In its second quarter financial report, The New York Times Company announced an 8.4% increase in subscription revenue due, in part, to the growth of digital-only subscriptions which include their news product, Cooking, Crossword and audio products. Revenue from digital-only subscriptions increased 29.6% to $146.0 million, compared to the second quarter of 2019. Print subscription revenue dropped 6.7% to $147.2 million, primarily due to lower retail newsstand revenue. Revenue from home delivery was flat for the quarter.
At the end of the quarter, the company had approximately 6.51 million subscriptions across print and digital. Paid digital-only subscriptions were approximately 5.67 million, a net increase of 669,000 subscriptions compared to the first quarter of 2020 and a net increase of 1.89 million compared to the same quarter last year. Of the 669,000 net new subscribers, 493,000 were digital news subscribers with the remaining 176,000 subscribers coming from Cooking, Crossword and audio products.
Outgoing president and CEO Mark Thompson comments on Q2
Mark Thompson, president and CEO, will be stepping down from his post in September, turning over the position to Meredith Kopit Levien. Thompson commented on the company’s second quarter results:
“The last full quarter of my stint as CEO of The Times was also one of the most significant. We posted our best ever results for new digital subscriptions, and for the first time in our history total digital revenue exceeded print revenue – a key milestone in the transformation of The New York Times and a testament to how much we've achieved over the past eight years,” Thompson said.
“We’ve proven that it’s possible to create a virtuous circle in which whole-hearted investment in high quality journalism drives deep audience engagement which, in turn, drives revenue growth and further investment capacity. This is why our newsroom is growing when so many others are being reduced. America and the world need access to great journalism now more than ever and I’m proud that, in these momentous and troubled times, our newsroom has the commitment, the talent and the resources to rise fully to the occasion,” added Thompson added.
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Second quarter highlights
Additional highlights for the second quarter of 2020 include the following:
- Total revenue was $403.8 million, a 7.5% decrease compared to $436.3 million in revenue from the second quarter of 2019.
- As noted above, subscription revenue grew 8.4%. Advertising revenue dropped 43.9% and other revenue, including affiliate revenue, dropped 5.0% year-over-year.
- Hit by COVID-19 impacts, digital advertising revenue decreased 31.9% to $39.5 million.
- Digital ad revenue grew to 58.3% of the company’s total advertising revenue, compared to 48.1% in the second quarter of 2019.
- Print ad revenue decreased 55% percent to $28.2 million.
- Other revenues decreased $2.2 million, or 5%, due to the conclusion of season 1 of “The Weekly” TV series and lower revenues from events and commercial printing. These revenue declines were partially offset by higher revenues from licensing revenue from Facebook News and affiliate sales via Wirecutter, an online consumer guide which the company acquired in 2016.
- The company cut costs in several areas. Total operating costs for the quarter were $374.9 million, compared to $398.3 million in Q2 2019.
- Cost of revenue decreased 6.1% to $230.1 million, compared to $245.2 million, primarily due to lower print product and distribution and ad servicing costs.
- Sales and marketing costs decreased 36.4% to $39.6 million, compared to $62.3 million in Q2 2019.
- Product development costs, however, increased 21.7% from $25.3 million to $30.7 million.
- General and administrative costs grew 16.7% to $58.8 million due to severance costs from workforce reductions of the company’s advertising department.
- Capital expenditures for the quarter were approximately $5 million, compared to $13 million in Q2 2019.
- Net income for the quarter was $23.7 million, or $0.14 per diluted share, compared to $25.1 million, or $0.15 per diluted share.
- As of June 28, 2020, The New York Times Company had cash and marketable securities of $756.7 million, up from $683.9 million at the end of 2019.
Third quarter outlook
The company provided the following guidance for the third quarter of 2020:
- Total subscription revenue is estimated to increase 10%, with digital-only subscriptions revenue growing about 30%, compared to the third quarter of 2019.
- Total ad revenue will decrease between 35% and 40% with digital ad revenue decreasing about 20%, primarily due to the COVID-19 pandemic.
- Other revenues are estimated to drop about 10% compared to Q3 2019.
- Operating costs will be flat or decrease in the single digits.
Even The New York Times is not immune to the impacts of the COVID-19 pandemic. However, the company was able to reduce costs at the same time its advertising revenue was declining, and the company expects to see similar patterns in the third quarter. The company seems to be holding its own, capitalizing on digital-only subscriptions and anticipating similar advertising revenue declines. One factor that could possibly favorably impact The Times’ advertising revenue in the third quarter is the November election. While the third quarter ends in September, candidates will be advertising heavily throughout the fall. This could help The Times offset COVID-related advertising declines.