Newsonomics: Is This the Bottom for The New York Times?
First, the good news of the month. The New York Times has outlasted Yahoo, as an independent company. Long ago, Yahoo, valued at as much as $140 billion, seemed one of those internet companies that might completely usurp the role of legacy companies. So today, with a market cap of $2 billion, the Times busily prepares its long-term future while Yahoo grabs $4.8 billion and fades into telco land.
That’s worth keeping in mind as we quickly review a down New York Times quarterly financials report. This morning [“New York Times sees digital and print advertising decline in second quarter”], the Times had an even harder time absorbing the big print ad losses than it had in a troublesome first quarter.
First published at Politico Media
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Those print ad losses are nothing short of astounding: the Times lost one of every seven dollars in print advertising year over year, down 14%. Print advertising – which not long provided 70% plus of all revenue – now makes up only 23% of all Times revenue. Still, at that 14% print ad decline, the Times hit its lowest, recent quarterly results – down three percent in total revenue. Not helping: digital advertising’s down revenue continued from the first quarter, down 7%.
The Times made the most of its now-almost-taken-for-granted big bright spot: digital subscription growth, which the company says is actually accelerating five years after the it went “paid.” In total – its news and crossword subscribers together – it could point to “51,000 net paid digital-only” news subscribers. All totaled: 1,424,000 subscribers to digital Times products.
Yet, it was advertising – which continues to dent all that reader revenue progress – that occupied most of this morning’s Times’ call with analysts. That call featured CEO Mark Thompson, Chief Revenue Officer Meredith Kopit Levien and CFO Jim Follo, all of whom indicated that the first half of this year should be a bottom. No one used that word, but in their financial projections, and comments, the second half of the year looks distinctly better.
How much better? Single-digit growth in advertising and double-digit growth in digital advertising, said Follo this morning. How good are those projections, given the Times fell short in its 2Q forecast?
Thompson centered on the Briticism “lumpy,” as in uneven. While July is in the books, and August largely known, September – which produces 50% of the quarter’s print revenue, and the greatest plurality of its digital — is less known. As Americans would know lumpiness mainly from their mashed potatoes, let’s use that metaphor for the Times’ changing advertising recipe. As I noted a quarter ago, the Times’ advertising transformation is a leading guide to how, and how rapidly, the advertising trade is changing across North America and western Europe.
First, this print ad decline is one to behold. The Times had held its print dollars better than most regional dailies — and, still does, but not by much. Compare the Times’ 14% loss for instance to McClatchy, one of the top five regional daily chains. Its second-quarter report: an 18% drop in retail ad revenue, a 24% drop in national ad revenue and a 14% drop in classified ad revenue, or 16.6% overall.
Gannett — the largest U.S. newspaper publisher – similarly, if more opaquely, reported similar down numbers (when acquired properties’ revenue is taken out for comparative purposes) yesterday.
Print, though, isn’t the future, of course, and it is fading ever-quicker.
It is the change in digital ad mix that will make the life-sustaining difference for the New York Times – a leader in making that mix transition – and for all other news-creating companies.
When CRO Meredith Levien talks transformation, on this call and elsewhere, she is talking industrial-scale change, highlighting again this morning, a transformation in “the whole supply chain of advertising storytelling.”
One key number highlights that transformation: Traditional digital display ads (a 20-year tradition, we should note) now make up a minority of digital ad sales. “A tipping point,” Mark Thompson rightly called it this morning. What it means: This proliferation of new ad formats and forms – from branded content (native ads) to mobile to increasingly nuanced programmatic to video and virtual reality – now constitutes a majority of the Times’ digital ad business. Consider, for a moment, how new – a few years – those formats are.
That crossover point — one among several crossover points that I have tracked over the years – will be a major driver of the news business worldwide in the next couple of years.
So, if that’s part of the lumpiness – fast changing formats – another is the whole nature of selling, and buying. “Duration is changing,” said Levien today. “Think less week-to-week and month-to-month campaigns, and more longer campaigns.” Combine that ad buying change with the fact that, as Thompson put it, the Times receiving a “smaller number of larger campaigns,” and we have a fairly discrete description of how this advertising stew defies traditional preparation. Lumpy = unpredictable, though the third-quarter forecasts acknowledge actual known business in the “pipeline,’ said Thompson.
With advertising revenue sill contributing about a third of all its revenue, the Times must master the new trade. If its rest-of-the-year projections come true, then, this first half of 2016 may represent a bottom, a turning point in that ad transformation.
Amid all the ad tumult, the improving reader revenue business shouldn’t be dismissed. Circulation revenue improved three percent year over year. Even as the Times loses significant print volume (down another 6% daily and 4% Sunday), its increased print pricing and all those digital subscription sales produce positive revenue growth. How is that happening?
The Times continues to tweak its product marketing engines, and that’s helpful, with bigger changes in those marketing, product and pricing models expected in 2017.
In the end, though, it has been the Times’ consistently high level of journalism, covering one of the biggest and most dramatic news years in memory, that has cemented many of those paying relationships. Engagement is up. Giving topline credit to the news product, Thompson said pay-supporting engagement is up: “The number of people coming four times a month, and ten times a month.”
Now, as the Times negotiates another tough budget for 2017, a big challenge lies ahead. How to maintain that surpassing news product quality (and presentation of it [Newsonomics: The New York Times Re-invents Page One — and It’s Better Than Print Ever Was] as ongoing budget cuts sap resources.
