The New York Times
(
NYT
) is expected to release its Q2 2011 earnings results on July 21,
2011. For this quarter, we focus our attention on the newly added
digital subscription feature and its potential impact on NYT's
digital-based revenues. NYT competes with 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
).
We maintain a
$9.20 price estimate for NYT stock
, which is a 5% premium over the current market price.
U.S. Newspaper Circulation Continues to Lag
A recent report released by the Audit Bureau of Circulation
(ABC) indicates that circulation has declined for 18 of the 25
largest U.S. newspapers from last year. For NYT, Sunday newspaper
circulation averaged 1.34 million daily (for the six months ending
March 2011), about 37,000 copies down from last year.
Digital Subscription Show Promise
With the recently launched digital subscription for NYT, the
company aims to extend its digital revenue stream beyond online
advertising, which increasingly faces competition from Internet
giants such as Google, Facebook and Yahoo. The company expects
about $13 million in incremental expenses for the digital
subscription initiative for Apr-Dec 2011.
The New York Times is pursuing aggressive promotion of its
digital subscription feature through discounts on its online
content, mobile app and tablet app subscriptions. However, it runs
the obvious risk of users migrating to other sites that provide
similar content for free. The near-term benefits from moving its
paywall have in fact been modest at best with unique visitors of
NYTimes.com increasing marginally to 33.6 million in May 2011 from
32.9 million in April 2011. Unique visitors to the website
remain a crucial factor in building an online subscriber base for
NYT, which relies on the site's "heavy users" as potential
subscribers.
Going forward, we will continue to closely follow NYT's paywall
business and its impact on the website's unique visitor
traffic.
See our full analysis and $9.20 price estimate for
NYT