NYT Looks for New Revenue Streams to Supplement Print Ad Struggles

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The New York Times ( NYT ) primarily operates in the newspaper business, with ownership of The New York Times, International Herald Tribune, Boston Globe, and About.com.  It competes for online advertising dollars with hybrid publications like News Corp's ( NWS ) The Wall Street Journal (WSJ) as well as internet-based outlets like Yahoo ( YHOO ), Google ( GOOG ) and AOL ( AOL ).

NYT announced its Q4 2010 earnings in early February, in which top-line revenue for the whole year declined slightly from $2.44 billion in 2009 to $2.39 billion in 2010. Within the advertising segment, print newspaper ads continue to struggle while online ads gain ground. The company's print newspaper ad revenues declined from $680 million in 2009 to $640 million in 2010, while online ad revenues increased from $120 million in 2009 to $140 million in 2010.

Our price estimate for NYT now stands at $9.09 , which is about 10% below market price.

NYT Looking to Diversify

The top-line revenue decline has prompted initiatives focused on diversifying the business and reducing dependency on the traditional print newspaper business. Although this business has struggled to sustain previous revenue levels, it still contributes highly to NYT's company-wide revenues.

See our full analysis and $9.09 price estimate for New York Times

But the company is pursuing new initiatives to grow online ad revenues. For one, it will launch a paywall (for "heavy users") for its online site in the near future. We've previously examined the outlook for this revenue stream, noting both upside and downside potential (see our article Upside and Downside Scenarios for NYT's Online Paywall ).

The company is also promoting its NY Times app for mobile devices, through which it expects to tap new demand from the surging smartphone and tablet markets. During the February earnings release, management commented that NYT's iPhone app had been downloaded over 6 million times since its 2008 launch, with almost half (about 2.5 million) of these occurring in 2010 alone. Even NYT's iPad app has seen more than 1.5 million downloads since its launch in October 2010.

NYT could also see added revenue from a digital content subscription service that Apple (AAPL) recently launched on its app store. However, it is important to note that, when users go through Apple's app store to sign up for the subscription, Apple maintains a substantial 30% cut of the revenue.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: AOL , GOOG , NWS , NYT , YHOO

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