Three Subscription Products Help The New York Times Deliver Strong Q1
Company said it is testing changes to its “pay model.”
Yesterday, The New York Times Company (NYSE: NYT) delivered strong first quarter financials, driven by three subscription products, including the company’s news, NYT Cooking and Crossword products. During the first quarter of 2019, The Times added 223,000 net new digital-only subscriptions, including 144,000 for news. This brings the company’s total number of subscribers to 4.5 million, keeping it on pace to reach 10 million subscribers by 2025.
“The breadth and depth of our news report(ing) have allowed us to spin out two highly successful digital products beyond core news, NYT Cooking and Crossword. This quarter, our Crossword product passed the 500,000 total subscription mark, which makes it, in its own right, the 5th largest digital subscription product from a U.S. news provider. And today, we launched our newest product, Parenting, in beta,” said Mark Thompson, president and CEO of The New York Times Company, in a May 8 news release.
Other highlights from the Q1 earnings report include:
- Total revenues were $439.1 million, a 6.1% increase compared to $413.9 million in revenue for Q1 2018.
- Subscription revenue was $270.8 million, a 3.9% increase year-over-year; advertising revenue was $125.1 million, a 0.4% decrease year-over-year; and other revenue was $43.1 million, a 55.8% increase year-over-year. $15.5 million of the “other revenue” increase was due primarily to growth in commercial printing and rental income from the company’s New York headquarters building.
- Revenue from digital-only subscription products was $109.9 million, a 15.1% increase year-over-year.
- Paid digital-only subscriptions were 3.58 million at the end of the first quarter, a net increase of 223,000 over the previous quarter and a 28.7% year-over-year.
- Digital advertising revenue increased 18.9%, and print advertising revenue decreased 11.9%. The company attributes growth due to direct-sold advertising on their digital platforms, including podcasts.
- Operating costs were $404.5 million, compared to $378.0 million in Q1 2018.
- Marketing expenses increased to $47.5 million, compared to $31.6 million in Q1 2018, primarily due to subscription acquisition and brand marketing expenses.
- Capital expenditures were $11 million, compared to $19 million in Q1 2018.
- Net income for the quarter is $30.2 million, or $0.18 diluted earnings per share.
- As of March 31, 2019, the company had cash and marketable securities of $808.8 million
Quarterly revenue and profits were higher than expected, reported Reuters.
The company offered the following guidance for the second quarter of 2019:
- Subscription revenue is estimated to increase in the low- to mid-single digits.
- Digital-only subscription revenue is estimated to increase in the mid-teens.
- Total advertising revenue will be relatively flat with digital advertising revenue increasing in the mid-teens.
- Other revenues will increase approximately 35% compared to Q2 2018.
- Operating costs and adjusted operating costs are expected to increase approximately 8% to 10%.
During the earnings call, Thompson also talked about a bit about Parenting, a new subscription in beta, made by parents for parents, and “The Weekly,” a new TV program for FX and Hulu. The new show launches in four weeks. Both are opportunities for the company did attract new audiences while further solidifying the loyalty of existing subscribers.
Thompson highlighted the company’s mission, delivering great journalism to the world, and reiterating their commitment to that mission. The company employs close to 1,600 and its newsroom is at its peak in terms of size. Thompson said they plan to expand their staff later this year.
One item came as a bit of a surprise – they will be changing their “pay model” – though they wouldn’t share details.
“Over the coming months, you’ll see us make some changes to our pay model. We don’t have any details of these changes to share with you this morning, beyond saying that they’re based on extensive testing in the US and other markets - testing which has given us real confidence that we have the scope to accelerate digital subscription growth even further,” Thompson said.
Following the release of the earnings report, The New York Times Co. Class A stock rose from $32.85 per share (on May 7) to $34.30 per as of 4:58 EDT yesterday, an increase of $1.45.
With a trusted, 167-year-old brand to back it, The New York Times Co. has done a great job developing subscription products, particularly digital-only subscriptions. The company now has three solid subscription products under its belt which continue to attract new subscribers, and now a fourth – Parenting – to reach a new audience.
What most intrigues us about this earnings report though is the experimentation of a new pay model. What does this mean for subscribers? For the company? Will the price increase or decrease, will the company adjust its metered paywall to allow more or fewer articles, or will the company offer subscription tiers beyond its print+digital or digital-only packages?
While other legacy media companies are still trying to straddle the digital divide, The New York Times is navigating it fairly well, and they have tested new ideas (e.g., acquisition of Wirecutter and creation of NYT Cooking) and succeeded. What will this latest experiment yield? We are dying to know!