The New York Times Company
) recently announced its Q1 2011 earnings and provided an
initial glimpse into the results of its newly introduced paywall.
The paywall was recently implemented to encourage "heavy users" to
subscribe. New York Times competes with News Corp's (
) The Wall Street Journal (WSJ) as well as internet-based outlets
like Yahoo (
), Google (
) and AOL (
Our price estimate for NYT stock, at $9.19
is about 5-10% above market price.
Early Signs from the Paywall
According to management, the paywall generated 100,000 paid
subscriptions within three weeks of its launch. Notably, the terms
of the paywall offer the first 4 weeks of service for only 99
cents, after which subscribers will shift to the standard (higher)
rates. The point here is that the service is still within its
promotional period and might see a few cancellations as subscribers
breach their 4-week discounted window. Overall, we estimate that
NYT will attract around 500,000 paid subscribers in 2011.
As expected, the paywall has brought a decline in online traffic
for NYT. According to Experian Hitwise, a market research firm, the
total number of visits on NYT.com declined 5% to 15% in the first
12 days after the paywall launched, and total page views declined
11% to 30%. We anticipate that monthly page views per user will
decline 30% in 2011 vs. 2010 levels.
What Does Management Expect?
Management sees that the decline in traffic at NYTimes.com as
being within expectations. The company expects no loss of
advertisement inventory on its site, as any inventory that goes
unsold in the premium market could be used for remnant programs or
promotional house ads. The hope here is that any potential revenue
loss from the traffic decline will be more than offset by
subscription revenue gains.
See our complete analysis for NYT stock here