The New York TImes Saw On-Line Advertising Drop 6% on the First Quarter

[LanceyHoward]

NYT added 139,000 electronic subscribers in the quarter but saw the decline in revenues due to declines in on-line viewership and weakness in the display advertising market.

If the New York Times is feeling a chill from there on-line operation I find it hard to believe others in the industry will not feel the same effect.

Publishing companies often will release earnings statements saying things like "Company X saw electronic advertising revenues increase 20% in the quarter and serves as proof of our continuing transition to an electronic publishing environment", bla bla bla.

But how much revenue is assigned to electronic and to traditional print is frequently arbitrary, If a newspaper sells an ad for $100 that runs in the print edition and another version in the electronic version the accounting department makes the call about how to break out the revenue. Since hard copy revenues are falling off a cliff anyway publishers tend to try to push up the electronic revenues at the expense of the print revenues.

McClatchy, for instance, reclassified the treatment of revenues from obituaries in the first quarter in a way the decreased print but increased electronic revenue. Then management bragged that electronic ad sales exceeded print sales in the first quarter.

It is all going to heck.

 

[The Big Ragu]

This is precisely why the Times has shifted to a subscription revenue model, not an ad revenue one. Subscriptions account for more than 60 percent of their revenue now and that has been the focus. The Washington Post, Globe and Mail, Wall Street Journal are following that same plan. Basically, Facebook and Google have cornered the ad market, and social media is getting that spend. An online publication trying to rely on advertising revenue just isn't viable. But that bridge was crossed a while ago. The Times actually charges a relatively high CPM for advertising. The revenue isn't insignificant, but the money it generates is still kind of peanuts in their grand scheme of things. Look at it this way. ... The revenue they get get from just a few incremental subscribers (the subscription revenue) is equal to the ad revenue from 10s of thousands of hits on a story. They earned more than a billion dollars in subscription revenue last year. ... $238 million from online ads. Subscriptions are where their business is at.

In terms of quarter to quarter, it's not like what you are posting about came out of nowhere. When they gave their outlook, last time they reported in February, they guided that digital ad revenue was going to be down mid to high single digits year over year. Online advertising has been a really tough game. It's Facebook, Google. ... and nothing else really.

I'd guess the much more concerning thing to investors (and the company itself) from its first quarter earnings would be that its growth in the number of subscribers, which has been growing like mad since the last election, slowed down. And that has almost entirely accounted for their growth in earnings. Last year, they were offering really big discounts for annual online subscriptions, and many of the readers who tried it didn't renew when the price went up. They still added 139,000 digital subscribers during the quarter, but investors are looking toward the future. The Times still looks to be on an upswing, but the question is whether that growth they experienced has peaked, and what happens next. Their costs are increasing. ... but for the time being, so is their subscription revenue. Year over year it was up more than 25 percent. Any revenue is good, obviously. But the ad revenue is sort of the afterthought to their business model now. Subscribers are where it is at for them.

 

[BTExpress]

I'd guess the much more concerning thing to investors (and the company itself) from its first quarter earnings would be that its growth in the number of subscribers, which has been growing like mad since the last election, slowed down.

Just wait until the three-ring circus in Washington ends and renewals drop off the cliff. People are already getting numbed to the crisis of the day in Washington.

 

[The Big Ragu]

Just wait until the three-ring circus in Washington ends and renewals drop off the cliff. People are already getting numbed to the crisis of the day in Washington.

I'd think that is one of two big risks for them. Their growth in subscriptions (and they got up over a billion dollars in subscription revenue last year) coincided with the "We are going to speak truth to power" journalism a lot of people are looking for right now. That three-ring circus you mentioned has clearly been a boon to them, the Post and WSJ. Also, there is clearly a limit on how much they can charge subscribers. As I said, they are still on an upswing, but a ton of people who were getting heavily discounted subscriptions didn't resubscribe when they came due.

 

[justgladtobehere]

The first paragraph in the op isn't clear. Total revenues were up as digital ads declined.
New York Times Co. Reports Revenue Growth as Digital Subscriptions Rise

One thing I noticed in the article was that digital subscriptions include subscriptions to separate apps.

 

[LanceyHoward]

This is precisely why the Times has shifted to a subscription revenue model, not an ad revenue one. Subscriptions account for more than 60 percent of their revenue now and that has been the focus. The Washington Post, Globe and Mail, Wall Street Journal are following that same plan. Basically, Facebook and Google have cornered the ad market, and social media is getting that spend. An online publication trying to rely on advertising revenue just isn't viable. But that bridge was crossed a while ago. The Times actually charges a relatively high CPM for advertising. The revenue isn't insignificant, but the money it generates is still kind of peanuts in their grand scheme of things. Look at it this way. ... The revenue they get get from just a few incremental subscribers (the subscription revenue) is equal to the ad revenue from 10s of thousands of hits on a story. They earned more than a billion dollars in subscription revenue last year. ... $238 million from online ads. Subscriptions are where their business is at.

