The New York Times basks in the glow of digital revenue


Another quarter, another wave of digital subscriptions for The New York Times Company (NYSE: NYT). The newspaper publisher's second-quarter 2017 earnings report revealed that it's still experiencing a surge of non-print subscriptions, as a multiyear bet on content geared toward mobile devices continues to pay off. Below, we'll hit the headline numbers, followed by a detailed look into the quarter's results.

The New York Times earnings: The raw numbers

MetricQ2 2017Q2 2016Year-Over-Year Growth
Revenue$407.1 million$372.6 million9.3%
Net income$15.6 million($0.21) millionN/A
Diluted earnings per share$0.09($0.00)N/A

Data source: The New York Times Company.

46 PHOTOS
Printing the New York Times in 1942
See Gallery
Printing the New York Times in 1942

The Newsroom 

Photo Credit: Library of Congress 

The bullpen

Photo Credit: Library of Congress 

Telegraphers record messages in the wire room.

Photo Credit: Library of Congress 

Incoming copy from AP

Photo Credit: Library of Congress 

Copy boys mimeograph dispatches.

Photo Credit: Library of Congress 

Dispatches.

Photo Credit: Library of Congress 

As the copy boy's rush to meet deadlines mimeographed dispatches cover the floor.

Photo Credit: Library of Congress 

Editors can be seen at the foreign desk discarding stories by 'spiking' them. 

Photo Credit: Library of Congress 

These editors are responsible for all stories outside the U.S. 

Photo Credit: Library of Congress 

NYT correspondents for Argentina, Switzerland, and Mexico.

Photo Credit: Library of Congress 

Drama critic Brooks Atkinson.

Photo Credit: Library of Congress 

Old and new dictionaries. 

Photo Credit: Library of Congress 

Head of the 'morgue' Tommy Bracken. 

Photo Credit: Library of Congress 

A New York Times radio operator. 

Photo Credit: Library of Congress 

In the radio room, the news is sent out to ships in morse code. 

Photo Credit: Library of Congress 

A radio operator records a message from Switzerland. 

Photo Credit: Library of Congress 

A cartographer looks over charts before preparing a map of the war in Europe. 

Photo Credit: Library of Congress 

The photo department sends out photo all over the world. 

Photo Credit: Library of Congress 

A negative is inspected in the dark room.

Photo Credit: Library of Congress 

A fashion image is retouched. 

Photo Credit: Library of Congress 

As mats are completed they are checked off by page. 

Photo Credit: Library of Congress 

One the page is marked up the completed time is marked alongside it. 

Photo Credit: Library of Congress 

A story is typed out on a linotype in the composing room. 

Photo Credit: Library of Congress 

Style change notices. 

Photo Credit: Library of Congress 

Linotype slugs are picked up from the table. 

Photo Credit: Library of Congress 

A mat is looked over for errors. 

Photo Credit: Library of Congress 

A man operates a proof press. 

Photo Credit: Library of Congress 

A page is prepared for print in the composing room. 

Photo Credit: Library of Congress 

This man has set the daily index by hand for 15 years.

Photo Credit: Library of Congress 

Proofs posted on the wall. 

Photo Credit: Library of Congress 

As deadlines creep closer page one is completed. 

Photo Credit: Library of Congress 

Type is set.

Photo Credit: Library of Congress 

Workers move a 1608 lbs paper reel. 

Photo Credit: Library of Congress 

Paper is fed through the press. 

Photo Credit: Library of Congress 

Curved plates are prepared for the press. 

Photo Credit: Library of Congress 

Curved plates are assigned their corresponding page number. 

Photo Credit: Library of Congress 

Plates are loaded onto the press. 

Photo Credit: Library of Congress 

Numbered plates await the press. 

Photo Credit: Library of Congress 

The press is almost ready to run. 

Photo Credit: Library of Congress 

And the press is a go! 

Photo Credit: Library of Congress 

The first edition is checked for quality. 

Photo Credit: Library of Congress 

Finished papers are cut. 

Photo Credit: Library of Congress 

Completed papers are bundled for delivery. 

