The New York Times has good news and bad news for investors, as it reports its second quarter financials for 2016. First, the good news. The newspaper added 51,000 net digital-only subscriptions for news products and 16,000 net crossword product subscriptions during the second quarter, bringing subscription totals to 1.2 million digital-only subscriptions for its news products and 1.4 million total digital-only subscriptions, a 25 percent increase year-over-year.
Now, the bad news. The New York Times reported a net loss for the quarter of about $500,000, compared to net income of $16 million for the same period last year. The loss was due, in part, to the closing of its Paris editing and prepress operations which cost $11.9 million, mostly in severance payments.
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Other quarterly financial highlights include:
- Total revenue fell 3 percent to $373 million from $383 million.
- Adjusted operating profit dropped to $55 million compared to $64 million year-over-year.
- Operating costs decreased to $339.9 million, compared to $344.8 million year-over-year.
- Total advertising revenue decreased 12 percent to $131 million.
- Print advertising revenue dropped 14 percent.
- Digital advertising revenue dropped 7 percent.
- Digital advertising revenue comprises more than a third of the company’s total ad revenue.
- Circulation revenue increased approximately 3 percent to $219 million.
- Total daily print circulation declined 6 percent.
- Sunday circulation dropped 4 percent.
- Circulation revenue from digital-only subscriptions grew 15 percent to $56 million.
- The Times had 126 million unique users in June.
- Engagement for nonsubscribers increased 20 percent year-over-year.
“We once again saw a robust quarter in terms of digital subscriber growth, with 51,000 net digital-only subscriptions to our news products added in Q2 and growth of 22 percent year-over-year. Much of our success in building our digital pay model is the result of a renewed effort to clearly communicate the value of Times journalism and our products through mission-related, native messaging to an expanding number of highly engaged readers,” said CEO Mark Thompson in a press release.
Thompson said digital advertising was lower than expected, but he anticipates double-digit growth in the third quarter. However, he also expects total advertising revenue to decrease in the mid-single digits.
“Advertising was tougher in the quarter, particularly on the print side. In digital, we saw very strong growth in mobile, video and virtual reality, branded content and programmatic advertising,” Thompson added. “These were not enough to offset declines in traditional web display in Q2, which led to an overall decline in digital advertising.”
The financials are, of course, impacted by Thompson’s strategy revamp announced in February. This includes buyouts accepted by about 80 Times employees which will cost the company about $11 million in severance payments during the third quarter. The new strategy also includes doubling of digital revenue to $800 million by 2020.
“And finally, in the quarter, we have undertaken a variety of steps to keep our cost base in line and will continue to maintain a mindful eye in this respect,” Thompson said in summary.
Like so many other news organizations, The New York Times is struggling to come up with the perfect mixed business model which balances advertising revenue, subscriptions and other revenue streams to create a sustainable financial future. The Times is experiencing some growth in the digital-only subscription arena – both news products and non-news products – but it needs to focus on reversing declining advertising trends or replacing that income with other revenue streams.
Meanwhile, the organization is trying a little bit of everything including virtual reality, video, branded content and Facebook Live videos to see what resonates with paying readers, but recent strategic decisions like closing its Paris operations and offering employee buyouts are costing the company tens of millions of dollars. While these decisions were no doubt made in the best interests of the organization long-term, the short-term costs are having a significant impact on The Times’ ability to turn a profit.