Inch by Inch, the New York Times Seeks Daylight Down the Field
Inch by inch, the New York Times’ strategies seem to be working. This is, though, a game of almost inches, as we look at the Times’ full-year and fourth-quarter financials, just released this morning.
Overall, there’s a remarkable flatness to the business:
- Profit of $256M as compared to $245.2M, YOY.
- Total revenues up .5% YOY, with 2012’s “53rd week” removed (as I’ve done in all comparisons here). That’s compared to .3% increase in 2012 compared to 2011. Talk about small ball.
- Circulation revenues continue to go up, ad revenues continue to go down, and we end up that flattish, zero-centric performance, which I described a year ago in reviewing the 2012 performance (“The Newsonomics of Zero and the New York Times“).
CEO Mark Thompson proudly pointed to the company’s best ad performance in three years, in the fourth quarter: Down only 1% YOY. He’s right. If sustained — and the Times is saying the 1Q ad performance should be like 4Q’s — then the Times would be on a path to get to whole digit (!) revenue increases for the year. We haven’t seen that since the mid-aughts at the Times, and largely in the daily industry.
That’s the big deal: To get to 2 or 3 or maybe, some day, 5% revenue growth.
The outlines of the Times strategy are clear, and its execution in progress. Mitigate those print ad losses, which had been run mid-single digit and higher, even though the Times can’t and hasn’t increased rate card prices for print. Rev up digital ad sales to get to positive; they were down .2% in 4Q.
Then, make the circulation revenues do the heavy lifting of revenue and profit growth. Those reader revenues — the salvation and the big bet of the Times in the modern paywall era — now total 52% of the Times’ revenue overall, with advertising a mere 42% and “other” 6%. Though we focus a lot on the digital subs, the Times’ 5.5% increase in print pricing continues to be a big driver in those reader revenues. Can it do that every year? How soon will we paying $1000 a year for seven-day print and All-Access? Is that the breaking point?
Digital subscriptions are now adding $150M a year to the Times performance. It can count 760,000 total digital subs, more than its print total of 676,000 last reported, and picked up 33,000 in the last quarter. That 33,000 is a good number. Plainly, digital subs are plateauing, yet that moderate growth could have stopped. As importantly, in the second quarter, the Times will launch the first of three new paid digital niche products — a premium tier for those that just want to pay the Times’ more money than its current top $35 for four weeks All-Access digital price. That’s the secret sauce of revenue growth for 2014, what I’ve written about as the Times’ “paywalls 2.0” strategy.
If the Times can maintain those 760,000 full-digital price subs — data tells it not to expect much cannibalization — then the new revenue from the new products could be the growth engine.
Those are troublesome ifs. If print ad loss can continue to be mitigated. If digital ads can move over the line to positive (video, Idea Lab+++). If market segments can be found for the new products.
It is an inch-by-inch process on a very long football field. Now, shed of its New England News group and its other once far-flung assets shorn, the Times is moving down field at a painfully measured pace, looking for daylight.
