The New York Times (NYSE: NYT), on August 14, announced that it will bring in Mark Thompson, previously a director at the British Broadcasting Corporation (BBC), as its new CEO. We think this is an interesting choice for the top job since The New York Times has reached outside of its own talent pool. However, in our opinion, hiring an executive from a digital media company is consistent with New York Times’ vision of becoming an organization which innovates on the digital media front. Arthur Sulzberger, the chairman of The New York Times Company, confirmed our thesis with the statement below:
“We have people who understand print very well, the best in the business…We have people who understand advertising well, the best in the business. But our future is on to video, to social, to mobile. [The appointment] doesn’t mirror what we’ve done. It broadens what we are going to do.”
Good move since Digital is Key
In our model for The New York Times, we forecast a substantial decline in the national print market. Since this has been one of the primary sources of income for the company, the effect of a secular market decline in the print industry has to be mitigated via the digital space for continued profitability. So, we think that Mark Thompson’s appointment is definitely a step in the right direction. Having a chief executive with experience in an industry that the company wants to expand in should help trigger a fundamental change of focus within NYT’s executive ranks. If Thompson is successful innovating on the digital front, we could see an increase in user engagement and an increase in the average number of unique visitors on NY Times properties, which should provide an upside to our price estimate.
Overall, we think that The New York Times’ efforts to recreate itself into a digital player will get a push with this appointment. However, while Mark Thompson’s experience at BBC can definitely lead the company on the video front, we will be keen to see if NYT brings in more executives to help it innovate on the social front.
We currently have a $7.20 price estimate for New York Times, which is approximately 20% below the current market price.