ValueAct: activist must not derail NYT’s successful switch online

Maybe getting subscribers is not the only hard part. Last week, investment fund ValueAct announced that it had bought 7 per cent of the common stock of The New York Times Company.

Shares in the business, which publishes one of America’s best-known newspapers, are down around a third this year. But the stock price has almost doubled over the past five years. It now boasts more than 8mn digital subscribers. The venerable media group has done better than many competitors in coping with the switch online.

ValueAct is at the gentler end of the activist spectrum. Even so, it is less worried about how many users the NYT has accumulated than how much can be wrung out of them.

The NYT has a widening portfolio of brands. Management is already focused on pricing its “bundle”. This includes the core news business alongside sports coverage, the Wirecutter gadget review site as well cooking and games offerings.

The NYT news product now costs roughly $17 per month while the entire menu can be had for $25. The company says there are more than 100mn people around the world who are theoretical NYT subscribers. The balance it needs to find is between tapping as many readers as possible at the highest optimal price.

News websites themselves are bundles of coverage on politics, business, sports and society. The NYT has intensified its focus on sports, buying The Athletic for $550mn, even though its annual operating losses were about $50mn

In television streaming, the likes of Netflix and Disney have seen user growth moderating and resorted to raising monthly prices, betting that consumers will still see the value. The NYT, a general interest newspaper, is still relatively inexpensive compared with more specialised media.

However, ValueAct should think twice before pushing for steep price rises. Gannett, the largest US local news provider, announced job cuts last week. Its mishmash of subscriptions and advertising is little match for a time of high inflation and slowing economic growth. That is a signal to ValueAct to tread carefully at the NYT.