The New York Times Company
), one of the leading newspapers in the United States, is set to
report its fourth quarter and full year earnings Thursday, February
7. As we've reiterated in the past, the secular decline in the
print advertising industry means that New York Times will have to
move away from its core competencies as a print publisher and move
to a digital product offering.Therefore, during this quarter's
earnings announcement we will continue to focus on New York Times'
digital subscriber growth, which will be the primary driver for any
revenue growth going forward. Additionally, we will be closely
watching the strategy that New York Time's new CEO Mark
Thompson's lays out in the earnings call as we are keen to know his
plans to grow NYT's digital business.
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NYT posted a net loss for the third quarter, which caused the
stock to drop over 20% after the earnings announcement. The firm
reported a slight 0.6% decline in overall revenues compared to 2011
driven by an 8.9% decrease in advertising revenues, partially
offset by a 7.4% increase in circulation revenues. The company also
reported a year-over-year decline in operating profit to $8.5
million 2012, compared with $42 million in 2011.
Overall, the decline in revenue was not too surprising as it was
driven by a 10.9% decline in print advertising. However, what was
encouraging was that the company posted healthy growth in their
digital subscriber base, which increased to 592,000 subscribers, an
increase of 11% from the second quarter.
Previously the Director-General at the British Broadcasting
Corporation (BBC), Mark Thompson, was appointed as the new
New York Times
CEO in November. We think he was a good choice since the company
now has a top executive with extensive experience in a digital
media company, and Thompson's appointment should help NYT focus on
innovation in digital media.
Since this will be Thompson's first earnings call as CEO, we are
interested to know his thoughts on NYT's digital strategies. We
expect more emphasis on social and mobile media platforms, but will
have to wait and see to know more on specific initiatives, if
Watching Digital Subscriber Growth
It is imperative that
New York Times
shows some improvement in online subscriptions since digital
subscriptions will be its primary business driver going forward. We
expect the company will reach approximately 550,000 digital content
subscribers by the end of 2012, and about 1.35 million subscribers
by 2019, the end of our forecast period.
However, we believe these numbers are only achievable if
New York Times
is able to maintain the quality of its content offerings since it
faces stiff competition from competing sites such as Huffington
Post. If Thompson's growth strategies are unsuccessful and NYT
digital subscribers only grow to 1 million by 2019, we would see
approximately 10% downside to our price estimate.
We currently have a
$7.54 price estimate for New York Times
, which is approximately 15% below the current market price.
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