The economy, which has still not completely awakened from its
state of hibernation, has been impeding the growth of publishing
The New York Times Company
) is no exception.
Challenging economic conditions, along with softness in
advertising demand, have been weighing upon the company's
performance. The publishing companies have been trying to shield
themselves from the impact of an unstable market and have been
contemplating new revenue generating possibilities.
Publishing companies have been offloading assets that bear no
direct relation with the core operations. The New York Times
Company recently completed the sale of About Group, which it
acquired in 2005, to
) for a consideration of $300 million. The About Group segment
comprises the websites About.com, ConsumerSearch.com and
Caloriecount.com, along with other related businesses.
Management had to take the hard decision to sell About Group,
which has been facing declining revenue since the last two
quarters. About Group segment's revenue dropped 8.7% in the second
quarter of 2012 due to falls witnessed in both cost-per-click and
display advertising. During the first quarter, revenue declined
Prior to this, in May 2012, The New York Times Company 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.
Initially, The New York Times Company used to hold a 17.75%
stake (or 750 Class B units) in Fenway Sports Group, which it had
acquired in 2002 for $75 million. But the economic downturn in 2008
and sinking print advertising demand compelled management to look
for strategic options to get rid of the non-core assets, and infuse
the proceeds to augment its struggling publishing business.
Another example of shedding the assets by the company is the
sale of Regional Media Group in December 2011 - consisting of 16
regional newspapers, print publications and associated ventures -
to Halifax Media Holdings LLC, the proprietor of
The Daytona-Beach News Journal
in Florida, for approximately $143 million.
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 pay more attention to its online activities. The
decision to offload the division is also considered part of the
cost containment efforts undertaken to stay afloat in this
The Regional Media Group has long been grappling with shrinking
advertising revenue. The Group witnessed secular declines of 9.7%,
9.2% and 9.7% in advertising revenue during the first, second and
third quarters of fiscal 2011, respectively. Circulation revenue
also fell 4.7%, 1.7% and 1.5% during the respective quarters.
Revenue for the Group tumbled 7.4%, 6.2% and 6.5% in the first,
second and third quarters of fiscal 2011, respectively.
The publishing industry has been struggling with sinking
advertising revenue for sometime now. This comes in the wake of a
longer-term secular decline as more readers are gradually choosing
free online news, thereby making the print-advertising model
increasingly irrelevant. To curb shrinking advertising revenue and
seek new revenue avenues, the publishing companies contemplated
charging readers for online content.
The New York Times Company has been adding diverse revenue
streams, which include a circulation pricing model and a
pay-and-read model for NYTimes.com 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.
The New York Times Company remains committed to streamline its
cost structure, strengthen its balance sheet, and rebalance its
portfolio. However, we remain apprehensive about the risks the
company faces due to its high dependence on advertising revenues.
Currently, we have a long-term "Neutral" recommendation on the
stock. Moreover, the company, which competes with
Gannett Company Inc.
holds a Zacks #3 Rank that translates into a short-term Hold
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