The New York Times Company reported their third-quarter financials last week, including total revenue of $547.7 million, a 7.6% increase year-over-year overall. Subscription revenue was $382.7 million, an 11.7% increase; advertising revenue was $110.5 million, a 0.4% decrease; and other revenue was $54.5 million, a 1.9% decrease. Broken down by reporting segment, The New York Times Group revenue was $523.6 million, a 2.8% increase year-over-year. The Athletic’s revenue was $24.1 million, mostly from subscriptions.

Subscriptions

The New York Times said that subscription revenue was driven to the large number of subscribers who converted from introductory promo pricing to higher prices, growth in the number of digital-only subscribers, and the addition of subscription revenue from The Athletic, which The Times acquired in January 2022 for $550 million in cash.

At the end of the quarter, The Times had 9.33 million paid subscribers, with 8.59 million being paid digital-only subscribers, and approximately 10.02 million paid digital-only subscriptions. The Times said there was a net increase of 180,000 digital-only subscribers and 210,000 digital-only subscriptions. Digital-only subscribers with The Athletic grew by 600,000, mostly due to providing access to The Athletic to digital bundle subscribers.

Subscription bundles

“The biggest story of our third quarter was continued progress on the bundle, with mounting evidence that our strategy is working. It was our best quarter yet for bundle net additions, with a record number of starts and a record percentage of our total starts taking the bundle. As a result of our efforts, we now have more than a million bundle subscribers, well on our way to our next mile marker of 15 million subscribers by 2027,” said Meredith Kopit Levien, president and CEO, in a November 2, 2022 news release.

Levien also said The Times made progress toward their goal of being an “essential subscription” for those who speak English and want to better understand and engage with the world.

“We did so by advancing the three pillars of our strategy: leading in news, helping people make the most of their lives and passions, and putting those ideas together in a bundle that makes The Times indispensable in the daily lives of millions more people,” Levien added. “Even in an uncertain macroeconomic environment, it’s clear The Times has a powerful, multi-revenue stream model with great unit economics, and we’re aggressively chasing the tailwinds that best position us to grow revenue and profit.”

Third quarter highlights

The Times shared the following highlights in their November 2 news release:

• Total operating costs for Q3 were $503.8 million, a 9.5% increase year-over-year.
• The cost of revenue was $249.9 million, a 14.7% increase year-over-year. The Times attributes this mostly to their acquisition of The Athletic as well as growth in newsroom employees and higher costs in servicing subscribers.
• Sales and marketing costs were $64.7 million, a 22.7% decrease year-over-year.
• Product development costs – all of which are considered technology costs – were $50.5 million, a 24.2% increase year-over-year. These were attributed due to more employees in the digital product development division along with the acquisition of The Athletic.
• General and administrative costs were $72.0 million, an increase of 11.7% year-over-year. This was due to more employees, the acquisition of The Athletic, and higher severance costs.
• The company reported $9 million in capital expenditures in Q3 2022 compared to $11 million in the prior year quarter.
• The company reported diluted earnings per share of $0.22, compared to $0.32 for the prior year period.

Guidance for the fourth quarter

The New York Times provided the following guidance for the final quarter of the year.

• Digital-only subscription revenue for The New York Times Group will increase approximately 20%, while The Athletic’s will increase 10% to 13%. Total increase for the company is estimated to be 30% to 33%.
• Total subscription revenue for The New York Times Group will increase 10% to 13%, The Athetlic’s will increase 6% to 8%, and the total increase for the company is estimated to be between 17% and 20%.
• The company is expecting to see decreases in digital advertising and total advertising revenues.
• Other revenue will increase in the low-single digitals for The New York Times Group and The New York Times Company. This does not apply to The Athletic.

Insider Take

While earnings were down and costs were up, The New York Times Company has important revenue increases and incremental increases in subscribers and subscriptions. With 9.33 million subscribers at the end of the third quarter, The Times is on pace to reach their subscriber goal of 15 million by the end of 2027. Their acquisitions of The Athletic and Wordle, their success with bundles, and their diversification of revenue streams such as Wirecutter have helped the company ensure a solid future, despite a rocky and uncertain economy. We think the company will finish the year strong.