenthal?

  This past year, they grew subs like 48%.

• 2:58:59Ben Gilbert?

  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.

• 2:59:11David Rosenthal?

  Yeah, interesting.

• 2:59:13Ben Gilbert?

  So just, just thought that was an interesting one to point out. All right, carve outs?

• 2:59:17David Rosenthal?

  Yeah, carve outs. We haven't done carve outs in a while. We had, we were worried, you know, we're doing these such super long episodes now. We're like, God, people don't want to listen to carve outs at the end. But we've been surprised. People want the carve outs.

• 2:59:29Ben Gilbert?

  We got a lot of pushback. Yeah.

• 2:59:30David Rosenthal?

  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 carve out is a really great fantasy series, book series that I read recently, Saba Tahir's 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 knockoff-y, but my wife Jenny had read the series and she was 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. A really good world building, very cool, sort

• 3:00:12David Rosenthal?

  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. Highly recommend.

• 3:00:25Ben Gilbert?

  All right. Man, I haven't, it's funny. I haven't read fantasy in so long.

• 3:00:30David Rosenthal?

  So I find it like a really good way. Fantasy and sci fi just last couple of years, I found like the best way to unwind at night and on the weekends. Cause like, yeah, just get away.

• 3:00:42Ben Gilbert?

  All right. Well, my, my first carve out is going to be the opposite of a way to unwind. It is the book Titan by Ron Chernow.

• 3:00:52Ben Gilbert?

  It actually felt a lot like researching this episode. It is the history, sort of the, the most recent, I think biography of John D Rockefeller and the entire story behind Standard Oil. The book was nothing like I expected it to be. I heard it recommended 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,

• 3:01:33Ben Gilbert?

  and not in two chapters of his life, simultaneously during his entire life, being just ruthless in the business practices and being puritanical in his religious beliefs and, and absolute devotion to God and to, he, he somehow thought it was his God given right and something that he needed to do to make the most money possible and then give it away in the way that he saw fit. And he did like the, we, modern medicine, no chance that it would be where he is today, absent the absolute monopoly and absolute anti, anti-competitive practices of Standard Oil and the railroads. It's just so interesting.

• 3:02:14David Rosenthal?

  He started Rockefeller University, right? Which is a

• 3:02:16Ben Gilbert?

  Yep.

• 3:02:17David Rosenthal?

  research institution in Manhattan.

• 3:02:19Ben Gilbert?

  New York. Yep.

• 3:02:19David Rosenthal?

  That has developed many, I think it's all PhDs and postdocs, right?

• 3:02:26Ben Gilbert?

  Sounds right. He also is the founder of the University of Chicago and left his No way. name completely off of it. Yeah.

• 3:02:31David Rosenthal?

  I didn't know that.

• 3:02:32Ben Gilbert?

  And he put it there specifically because he was like, I don't want this to be intermixed with my business practices and everyone, you know, if I, if I put it in Manhattan or Cleveland, people will think I'm using it for influence.

• 3:02:46David Rosenthal?

  Interesting.

• 3:02:47Ben Gilbert?

  That's totally, totally fascinating.

• 3:02:49David Rosenthal?

  That's wild.

• 3:02:50Ben Gilbert?

  It's a long book. It's really good. Ron Chernow, for folks who don't know, also wrote the book that Hamilton, the musical is based on. And actually, when I referenced JP Morgan earlier, and I say he shows up in all these stories, I was just reading about him showing up in Titan as well. So can't, can't recommend it strongly enough. I also have one more carve out that I want to throw in.

• 3:03:11David Rosenthal?

  Bonus carve out alert.

• 3:03:13Ben Gilbert?

  Great company that we invested in from PSL Ventures called Iteratively, launched and announced their funding and 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 U and user logged in instead of a lowercase u. 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

• 3:03:56Ben Gilbert?

  testing really seriously. Like, you can't ship a bug. You can't, you can't check in something to the, the code repository that has a, that basically that won't build. So why should you be able to check in a bug in your analytics? And if we can sort of enforce that, then let's take our analytics as seriously as we take, you know, bugs. And it leads to all types of cool stuff like, well, I'm, I can go on forever. Super excited about this company. Check it out, iterative.ly.

• 3:04:23David Rosenthal?

  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.

• 3:04:32Ben Gilbert?

  Yep. A year and a half under my hat.

• 3:04:35David Rosenthal?

  Yeah, man.

• 3:04:37Ben Gilbert?

  Well, let's see. Listeners, I think that brings us to a close of.

• 3:04:43David Rosenthal?

  Should we do another hour, just to be sure?

• 3:04:46Ben Gilbert?

  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 the 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. And as a bonus, when you sign up, you'll also receive the written playbook from each episode where we codify the takeaways in some bullet points that you can, you can share with friends or that you can sort of search your email for to reference for easy

• 3:05:29Ben Gilbert?

  findability if you want to remember something that we pointed out in an episode. If you love Acquired and you want to be a deeper part of what David and I do here, you should become an Acquired limited partner. You'll get access to our library of over 50 interviews and deep dives on company building topics, our monthly Zoom calls, which was great to do a few weeks ago. So, so fun to see so many of you. And you'll get live access to listen in when we record big events like emergency pods and our book club discussions with authors. Most importantly, though, this is like my favorite thing about what this show has become. You'll become part of the Acquired community. We've been amazed by the caliber of the people and the insights on our LP calls. And it's just so clear to David and I that we have the greatest audience in the world

• 3:06:12Ben Gilbert?

  from young people just starting their careers to CEOs and top executives who are running hundred billion dollar companies, general partners at venture and investment firms of every size around the world. People have made friendships, gotten jobs, raised capital, launched new careers, even met co-founders through the Acquired community. So if you are not already an LP, click the link in the show notes. Go to acquired.fm/lp. Can't wait to see you.

• 3:06:38David Rosenthal?

  It's pretty cool. We've got some like mafias forming of acquired LPs and community members at different, pretty hot startups around, I was gonna say around the Bay Area and Seattle, but really around the world. Yeah, around the internet.

• 3:06:54Ben Gilbert?

  Absolutely, absolutely. Well, if you aren't subscribed, this is maybe your first episode and you like what you hear, you should. If this is something that you've liked for a long time and you've been waiting for that right episode to share with someone. For example, I'm sharing this episode with my grandma. She expressed interest in listening. Anybody who cares about journalism, The Times, the media landscape, please share. And of course, of course, one to one is great. Of course, sharing on the internet is great. You can tag us at AcquiredFM on Twitter if you do so. And we appreciate anything you do to bring new folks to the show. With that, we'll see you next time.

• 3:07:33David Rosenthal?

  See you next time.