The New York Times Company put out a press release this morning announcing its earnings.  Quite a sad situation, the Grey Lady is dying and if they don’t figure out some massive change there will be some type of forced restructuring.

On the positive side, their internet revenues grew 6.7% to reach $87 million.  The bad news, however, is the continued plunge in print advertising which was down by 15.9%.  The net result is that overall revenues dropped by 8.9% to $687 million.  They have cut costs by 6.7%, but the death spiral continues.

According to Henry Blodget of Silicon Alley Insider they only have $46 million in cash left.

At the end of the quarter, cash and cash equivalents were approximately $46 million and total debt was approximately $1.1 billion. The Company’s current source of short-term funding is its revolving credit agreements under which it had approximately $398 million in borrowings outstanding at the end of the quarter.

So what should they do?  A reporter from ZDNet suggests that they should talk to Yahoo, which might be interesting way for Yahoo to tank further.  No, I don’t think that’s the way to go.

What the NY Times needs to do is to start thinking about radical innovation.  They need to think so completely differently about their business that they may not be able to do it.

They need to start thinking about how they increase their productivity by 50 to 100 times (note: not percent, but a multiple of 50 to 100 times their current output with the same cost structure).   At the same time, they need to be thinking about how they increase their exposure by the same multiple of  50 to 100x.  They need to be thinking about how they become a news gathering and distribution platform for the web.  They can’t do it alone, but if they embrace their audience and open their content they might have a chance.  It will take radical innovation, but that’s what they need.

Saturday’s NY Times Television story, You’ve Seen the YouTube Video; Now Try the Documentary, describes a viral video’s journey from YouTube to National Geographic Channel.  It’s an extraordinary video of a herd of buffalo fighting off a pride of lions and a croc to save one of its calves, and the video’s adventure is almost as fascinating as the battle footage, with its viral popularity and National Geographic’s interest triggered by an incidental upload to YouTube because it was cheaper and easier than burning a DVD and mailing via USPS.

Battle at Kruger – YouTube Video

The New York Times story speaks to the growing power and influence of the internet and YouTube relative to broadcast television.  But there’s also a meta-story that reinforces the challenge that traditional media companies face as they come to terms with the internet.

The print world has been forced to open up its content to the online world.  Readers who want online news content will find it, and the print ad revenue those readers used to bring with them is being replaced by smaller online ad revenues.  The only choice for newspapers has been to keep at least the online ad revenue by opening up their content and maximizing monetization, or to let their competitors take all the revenue from them.

So nytimes.com, the only way I read that paper, carries the full story online, accompanied by beautiful hires images and an unfortunately no longer functioning link to the original YouTube post.  Someone in nytimes.com’s ad sales department did a great job too, as the article is surrounded by banner ads for the National Geographic Channel episode.  Or also likely, the article and the advertising were planned together – in a world where content is free, content and advertising are increasingly one and the same. Either way, there is no doubt that those well-targeted ads are maximizing the revenue potential for this particular story.

Click on any of those banner ads and you’ll get a stark reminder that television and print are still in very different worlds.

The National Geographic Channel has a well-constructed mini-site for Caught on Safari: Battle at Kruger, featuring the next prime time airing and accompanied by a video short/promo, the full YouTube clip, photos, information about Kruger, and related stories.  But you won’t find the the hourlong episode online.  The “real” content can only be accessed through your cable or satellite feed, where Newscorp and National Geographic, who jointly run National Geographic Channel, ring the cash register.

Print, and more profoundly, music, were the first media for which the internet could deliver a competitive and over time superior audience experience at a lower distribution cost.  As described above, the only response available to most outlets has been to cannibalize themselves or be killed.  No surprise that shares in The New York Times Company (NYT), at $19.67, are down 57% over a five year period; other major papers are in the same boat.

The internet does not yet deliver a super audience experience at a lower distribution cost compared to television.  Not yet.  Most streaming, YouTube in particular, is nowhere near standard broadcast quality, let alone HD, but there are an increasing number of exceptions.  It’s still pretty expensive to stream high quality video.  Getting internet video into the living room is costly, kludgy and not ready for the mass market, but then again, I also prefer reading a physical newspaper over breakfast than catching up on the news with my laptop.

So the networks have benefited from the luxury of time and insight from print and music as they experiment with online content and monetization.  They can still keep their highest value content available through broadcast only, where most of the money is, and use online as a tool for promotion and viewer engagement, selectively releasing episodes where doing so reinforces that dynamic.  Investors aren’t betting against the networks; shares in News Corp. (NWS), at $19.35, are up 33% over their price five years ago.

In the meantime, internet video is beginning to breach the walls of the living room, and the quality / cost tradeoff of internet video distribution continues to progress along the path suggested by Moore’s law.  The networks have some more time to work out how to maximize online monetization, but they don’t have forever.  And while they have a big leg up on the newspapers and music labels in this game, it’s sobering to bear in mind that investors weren’t betting against those players either five years ago.

[tags]Battle at Kruger, National Geographic Channel, New York Times, News Corp[/tags]