Photo Credit: Library of Congress 

A truck is loaded with the latest edition of the New York Times. 

Photo Credit: Library of Congress 

A cart is loaded with finished papers. 

Photo Credit: Library of Congress 

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

What happened with The New York Times this quarter?

  • Subscription revenue increased 13.9% to $250.0 million on the strength of a 46.4% leap in total digital-only subscriptions. Digital subscription revenue totaled $82.5 million during the quarter.

  • Paid digital-only subscriptions expanded sequentially from last quarter by 114,000, to a total of 2.33 million by quarter's end. The additions represented a 63.4% increase versus the second quarter of 2016, and were comprised of 93,000 digital news subscriptions, with the balance to the company's digital crossword product.

  • Digital subscriptions are still benefiting from high interest in the company's coverage of the Trump administration, as CEO Mark Thompson pointed out during the conference call with analysts.

  • Digital-only crossword subscriptions proved again to be a small but rapidly growing component of total revenue. Crossword subscriptions revenue rose nearly 42% to $3.2 million during the quarter.

  • There appears to be long-term potential in international subscriptions. Non-U.S. subscriptions soared by 80% during the quarter, and now make up 14% of digital-only subscriptions.
  • Advertising revenue increased by 0.8%, which, as management relayed, marked its first positive advance since the fourth quarter of 2014. Print advertising's decline of 10.5% was offset by a 22.5% increase in digital advertising.

  • Weakness in print advertising was formerly a huge problem for the Times. But with each passing quarter, expansion in non-print services reduces print advertising's contribution to the company's top line. In the last three months, print advertising made up just 19% of revenue, and management reported that for the first time, digital subscription revenue surpassed that of print advertising.

  • "Other" revenue rose 12.8% to $24.8 million, buoyed by revenue from the October 2016 acquisitions of two product review sites: The Sweethome and The Wirecutter.

  • Operating costs rose 11% during the quarter to $377.4 million, due primarily to severance costs for terminated employees and increased compensation. Substantially higher net income versus the comparable quarter resulted from restructuring and pension charges taken in the second quarter of 2016. These special items produced a comparative current year benefit of $23.5 million.

What management had to say

STOCK PRICE FOR NYT

Full price information

The New York Times is seeking to strengthen its ability to generate investigative journalism at a faster pace, to capitalize on the demand for high-quality news delivered to mobile devices. In the earnings conference call, CEO Thompson touched on the newspaper's somewhat controversial decision to reduce newsroom editing staff, both as a cost-saving measure and to ultimately expand content while expediting it to consumers:

We continue to implement the strategy outlined in our path forward and our newsroom's 2020 report and are confident that we will achieve our stated target of a $100 million of annual digital revenue by 2020. Our newsroom is undergoing a process to streamline its editing function to match the speed and form of digital journalism, while freeing up resources to put more journalistic boots on the ground, to deliver more investigations and help us further develop our capabilities in visual journalism.

While it's logical to allocate more resources to a burgeoning revenue stream, the strategy outlined above isn't without risks. The Times' accurate, grammatically sound, and typically typo-free copy is part of its larger brand proposition. While the newspaper arguably has traditionally kept too many editing layers in its process, a noticeable deterioration in copy quality could lead to some subscriber dissatisfaction.

Looking forward

The company doesn't provide detailed revenue and earnings guidance, tending to focus on a few big-picture items. For the third quarter, it expects subscription revenue to increase at a similar rate as the second quarter, i.e., near the mid-teens, on the strength of an anticipated 40% growth in digital subscriptions.

Advertising revenue is expected to decline from the mid-to-high single digits, while "other" revenue is slated to build on its near-13% advance in the second quarter, with growth shifting to the high teens. Operating costs are expected to rise in the mid-single-digit range.

In sum, management anticipates that the third quarter, at least structurally, will look pretty similar to the second quarter -- an outcome that shareholders will happily subscribe to.

10 stocks we like better than The New York Times
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and The New York Times wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of July 6, 2017

Asit Sharma has no position in any stocks mentioned. The Motley Fool recommends The New York Times. The Motley Fool has a disclosure policy.


Read Full Story

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.