Spending Money to Make Money
How, in 1975, the New York Times averted a financial crisis, becoming the paper it is today
By John Morton
There are many pleasures to be had in reading Arthur Gelb's "City Room," his account of a lengthy career at the New York Times. But the most fascinating to me was his detailing of the brilliant journalistic decisions that transformed the Times from a near money-losing newspaper into the success it is today.
John Morton (firstname.lastname@example.org), a former newspaper reporter, is president of a consulting firm that analyzes newspapers and other media properties.
Gelb joined the Times in 1944 as a 20-year-old copy boy, having just dropped out of City College of New York. (He later got a degree from New York University while still working at the Times.) Over the next 45 years he worked as reporter, drama critic, deputy culture editor, metropolitan editor and, finally, managing editor. Somehow he amassed voluminous details about the people, events and dramas within and outside the newspaper that he uses to flesh out the narrative of his career.
In 1975, as Gelb relates, Times editors were warned that rising newsprint costs threatened to drive the paper into unprofitability, and this led, under instructions of Publisher Arthur Ochs Sulzberger, to an unusual meeting of news and business executives. At most newspapers then, and at many still, news executives were leery of the business side.
Those concerns were assuaged at the Times primarily by Walter Mattson, a senior vice president who got his start in the business as a Linotype operator and who later became president and chief executive officer of the parent New York Times Co. (and who was one of the smartest men I've ever known). Mattson had developed a respectful relationship with Abe Rosenthal, then the managing editor, because, as Gelb puts it, he understood "our problems involving news space and production."
Before the collaborative meeting, Mattson invited all the desk editors to a gathering where he displayed graphs that projected decreasing circulation and advertising and rising costs. Gelb writes that the "message was unmistakable--the paper was in big trouble," and he recalls commenting to another editor, "Let's open the window and jump right now."
Instead, the news and business executives arranged for polls to develop demographic data about typical readers and to learn why more of them were not taking the Times.
Gelb, as metropolitan editor, had already devised a Sunday New Jersey Section and a daily New Jersey page, which had increased circulation and advertising. Next came a half-page of open space that anchored daily culture coverage in the following pages. "It wasn't long before the foreign desk also requested open space as an introduction to its daily report--and so it went," writes Gelb.
The Times then was a two-section paper, and Mattson had been promoting the idea of a four-section paper, possibly with separate business, metropolitan and sports sections following the first section's national and international news. Rosenthal had resisted this, fearing the Times' traditional character would suffer, but the paper's dwindling finances convinced him otherwise.
Still, Rosenthal insisted that the new sections would require spending more on space and staff if they were to become "must reading." In a much-quoted comment, he said, "When a newspaper like ours needs help in difficult times, the best way to nourish it is not by watering the soup but by enriching it with more meat and tomatoes." Mattson agreed.
As the alliance with the business side developed, it became fractious at one point when the advertising department pressed for a daily style section with emphasis on fashion. The editors resisted, successfully arguing that this section should change its focus daily.
Thus the modern New York Times unfolded. The first new section, Weekend, triumphed, eventually boosting Friday circulation by 35,000, with significant advertising gains. Next came The Living Section, boosting Wednesday circulation by 32,000. Later came The Home Section on Thursday, Sports Monday and Science Times on Tuesday. In a little more than three years, the Times had been transformed from barely profitable into a thriving newspaper.
In 1975, the Times had a perilously low operating profit margin of 1.9 percent. By 1979, the operating margin had improved to 7.0 percent. Profitability continued to improve in ensuing years, reaching the mid- to high teens. These still are modest margins compared with other newspaper companies, but other newspapers do not match the Times' spending on domestic and foreign staffs. The soup, indeed, is rich.
Of course, this transformation could not have happened without an enlightened publisher and a controlling family ownership dedicated to preserving the newspaper's legacy. And we would not have had this insider's view of the transformation if Arthur Gelb had not, throughout his career, paid close attention and stayed close to the Times' heart, the city room.