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.