New York Times Reports Strong Digital Subscriber and Ad Growth in 2018
Company is three-fourths of the way to its 2020 goal of doubling digital revenue.
The New York Times (NYSE: NYT) finished 2018 strong with significant digital growth in the fourth quarter. In its Q4 and 2018 full year financial report yesterday, The New York Times reported big gains in digital subscription growth, digital advertising revenue and total digital subscriptions. Mark Thompson, president and CEO, of The New York Times Company commented on the company’s results.
“A strong quarter capped a strong year for The New York Times. We added 265,000 net new digital subscriptions in Q4, the biggest gain since the months immediately following the 2016 election. Digital subscription growth accelerated in the second half of 2018, and we ended the year with 3.4 million digital subscriptions and 4.3 million total subscriptions. We achieved digital advertising revenue growth of 23 percent year-over-year in Q4, or 32 percent on a like-for-like basis, our best result for many years,” said Thompson.
In 2018, The New York Times had total digital revenue of $709 million, bringing the company to three quarters of its five-year goal of doubling digital revenue to $800 million by 2020. Because of this success, Thompson said they are raising the bar a bit – with a target of more than 10 million subscribers by 2025.
“Our appeal to subscribers – and to the world’s leading advertisers – depends more than anything on the quality of our journalism. That is why we have increased, rather than cut back, our investment in our newsroom and opinion departments. We want to accelerate our digital growth further, so in 2019, we will direct fresh investment into journalism, product and marketing,” Thompson added.
Other highlights from the earnings report include:
- Total revenue for Q4 was $502.7 million, a 3.8 percent increase year-over-year, including an additional week in 2017. Excluding the extra week, total revenues grew 10.4 percent.
- Other revenues for the company were $47.5 million, representing 47.7 percent growth year-over-year. Those additional revenues came from commercial printing services, affiliate revenue from Wirecutter, live events and rental income from the headquarters building.
- Subscription revenues were $263.6 million, a decrease of 2.2 percent, primarily due to the extra week in 2017. Excluding the extra week, subscription revenue grew 5.0 percent.
- Total advertising revenue was $191.7 million, compared to $182.6 million in Q4 2017.
- Digital-only subscription revenue from news, Crossword and NYT Cooking was $105.3 million, an increase of 9.3 percent, including the extra week in 2017. Excluding the extra week, digital-only subscription growth would have been 17.9 percent.
- At year end, The New York Times had 3.36 million paid digital-only subscribers, a net increase of 265,000 over Q3 2018.
- Of the 265,000 net new subscribers, 172,000 subscribed to the news product. The rest subscribed to Crossword and NYT Cooking.
- Operating costs in Q4 were $426.7, compared to $394.8 in Q4 2017. The increase was primarily due to higher marketing costs, labor and raw material costs from commercial printing, and advertising costs. Some of these expenses were offset by lower print production and distribution costs.
- Marketing expenses grew to $48.6 million, compared to $32.6 million in Q3 2017. This increase was primarily due to costs related to subscription acquisition and brand marketing.
- Net income for the quarter was $57.0 million, or $0.33 per share, compared to a loss of $56.8 million, or $0.35 per share, in Q4 2017.
- The company declared a $0.05 dividend per share on Class and Class B stock, payable on April 18 to shareholders of record as of April 3.
Additional factors impacting the company’s financials during the fourth quarter include:
- An $11.3 million gain from the company’s share of the sale of assets by Madison Paper Industries
- A $1.4 million expense from the redesign and consolidation of space in the company’s New York headquarters
The company offered the following look for the first quarter of 2019:
- Total subscription revenue will increase in the low to mid-single digits with digital-only subscription revenue to increase in the mid-teens.
- Total advertising revenue is expected to decrease in the low to mid-single digits, while digital advertising revenue is expected to increase in the mid-teens.
- Other revenues in Q1 2019 are expected to grow 50 percent.
So far, investors have reacted positively to the report. On February 5, the day before the report was released, NYT Class A stock was valued at $26.91 per share. As of 6:32 p.m. EST yesterday, NYT stock was valued at $29.69, a $2.78 uptick.
It is refreshing to see a well-respected, legacy media organization get digital right. So many media organizations, whether legacy newspapers or digital startups, are struggling to find the right business model to adapt to the ever-changing media world. But The New York Times is figuring it out, and that’s both refreshing and exciting!
The company has found its groove with digital advertising and digital-only subscriptions, and it is willing to invest in acquisition costs to grow their subscriber base. They also took a leap of faith to diversify their assets by investing in Wirecutter. As long as they remain transparent about the affiliate revenue they get from Wirecutter, the investment will continue to serve them well. The company is close to reaching its 2020 goals, and we hope they get there to serve as an example to struggling media organizations that digital business models can work.