The New York Times Company ( NYT ) posted
first-quarter 2013 earnings of 4 cents a share that missed the
Zacks Consensus Estimate by a penny and fell 20% from 5 cents
delivered in the year-ago quarter. The current economic situation
does not seem promising for publishing companies, which are bearing
the brunt of waning advertising demand, and this Zacks Rank #4
(Sell) stock is no exception. Consequently, the company is
contemplating on introducing a new line of digital products and
services, and targeting global customers to counter the
Including one-time items and discontinued operations, quarterly
earnings came in at 2 cents, substantially down from the year-ago
earnings of 28 cents a share.
The quarter also reflects favorable response to the digital
subscription packages and increase in circulation revenue. However,
these failed to offset the diminishing print advertising
Publishing companies have been divesting assets that have no
direct relation to the core operations. The New York Times Company
on Sep 24, 2012 completed the sale of About Group, which it
acquired in 2005, to InterActiveCorp ( IACI ) for a
consideration of $300 million. In October, the company sold its
stake in Indeed.com, a job portal, for approximately $167
Another example of asset divestiture by the company is the sale
of Regional Media Group in Dec 2011, which was once a part of News
Media Group. The company now intends to sell its New England Media
Group, including The Boston Globe and its allied
properties. Another diversified media conglomerate, The
Washington Post Company ( WPO ) completed the
sale of its daily and Sunday newspaper, The Herald , to
Black Press Ltd. and its subsidiary Sound Publishing.
The New York Times Company now reports through one reportable
segment, News Media Group, which includes The New York Times Media
Group and New England Media Group. The company's top line decreased
2% to $465.9 million, and came below the Zacks Consensus Estimate
of $471 million attributable to a fall in advertising revenue. The
New York Times Media Group revenue edged down 0.9% to $380.7
million and New England Media Group revenue fell sharply by 6.7% to
The ongoing slouch in the advertising market continues to weigh
upon The New York Times Company, the publisher of The New York
Times , the International Herald Tribune , The
Boston Globe and 15 other daily newspapers. Total advertising
revenue slid 11.2% to $191.2 million in the quarter.
The New York Times Company's print advertising declined 13.3%
during the quarter. Digital advertising revenue for New York Times'
Digital business, which includes NYTimes.com, Boston.com and
BostonGlobe.com, fell 4% to $46.5 million, and now accounts for
24.3% of total advertising revenue, up from 22.5% in the prior-year
The company experienced a fall in all major advertising
categories. Both national and retail advertising dipped 10.5% and
15%, respectively, during the quarter. Total classified advertising
dropped 10.9%. Within classified, real estate and help-wanted
advertising fell 15.3% and 15%, respectively. Automotive
advertising tumbled 9.8%.
The diversified media conglomerate hinted that total advertising
revenue trends in the second quarter of 2013 would be comparatively
better than the first quarter.
On the brighter side, the rise in circulation revenue came as a
respite. It climbed 6.5% to $241.8 million. Management now expects
total circulation revenue to jump in the mid-single digits in the
second quarter of 2013, gaining from digital subscription
initiatives and increase in print circulation price at The New
York Times .
Total adjusted operating profit rose 3.4% to $49.6 million,
whereas adjusted operating margin expanded 50 basis points to
10.6%. The growth reflected sturdy circulation revenue and
effective cost management.
Other Financial Aspects
The company ended the quarter with cash and marketable
securities of about $866 million, and total debt and capital lease
obligations of approximately $698 million.
The New York Times Company incurred capital expenditures of
approximately $4 million during the quarter. Management now
anticipates capital expenditures of approximately $40 million in
The company's advertising volume came under pressure as
advertisers shied away from making any upfront commitments in an
economy which is showing an uneven recovery. The publishing
industry has long been grappling with sinking 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 seek new revenue
avenues, the publishing companies contemplated charging readers for
Despite hiccups in the economy, what still promises a guaranteed
revenue generation avenue is The New York Times Company's pricing
system for NYTimes.com, which was launched on Mar 28, 2011. The
company notified that the number of paid digital subscribers for
The New York Times and the International Herald
Tribune reached 676,000 at the end of the quarter, reflecting
a jump of about 45% since the end of the first quarter.
The company also launched a pay and read model for
BostonGlobe.com. The number of paid digital subscribers reached
32,000 at the end of the quarter, representing an increase of 50%
since the end of the previous quarter.
The increase in the subscriber base was due to the company's
decision to limit the number of free articles that can be read by
online traffic visiting the website of its flagship newspaper.
Online visitors cannot access more than 10 free articles per month,
which is exactly half of what the pay-and-read model offered when
the system was launched.
However, recently, The New York Times Company stated that
traffic visiting NYTimes.com and mobile Website (m.nytimes.com) or
users through mobile applications can now have limitless access to
video content for free. This applies to both subscribers as well as
Another media conglomerate, News Corporation (
NWSA ) has also
moved toward an online subscription-based model for general news
content. News International, a subsidiary of News Corporation,
began charging readers for online content for The Times of
London and Sunday Times of London effective Jun
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 risks that the
company faces due to its high dependence on advertising revenue.
The company intends to transform itself and lessen its reliance on
In doing so, the company wishes to launch lower-priced as well
as premium subscription based model to target different masses
according to their appetite, and emphasize on online video
production and brand extension. The company will also christen
International Herald Tribune as the International New York Times to
represent itself as a single brand identity in order to attract
international digital subscribers. These initiatives will come into
play in the fourth quarter of 2013 and into 2014.IAC/INTERACTIV (IACI): Free Stock Analysis
ReportNEWS CORP INC-A (NWSA): Free Stock Analysis
ReportNY TIMES A (NYT): Free Stock Analysis ReportWASHINGTON POST (WPO): Free Stock Analysis
ReportTo read this article on Zacks.com click here.Zacks Investment