Why I'm Buying This Beleaguered Stock

When disclosure rules permit, I'm going to buy a small stake in New York Times (NYSE: NYT  ) .

It's a potentially crazy bet. So why make it? Digital content won't be free forever, and few organizations create and distribute more valuable content than New York Times' various publications.

We're already seeing the shift. Dow Jones was charging for the digital edition of The Wall Street Journal long before News Corp. (NYSE: NWS  ) took over. The Financial Times also charges for access to its website, and the U.K.'s Guardian is now experimenting with a similar idea. The New York Times appears to be next.

According to The New York Observer, the Times this summer will unveil a plan to earn more from its digital content. The two options: a pay-per-read metering system, or a donations-based approach similar to the one used by National Public Radio.

Neither would be easy. Newspapers are suffering from poor reputations and declining revenues. Many are closing. Those that remain are hurting badly enough to prompt some states to consider de facto bailouts via huge tax breaks.

The good news: Systems to support one-off and subscription sales are emerging. Amazon.com's (Nasdaq: AMZN  ) Kindle is the most obvious, but there's also talk of Apple (Nasdaq: AAPL  ) creating a Mac tablet that could offer its own e-reader. Or it could simply copy the iPhone, which already supports Times Reader, software that allows The New York Times' digital edition to read like the inkier print version.

Times Reader is a potential source of advantage for New York Times, because it's a different take on digital availability, something that you won't find from Washington Post (NYSE: WPO  ) or McClatchy (NYSE: MNI  ) .

But Times Reader is only a portion of this digital story. More importantly,  New York Times' papers thrive in the peer-reviewed world of social networking. "Peer reviewed" in this case refers not to scientific scrutiny, but to reader evaluation. NYT's content gets vetted as it is read and submitted for others to endorse via Twitter, Digg, StumbleUpon, Delicious, and so on.

Two stories from the latest editions of the Times populate Digg's home page as I write this. No other magazine, newspaper, or blog had more than one. I expect this will continue to be true when New York Times gets more aggressive about charging for content, so long as it's charging for its own unique content -- editorials from Times writers, or reviews of local Manhattan eateries, for example.

But I could be wrong, especially since the Times has already failed once at charging for digital content. I'm betting real money that this time, the paper (and its parent company) gets its right. If I'm wrong, I'll pay in more than public ridicule.

What do you think? Would you buy New York Times right now? Use the comments box below, or weigh in at Motley Fool CAPS.

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Fool contributor Tim Beyers had stock and options positions in Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is here for your reading pleasure. Grab a cuppa joe, sit back, relax, and enjoy the disclosure-y goodness.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 09, 2009, at 11:33 AM, caltex1nomad wrote:

    The only problem I see is all the good Journalists are dying off and enrollment in good Journalism schools is way down. I agree that online and e-readers are the future, but if the quality of the content isn't there who will be willing to pay for it.

  • Report this Comment On June 09, 2009, at 12:16 PM, gottabeneutral wrote:

    No way...........NYT arrogance will take them to oblivion........Sultzbergers, et al.

    Long ago they abandoned any impartilaity & became an opinon (not news) paper, & even that audience is dying.

    Hey Motley, stick with REAL prospects- MIDD, BHP,

    APPL,CGA, MARVEL, etc.,

    You do great research, so why make a reach for losers?

  • Report this Comment On June 09, 2009, at 1:51 PM, miles60 wrote:

    Regardless of charges of bias and opinionation like those from gottabeneutral, the NYtimes puts out some extremely good reporting. More importantly, their reporting is almost always unique as opposed to just a copy of the AP story on the same subject. Their site is very well done. But would I pay to access their content? Probably not. There are just too many other good, free options out there. BBC, Washington Post, Al Jazeera, LA Times, Google News...none of these are quite as good as NYtimes, but they're reasonable substitutes. I'm intentionally leaving out MSNBC and CNN as the content of those sites is like watching the 10 o'clock news on a national scale. I might consider donating in a NPR-like format, but paying for content just isn't worth it. If they want to charge for the op-ed pieces and leave the rest free, I'll enthusiastically read the free articles, but I just can't imagine actually committing to a subscription. Maybe if they can do it such that I can pay per article (and the cost is less than a nickel per article).

    If NYtimes staff are out there reading this, here's an idea...have readers vote on or suggest which stories you should spend your time working on. The ones with the most votes will get the most page views, and if readers pay per page view, you can get an idea for what the budget can be for the story in advance.

  • Report this Comment On June 09, 2009, at 2:54 PM, PlERCE wrote:

    No WAY! I'll give you three good reasons without even digging into the nitty gritty from their financials...

    1. GROSSLY underfunded pension plan -- have fun with that liability when the asset portfolio is probably dwindling in this market

    2. ad. revenues across the industry are in free-fall...NYT alone has been losing a steady 20, 25% EACH quarter...

    3. industry average of a 2.2x EBITDA multiple...and before i give you this number, yes, i understand NYT is a VERY strong brand, but that is NO justification for paying for a 5.5x EBITDA multiple!! disgusting!!

    If ANYTHING, I'm shorting this piece...

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