A Milestone Behind, a Mountain Ahead

In 2012, something remarkable happened at The Times. It was the year that circulation revenue — money made from people buying the paper or access to its digital edition — surpassed advertising revenue. That’s an upside-down and through-the-looking-glass situation for newspaper economics. For many decades, print advertising has been the big moneymaker.

When that milestone was reached last summer, Jodi Kantor, a reporter, celebrated it on Twitter: “For years folks have asked who will save the N.Y. Times. Now we know: our beloved readers. Thank you from one reporter.”

And there was cause for celebration. Digital subscriptions, begun the previous year, were looking like a success story; print circulation losses had slowed. But there was a dark side, too: the continued loss of crucial print advertising. In last year’s third quarter, operating profit was down by 60 percent from a year earlier in The New York Times Company’s newspaper group, which also includes The Boston Globe and The International Herald Tribune. The culprit? Print advertising continued its downward spiral, dropping by 11 percent, and nothing in the digital world — neither advertising nor subscriptions — was coming close to making up the difference.

If 2012 was a milestone year, this year — given The Times’s new chief executive and that far-from-rosy financial picture — promises to be every bit as important. And it is important not only in a business sense but also for the profound effect that the business of The Times will have on its journalism and its readership.

Here are some of the business issues at hand:

¶How to deal with the cash that the Times Company gained in selling off some of its properties.

¶How to best capture the global market, including plans for a second foreign-language Web site. The future of the Times-owned International Herald Tribune is one significant piece of that puzzle.

¶How to fend off vigorous competition from The Wall Street Journal.

¶How to shore up print circulation and advertising, which still provide most of the company’s revenue.

¶How to use data analytics to the company’s best advantage and capitalize on the monumental growth of mobile devices.

But as remote as some of that may sound, the reader will remain front and center. Much of The Times’s future is tied to readers’ willingness to keep paying for its offerings in print, and for more readers to be willing to pay for digital access.

Last week, I talked to Arthur O. Sulzberger Jr., the publisher, and Mark Thompson, the new chief executive, about their plans. Because they are not ready to unveil their overall strategy for the company — and, in fact, are still working on it — they spoke only in general terms.

“The strategic challenge is, given the amazing asset of our formidable journalism, to make the connection between that and those willing to pay,” Mr. Thompson said. Deciding how to develop the successful digital subscription model and how to further The Times as a global brand are among his highest priorities, he said. Cutting expenses — often in the form of employee head count — is an already declared necessity.

Jill Abramson, in her second year as executive editor, is performing a tricky balancing act. She must make the paper’s news content stronger than ever and quickly develop its digital offerings, all while reducing costs in her newsroom — the nation’s largest, with about 1,150 employees and a budget of about $200 million.

It is a tumultuous time, not made easier by the public scrutiny of everything that happens at The Times. Last week, a huge headline in The Huffington Post proclaimed, “The Ax Approaches,” atop an article about management buyouts and possible layoffs in the Times newsroom. That report was prompted by an earlier one in New York magazine.

Meanwhile, The Times dismantled the environmental reporting team for what it said were both financial and strategic reasons, moved some senior editors to new roles, and saw two respected newsroom leaders, John Geddes and Jonathan Landman, accept buyouts.

Ms. Abramson told me in an interview that she was confident all would turn out well for The Times and its readers. She acknowledged that there was anxiety in the newsroom and said she was doing her best to quell that.

Her top priority as editor in 2013, she said, is “to continue and deepen something that we made great strides on in 2012: the global investigative reporting that I don’t think anyone else is doing.” She also sees expansion of The Times’s multimedia journalism as a high priority.

The stakes are high. Although I’ve sometimes been critical of The Times, I also believe it is irreplaceable as a news organization. Consider the stunning articles last year about Wal-Mart’s business abuses in Mexico, and the Chinese prime minister’s family wealth. Consider The Times’s rich offerings on books and the arts, its deep Washington reporting, its wide-ranging national report (including the moving “Donna’s Diner” series), its coverage of Hurricane Sandy.

The challenges are complex but, in the end, a newspaper company’s success still comes down to the reader:  the person who chooses to subscribe, who clicks on the advertising or buys the Tiffany bracelet, who finds the reporting impossible — or quite possible — to do without.

“The reader has always been the most critical element,” Mr. Sulzberger said. “The idea is that quality journalism produces a quality reader who attracts quality advertising. That hasn’t changed.”

My former boss, Warren Buffett, is fond of saying that newspapers, if they are to survive, must make themselves indispensable. That was easier before the Internet came along, providing a host of attractive new options for readers and advertisers alike.

Despite its declining fortunes, The Times is still indispensable to its readers. In a fast-changing world, it urgently needs to stay that way, and to make the economics work too. That will require agility, the ability to innovate and the willingness to take risks.

Newspaper people aren’t especially known for this kind of behavior. But they are going to need big doses of it in 2013, and beyond.