By DAVID WARSH BOSTON

For all the reporting about the unceremonious manner in which Arthur O. Sulzberger Jr. replaced executive editor Jill Abramson with Dean Baquet, the strongest evidence that the needle on his tenure as publisher of The New York Times has reached the danger zone is the company’s internal “Innovation Report” that someone at the New York Times Co. leaked last week, perhaps in hopes of offsetting the bad publicity.

Prepared by an eight-person newsroom team led by Sulzberger’s son, Arthur Gregg Sulzberger, the glossy 96-page report is likely to have the opposite effect. It amounts to a clarion call to blow up the 163-year-old business in order to go into competition with BuzzFeed, Vox, Business Insider, First Look Media, and Huffington Post.

Astoundingly, the report doesn’t so much as mention the Times's’ much more menacing digital competitors, Bloomberg News and Reuters, breakthrough innovators in the news business whose news-gathering resources are far greater than those of the newspaper company. On every page, the “Innovation Report” betrays its authors’ failure to understand what the fundamental business of The Times is about.

Naturally the digital community loved the report.  “One of the key documents of this media age,” declared Harvard University’s Nieman Journalism Lab. “The End of the Print New York Times,” headlined a Buzzfeed story. “…[P]aints a dark picture of a newsroom struggling more dramatically than is immediately visible to adjust to the digital world, a newsroom that is hampered primarily by its own storied culture,” wrote Myles Tanzer, the BuzzFeed reporter who first got hold of the document.

And, naturally, the document is well written, handsomely designed, and full of informative reflections on reputation-building in the age of social media.  But the framing is off, in a way that is dangerous to the enterprise. Sprinkled throughout are various facts intended to be alarming:  Huffington Post.com has already eclipsed The Times in total readership; Vox.com surpassed the WSJ in total digital readership in 2013.  Yahoo News has signed up Katie Couric as its “global anchor.”

There are two “chapters,” the first about ways of growing the audience for what the Times produces, the second about persuading newsroom staffers that audience-growing is more important than anything else today. Janine Gibson, the former U.S. editor of The Guardian.com, whom the Times unsuccessfully sought to hire, put it this way.

The hardest part for me has been the realization that you don’t automatically get an audience. For someone with a print background, you’re accustomed to the fact that if it makes the editor’s cut – gets into the paper – you’re going to find an audience. It’s entirely the other way around as a digital journalist. The realization that you have to go to find your audience – they’re not going to just come and read it—has been transformative.

And just in case that’s not clear, a couple of paragraphs later, Paul Berry, a Huffington Post founder,

At The New York Times, far too often for writers and editors the story is done when you hit publish. At Huffington Post, the article begins its life when you publish.

So it is all about marketing and “audience engagement.”  That makes sense, up to a point:  the world of social media has greatly changed the way that news spreads. But for all its enthusiasm, the report is not a convincing document. The framing is wrong.

There is no thought in it about what is being amplified:  about what “news” is, where it comes from, whence arises the authority of its producer.  There are none of the standard fact-based arguments from history about how the news business has evolved over 150 years: no note taken of the serial threats posed to print newspapers by magazines, radio, television, cable and now the Web. Least of all is there anything in it about the print editions that make newspapers different from Web sites, especially Bloomberg and Reuters. That is the arena in which the real contest will take place.

Instead there are a couple of pages of business school mumbo jumbo about disruptive innovators, stylized charts and allusions to Kodak and digital cameras, Toyota and Detroit. If you are a fan of “Snowfall,” the book-length multimedia story of an avalanche The Times published as a special section in December 2012, of its series of cooking videos  (now discontinued), or its tchotchkes store, you’ll find this report far-sighted.

If, on the other hand,  you want to know what’s going on in Ukraine, what central bankers are thinking around the world, or any of a hundred other pressing questions, you’ll be left scratching your head. Why are Bloomberg and Reuters reports so good on these topics? (Each employs roughly twice as many journalists as The Times, The WSJ around half again as many.) And how significant is it that Bloomberg and Reuters don’t need to print their news to remain highly profitable? An advantage over time?  Or a disadvantage?

I suppose it is unrealistic to expect The Times to be frank about its real vulnerabilities. Perhaps the innovation report is intended mainly as a diversion, to distract from the real changes that are taking place somewhere else. But that is, I think, where the dismissal of Abramson comes in.

