Amidst an economy, which has not completely awakened from a
state of hibernation,
The New York Times Company
(
NYT
) has been moving on, keeping its head high as it posted
better-than-expected results for the second consecutive quarter of
fiscal 2012.
The New York Times Company's second-quarter 2012 earnings of 14
cents a share beat the Zacks Consensus Estimate by a penny, and
rose 27.3% from 11 cents earned in the prior-year quarter. The
quarter reflects a favorable response to the digital subscription
packages, increase in circulation revenue and fall in attrition
rate as subscribers of the New York Times' print version are able
to access content or articles online as well as on all applications
of The Times for no additional charge.
The New York Times Company's top line portrayed a marginal
growth. After a slight decline of 0.3% in the first quarter, total
revenue rose 0.6% to $515.2 million in the second quarter, and also
surpassed the Zacks Consensus Estimate of $509 million. The
increase in top line was led by strong circulation revenue.
The diversified media conglomerate hinted at improving
advertising revenue trends in the third quarter of 2012 compared
with the second quarter on the back of enhanced digital advertising
performance.
Diversifying Business Model
We remain impressed with The New York Times Company's efforts to
add diverse revenue streams, which include a circulation pricing
model and a pay-and-read model for NYTimes.com, the International
Herald Tribune and BostonGlobe.com, to make it less susceptible to
the economic conditions. The company is also adapting to the
changing face of the multiplatform media universe, which currently
includes mobile, social media networks and reader application
products in its portfolio.
Despite hiccups in the economy, what still promises a revenue
generation is The New York Times Company's pricing system for
NYTimes.com, which was launched on March 28, 2011. The company
notified that the number of paid digital subscribers for The Times
and the International Herald Tribune reached 509,000 at the end of
the quarter, portraying a jump of about 12% since March 18,
2012.
The company also launched a pay and read model for
BostonGlobe.com for a weekly subscription of $3.99. The number of
paid digital subscribers reached 23,000 at the end of the quarter,
representing an increase of 28% since March 18, 2012.
The publishing industry has long been grappling with flagging
advertising revenue. This comes in the wake of a longer-term
secular decline as more readers choose free online news, thereby
making the print-advertising model increasingly irrelevant. To curb
shrinking advertising revenue and seeking new revenue avenues, the
publishing companies contemplated charging readers for online
content.
Another media conglomerate,
News Corporation
(
NWSA
), has also moved towards an online subscription-based model for
general news content. News International, a subsidiary of News
Corporation, began charging readers for online content of The Times
of London and Sunday Times of London effective June 2010.
Other Initiatives
In an effort to offset the declining revenue and shrinking
market share, publishers are scrambling to slash costs. The New
York Times Company has been realigning its cost structure and
streamlining its operations to increase efficiencies, and in turn
the operating performance.
The company is also offloading assets that bear no direct
relation to the core operations. The New York Times Company
recently divested its remaining stake (210 Class B units) in the
Fenway Sports Group, the owner of the Boston Red Sox and the
Liverpool Football Club, for $63 million.
Another example of shedding the assets by the company is the
sale of Regional Media Group, which has been struggling with
shrinking advertising revenue.
Waning print advertising revenue, in an uncertain economy,
compelled The New York Times Company to take this tough decision of
divesting Regional Media Group, part of The New York Times Media
Group. This would allow the company to re-focus on its core
newspapers and concentrate on its online activities. The decision
to divest the division is also considered part of the cost
containment efforts undertaken to stay afloat in this turbulent
environment.
Holds Zacks #2 Rank
The New York Times Company remains committed to contain costs,
strengthen balance sheet, and rebalance portfolio. Currently, we
have a long-term 'Outperform' recommendation on the stock. However,
the company holds a Zacks #2 Rank that translates into short-term
'Buy' rating.
NEWS CORP INC-A (NWSA): Free Stock Analysis
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NY TIMES A (NYT): Free Stock Analysis Report
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