In terms of quarter to quarter, it's not like what you are posting about came out of nowhere. When they gave their outlook, last time they reported in February, they guided that digital ad revenue was going to be down mid to high single digits year over year. Online advertising has been a really tough game. It's Facebook, Google. ... and nothing else really.

I'd guess the much more concerning thing to investors (and the company itself) from its first quarter earnings would be that its growth in the number of subscribers, which has been growing like mad since the last election, slowed down. And that has almost entirely accounted for their growth in earnings. Last year, they were offering really big discounts for annual online subscriptions, and many of the readers who tried it didn't renew when the price went up. They still added 139,000 digital subscribers during the quarter, but investors are looking toward the future. The Times still looks to be on an upswing, but the question is whether that growth they experienced has peaked, and what happens next. Their costs are increasing. ... but for the time being, so is their subscription revenue. Year over year it was up more than 25 percent. Any revenue is good, obviously. But the ad revenue is sort of the afterthought to their business model now. Subscribers are where it is at for them.

I was unclear,

The New York Times has over 2.7 million digital subscribers. I think they will make it. I should not have said it is all going to heck.

I should have said it is all going to heck for everyone else in the industry without a solid digital subscriber base. As far as I know only the New York Times, the Wall Street Journal and probably the Washington Post have solid digital subscriber bases. Gannett, for example, has 380,000 for USA Today and 80 local papers. So for most of the industry, the double digit drops in print advertising, the lack of a solid electronic subscriber base and the weakness in electronic display advertising means that the outlook for most of the industry is awful.

 

[TexasVet]

Most papers have a separate pricing system for print ads vs online ads. Of course, print would be higher. And if a business advertises in both, there's most-likely a combo package and the price of where each dollar goes is done by the book and the ad request order ... otherwise known as coding.

Print papers are easier to track since you know where your subscribers and rack sales are. Digital, on the other hand, could be spread across the country/world, making it less attractive for that local furniture store or auto dealer to spend their ad dollars.

Furthermore, lots of businesses are shifting their marketing from solely newspapers and radio to a multitude of platforms, knowing they could get a better rate by advertising through Facebook and Google, as well as other online-only mediums.

 

[Editude]

Yes, it's close to 2.8 million in digital subscriptions (some of that is cooking/crosswords) and 3.7 million total, including print-only subscribers. Mark Thompson, the CEO, sees millions more untapped (college educated, solid in English) subscribers, especially overseas, but the Trump bump has to recede at some point.

 

[LanceyHoward]

Most papers have a separate pricing system for print ads vs online ads. Of course, print would be higher. And if a business advertises in both, there's most-likely a combo package and the price of where each dollar goes is done by the book and the ad request order ... otherwise known as coding.

Print papers are easier to track since you know where your subscribers and rack sales are. Digital, on the other hand, could be spread across the country/world, making it less attractive for that local furniture store or auto dealer to spend their ad dollars.

Furthermore, lots of businesses are shifting their marketing from solely newspapers and radio to a multitude of platforms, knowing they could get a better rate by advertising through Facebook and Google, as well as other online-only mediums.

The point I raised is basically how the ad request is coded. When I bought the obituary for my father in the Denver Post we wanted it in print because we felt that the people who knew my Dad most likely read the print copy. But I think the on-line ad was included in the pricing. Iam not sure we had an option.

So how was the revenue assigned?

In the latest McClatchy earnings release they announced they had reached a milestone. Digital advertising had surpassed print advertising. But in the conference call they admitted they had reclassified the revenue from obituaries to weigh them more heavily to the electronic side of the business.

 

[LanceyHoward]

Yes, it's close to 2.8 million in digital subscriptions (some of that is cooking/crosswords) and 3.7 million total, including print-only subscribers. Mark Thompson, the CEO, sees millions more untapped (college educated, solid in English) subscribers, especially overseas, but the Trump bump has to recede at some point.

Yeah, the Trump bump will recede. But how many newspapers have gone out of business in the interim?

 

[TexasVet]

The point I raised is basically how the ad request is coded. When I bought the obituary for my father in the Denver Post we wanted it in print because we felt that the people who knew my Dad most likely read the print copy. But I think the on-line ad was included in the pricing. Iam not sure we had an option.

So how was the revenue assigned?

Every newspaper is different on obits. Big-city papers charge an outrageous amount while weeklies in the boonies not so much. However, most papers I've known charge to run it in print and run it for free online as a courtesy ... Not everyone does that, though.

 

[CD Boogie]

They still haven't implemented the type of impenetrable firewall that the WSJ deploys. I can read every story in the Times without paying. Every one. Most people here know this, right? You type the headline of said story into Google and then click on the top search result. How have they not closed this loop yet? It's financial malfeasance.