New York Times Stock: Digital Revenue Up, Earnings Fizzle

It’s the source of “all the news that’s fit to print,” but for the past few years, The New York Times Co. (NYSE: NYT) hasn’t generated a lot of good news from its own business. Though it’s weathered the assault on ad-dependent publications better than most, it hasn’t gained much value for several years. Over the past 10 years, New York Times Co.’s stock has fallen more than 60%.
This week the newspaper company reported fourth-quarter earnings that had a little bit of everything: a modest decline in print advertising along with a sharp increase in digital advertising that essentially cancelled each other out and left overall revenues flat.
Quarterly earnings were down for both the quarter and the full year, due in part to the costs of staff reductions and investments in new technology . . . essentially the costs of doing business in an industry in transition.
One of the New York Times Co.’s biggest successes in recent years has been its ability to sign up paying customers for its digital product. It currently has more than 900,000 digital subscribers and says that there are enough untapped markets remaining that it should be able to surpass the 1 million mark this year. To cross that milestone, The Times will actively reach out to international readers.

Progress on Paid Content

This is all encouraging, but it’s not exactly the sort of definitive good news that investors crave. The Times has consistently offered a quality product and the revenues it reported this week suggest it’s slowly succeeding in bringing customers across the subscriber wall where they will pay to read content. At a time when there’s such an abundance of free content, this is a major accomplishment.
But the staff reductions of the past year, the steep investments in new technologies, and the planned hiring of new staff with somewhat different skill sets this year all point to a company that is still in transition, still trying to put all the pieces together into a solidly profitable venture. Until then, chances are good its stock will bounce around but not really take off.

Newspaper Profits Elusive

These days, quality newspapers like the Times are, financially speaking, a little like airlines. They offer a quality product but they struggle to turn a profit from them. In 2013, the news sector got a huge vote of confidence when Jeff Bezos purchased The Washington Post for $250 million. Bezos explained his purchase by saying he saw life in the news business and believed technology could help enhance reach and profitability. That paper has added some apps and technology enhancements since then; it has not undergone a dramatic transformation.
We’re still waiting for someone to really fix the news business. The tweaks that the Times and others are offering still fall short of that goal. For the Times, it’s been a long road to developing a business model that works. For investors, its stock seems still to be a bit of a gamble.

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