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March 29, 2024

Newsonomics: NYT's 1Q, Reader Revenue is now 57% of All Times Revenue

If there were any doubt about the importance of reader revenue to the future of The New York Times – and most of the news publishing business – consider these numbers, offered up in the company’s first-quarter, 2016 financial report this morning.

The New York Times now depends on readers for 57% of its overall revenue. Compare that to the 38% of the fourth quarter, 2010 – just before the Times launched its paywall. That paywall changed its trajectory, and set a new model for the news industry.

But another number released this morning presents a parallel to 2010: Then, the Times was down about 1.9% in overall revenues. Today, it reported being 1.2% down, year over year, in overall revenues.

No matter all the change, the Times still hasn’t found a path to revenue growth.

 

First published at Politico Media

Follow Newsonomics @kdoctor

 

The complex story made simple: All that new digital reader revenue has almost made up for print ad revenue and print subscriptions and single copy sales that are in perpetual decline.

In fact, as CEO Mark Thompson delivered the prologue to the quarterlies, he made note of the “cash-generative” qualities of print – meaning grabbing the print funding of the digital business as long as you can and reinvesting it in digital – and the focus on the “rigor and realism to the print platform.” That refocusing on print as a platform continues; most of the work and workflow change is internal, with occasional public expressions, like the recent retrenchment in Paris-based print operations.

Costs will continue to come out – as Thompson promises markets the lure of real profits in 2017 – as they must; the Times year-over-year wasn’t much changed. That cost control remains essential. Overall, the Times is taking in 14% less in revenues in 2016 than it did for its core products (not counting other holdings, like the Boston Globe, that have been sold) in 2010.

The Times changed its digital subscription reporting. It’s a move of small importance now, but one that will continue to offer the Times, and other high-quality content producers, a route forward in increasingly uncertain advertising sales times.

Overall, the Times could announce a new total of 1,357,000 total “digital subscriptions.” That’s quite a bounce from the 1,094,000 reported just a quarter ago. Why? Now, the Times’ crossword subscription has arrived sufficiently of age to be thrown into the total. At 200,000 total subs, that product line produces new revenue at $39.95 annual or $6.95 monthly price points. The Times has found a new way to monetize its long-held crossword franchise, matching its daily Minis to the smartphone addiction of this age. Notably, here, existing Times news subscribers get 50% off; consider the bundling of several digital subscriptions the territory to be carved out.

The Times says that digital news subscriptions are increasing at three to four times the rate of the crosswords, 40,000-45,000 plus news ones added in the first quarter, as compared to 10,000-15,000 crossword ones.

In this fledgling business, we can see the healthier sprout of a Paywalls 2.0 movement, one I’ve been on the lookout for, for years. The big idea? As the gap between reader-willing payment and advertising revenue losses grows, publishers need to find other things that readers will pay for, in addition to the daily news report.

Of course, the crossword offers smaller revenue streams — but profit margins are impressive.

Crosswords offers the Times its first beachhead in beyond-news reader payment. Gnarlier territory to monetize extends to its Cooking readers, and those it hopes to grow from the new Watching and Well, topical products-in-the-making.

(How much would you pay for some new mobile version of intensive workouts the Times has recently highlighted? First 7-Minute app from 2014, here)

Then, there’s that big global push. I detailed the New York Times en Español strategy in February. With the Times’ recent public commitment $50 million over three years to expanding on that product, non-U.S. customers – who make up more than one in ten digital subscribers – will add to those overall digital subscription totals. That’s a 2018-2020 payoff – but the numbers will be needed then as well.

That global audience offers a twofer advantage. As Meredith Kopit Levien offered commentary about the mediocre digital ad results — down a troubling 1.3% for the quarter — she noted that luxury now makes up about 20% of total Times advertising. That global audience will become a big target for advertisers.

Overall, the Times’ ad woes parallel those of content creators, both legacy and start-up, overall (“Newsonomics: With new roadblocks for digital news sites, what happens next?”) On the call, Times CFO Jim Follo estimated traditional digital display ads at 45-50% of the Times digital advertising. That’s an important number because it’s in decline. As Google and Facebook remake the digital ad world, it’s the non-traditional ad types that offer the rays of ad revenue hope.

As Levien pointed out repeatedly, it’s branded content (the Times T-Brand Studio, which she says is up 100% in revenue year over year) and marketing services to advertisers that are the growth engines. Then, there are sponsorships and the increasing reality of VR, both on the upswing as well. Mobile? It’s now 22% of total digital ad revenue. That’s a good number in the industry, but still less than half of where the audience is; more than 55% of Times’ use is mobile.

So consider that traditional digital display number one to watch, still another crossover number in this unending journey from print to digital. Publishers want that reliance on digital display to become a smaller share of that business, much as they want to rely less on print circulation and print ad revenue.

Those sobering print numbers: Print advertising revenues down another nine percent. While circulation revenues overall grew by 2.4% (hello crosswords, which had been in the “other” revenue category until this report), print copy decline continues. The Times lost 3.8% of its Sunday print readers and 5.7% of its daily ones.

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