The other key player in the drama is Mark Thompson, the man Sulzberger hired in 2012 to be New York Times Co. chief executive.  He arrived under something of a cloud: Had he, as director general of the British Broadcasting Co., ignored reports that a retired on-screen personality had been a sexual predator?  There was, however, no doubt that Thompson had led the BBC through a highly successful adaptation to the digital environment. He’s since shown himself to be a capable executive at The Times.

But, thanks to the British system, under which the owner of every television set, no   matter whether the signal arrives via terrestrial or satellite broadcast, cable or Internet, pays a government fee, which then is used mainly to support the BBC. (ITV and Sky Channel make their way with advertising).  Thus the BBC had a dependable and stable source of income in the years when Thompson engineered its build-out to the Web. Nobody was talking about “the end of British television.”

The Times, which still gets most of it revenues from its print edition, has no such legislatively mandated income stream. So the great schism in the business is between those who expect the paper product to continue to be its main business for many years to come, and those who are pessimistic about print’s future.  Thompson, a broadcast executive, must decide which side he is on.

Whatever the differences in newsroom management style between Abramson and Baquet, they probably pale in comparison for their shared contempt for the pure digital enthusiasm that was the motive force of last week’s “Innovation Report.”  Baquet will do better with the newsroom; his is a gentler mien. Abramson will remain a heroine to those who care about the news.

Baquet is already a hero:  he resigned from as editor of the Los Angeles Times in 2007 rather than make further newsroom cuts. Despite that, he is considered to be more business-savvy than Abramson. But Baquet’s real battle will be, like hers, with the front office, and there, I suspect, equally resolute. As he told one of his own reporters in an interview last week, “The trick of running The New York Times is that you have to keep in mind that it is a very powerful print newspaper with a very appreciative audience. You have to protect that while you go out there and get more readers through other means.”

New York Times Co.’s circulation revenues were $824 million last year. Digital editions contributed $149 million of that (up 33 percent from the year before), meaning print accounted for $675 million, according the annual report. Advertising revenues, were $667 million in 2013, The company doesn’t break out digital vs. print totals, but print advertising presumably brings in far more than digital. So figure five times more ad revenue from print than from digital, and The New York Times Co. last year gained around $1.2 billion from selling newspapers, vs. another $250 million from selling various pixel versions.  A digital-first strategy is obviously a good idea, but how quickly it can be expected to change these ratios is the crux of the matter.

There is, I think, no way The Times can grow rapidly in the years to come (though it can hope to grow steadily, once the advertising world settles down) – certainly not enough to directly challenge the media giants whose revenues are anchored in financial data – Bloomberg, Reuters and The Wall Street Journal. But The Times can certainly be a boutique newspaper, becoming more like the Financial Times (another recent convert to the digital-first strategy), appealing to those who recognize New York (and, to a lesser extent, Los Angeles) as the capital of the Republic of Fashion and the maker of political taste.

The real question is whether The Times can generate enough profits to keep together the 13 cousins, spouses and grown children of the fourth and fifth generations of the Sulzberger-Ochs clan who have pooled their resources to form a trust to maintain control. This is far above my pay-grade, but I note that as rapidly as the publisher is advancing his son, at least two family members who are alternative leaders for the next generation are working for The Times, Sam Dolnick and David Perpich.

Sulzberger’s 21-year tenure as publisher has been marred by many firings.  It started back with Boston Globe publisher Benjamin Taylor in 1999 (having bought The Globe for $1.1 billion in 1993, The Times sold it and the Worcester Telegram & Gazette last year for $70 million). He fired executive editor Howell Raines in 2003, amid the Jayson Blair scandal. (He had chosen Raines in 2001.) Sulzberger fired chief executive officer Janet Robinson in 2011, having appointed her in 2004 (her severance package, which include provisions that required her to remain silent about the matter, totaled $23 million). Last week it was Abramson, whom he appointed executive editor in 2011.

He may finally have finally found his footing. At least he moved swiftly to resolve a situation that had become untenable. My hunch is that there’s another dismissal yet to come at The Times.  The cousins who participate in that family trust may decide to ease Sulzberger into an early retirement. He is 62.  There is plenty of time for him to go into the digital business with his son and to leave running the newspaper to the rest of the family.

David Warsh is a long-time financial journalist and economic historian. He is the proprietor of economicprincipals.com.

 

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