New York Times Grew Digital Ad Revenue and Subscriptions in Q4

But also saw a drop in print advertising and overall advertising revenue

Subscription News: New York Times Grew Digital Ad Revenue and Subscriptions in Q4

Source: New York Times

Last Thursday The New York Times Company (NYSE: NYT) posted its fourth quarter financials and full-year 2016 results. There’s good news and bad news. In the fourth quarter, the Times added 276,000 net new digital news subscriptions, its best quarter since 2011 when it began using the digital pay model. For the full year, it added 583,000 net digital-only subscribers. Of that total, 514,000 came from digital news products, while the rest were from the New York Times’ crossword product.

Other fourth quarter highlights include:

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  • Diluted earnings per share were $0.24 compared to $0.31 year-over-year.
  • Adjusted diluted earnings per share were $0.30, compared to $0.37 year-over-year.
  • Operating profit decreased to $55.6 million, compared to $87.7 million year-over-year. The Times attributed this to a $21.3 million pension settlement charge, lower print ad revenue and higher costs, partially offset by higher circulation revenue.
  • Adjusted operating profit was $95.7 million, compared to $117.7 million year-over-year.
  • Total revenue decreased 1.1 percent to $439.7 million, compared to $444.7 million year-over-year.
  • Circulation revenue increased 5.0 percent, advertising revenue decreased 9.7 percent and other revenue increased by 16.2 percent.
  • Circulation revenue from digital-only subscriptions to news products grew 21.2 percent to $61.1 million.
  • Paid digital-only subscriptions totaled 1.853 million at the end of Q4, a net increase of 296,000 compared to Q3 and a 45.9 percent increase over Q4 2015.
  • Operating costs increased to $362.8 million, compared to $352.7 million year-over-year. Higher costs are attributed to higher marketing, advertising, newsroom and technology costs, offset partially by lower print production and distribution costs and lower non-operating retirement and severance costs.

Full year highlights include:

  • Operating profit was $101.6 million, compared to $136.6 million for 2015. The decrease was attributed to lower print ad revenue and higher costs.
  • Adjusted operating profit was $240.9 million in 2016, compared to $289.0 million in 2015.
  • Print advertising revenue decreased 15.8 percent while digital ad revenue increased 5.9 percent.
  • Digital advertising revenue was $208.8 million for 2016, compared to $197.1 million in 2015.
  • Other revenues grew 16.2 percent, primarily from revenue provided by The Wirecutter and The Sweethome which the company acquired in October.

Subscription News: New York Times Grew Digital Ad Revenue and Subscriptions in Q4

Source: New York Times

“The continued excellence of our journalism and our consumer-first focus led to incredible strength in our circulation business, both in the fourth quarter and for the full year,” said Mark Thompson, president and CEO of The New York Times Company in a prepared statement. “As of today (Feb. 2), we have passed the 3 million paid subscription mark (print and digital), a significant milestone.”

 “As we said we would, we returned to double-digit digital advertising growth in the second half of 2016. In Q4, we were up 11 percent year-over-year from solid performances in smartphone, marketing services, branded content and programmatic advertising, with growth in these businesses more than making up for stress on the legacy parts of digital advertising,” Thompson added.

“We continue to experience significant headwinds in print advertising, but the robustness of our consumer business, which we expect will continue, provides a strong counter balance to these market challenges. We will remain focused on our legacy cost base while continuing to invest in digital growth and innovation,” Thompson said.

For 2017, The New York Times Company offers the following projections for the first quarter:

  • Total circulation revenue will increase approximately 6 percent.
  • Total advertising revenue will decrease in the high-single digits.
  • Operating costs and adjusted operating costs will increase in the mid- to high-single digits.

In mid-January, The Times issued an internal report, Journalism That Stands Apart: The Report of the 2020 Group, which outlines some of the changes the organization needs to make.

“We are, in the simplest terms, a subscription-first business. Our focus on subscribers sets us apart in crucial ways from many other media organizations. We are not trying to maximize clicks and sell low-margin advertising against them. We are not trying to win a pageviews arms race. We believe that the more sound business strategy for The Times is to provide journalism so strong that several million people around the world are willing to pay for it. Of course, this strategy is also deeply in tune with our longtime values. Our incentives point us toward journalistic excellence,” said the report.

“Yet to continue succeeding – to continue providing journalism that stands apart and to create an ever-more-appealing destination – we need to change. Indeed, we need to change even more rapidly than we have been changing,” the report said. “Why must we change? Because our ambitions are grand: to prove that there is a digital model for original, time-consuming, boots-on-the-ground, expert reporting that the world needs.”

Among the changes recommended in the report are more engaging, more visual multimedia storytelling; a new approach to features and service journalism; more engagement with readers; expanded training; accelerate the pace of hiring top journalists; more diversity among newsroom staff; reevaluate its relationship with freelancers; and reorganize how the newsroom works.

And this week Advertising Age reported that the New York Times is offering free Spotify service to new subscribers, aimed at growing a younger audience. According to Advertising Age, new digital subscribers who purchase a one-year online subscription to The Times will get free access to Spotify.

Insider Take:

Combine all these moving parts with President Trump’s repeated rants against the 165-year-old media organization and The New York Times has a lot working in its favor. It is already seeing success from its digital subscription efforts, and it has taken a good, hard look at what it needs to do moving forward while respecting its roots. The Times recognizes and leverages its strengths, but it is also willing to admit to areas where it could improve.

From a subscription standpoint, we love that The Times addressed this issue front and center in the report, recognizing it is a subscription-first company and its focus is its subscribers. If the company continues to focus on them, while improving itself operationally and making necessary adjustments across the board, it could set the stage for other media organizations struggling to make the digital model work for them. We think they’re up to the challenge.