The New York Times Co. joined McClatchy yesterday in booking a rare operating loss for the third quarter, $9 million or about 2.5 percent on revenues of $364.7 million.
But the many moving parts of the Times digital transformation effort had a number of positives mixed in as well. Here are nine takeaways:
- About that loss. It was driven by high costs associated with staff reductions ($20 million) and investment in new products. The first will be a one-time blip. But the Times will be launching and relaunching new digital versions for some time to come. Each is expensive to develop and market, and significant new revenues may be slow in coming.
- Equilibrium in ad and circulation revenues. A 17 percent year-to-year gain in digital advertising for the quarter roughly offset a 5 percent decline in print. Similarly revenue from a net gain of 44,000 digital-only subscribers offset revenue losses for print and print-digital subscriptions. That’s an achievement. On the ad side, most of the industry is not yet growing digital and other revenue fast enough to cover print ad losses — and Times execs, in a conference call with analysts, concede that they don’t expect to do so again in the fourth quarter.
- Room to grow digital audience. The 44,000 quarter-to-quarter gain, the largest the company has recorded in several years, CEO Mark Thompson said, came mainly from new international customers and the “consumer education” sector (i.e. discounted subs to students). Thompson said that with improved marketing abroad he expects to continue growing that group of subscribers.
- Too expensive? The Times has raised print subscription prices this year, but the higher revenue per customer, chief financial officer James Follo said, was “outweighed by volume declines.” Daily print circulation was off 5.2 percent year-to-year and Sunday 3.2 percent. With the cost of a seven-day print subscription outside the New York metro area inching close to $1,000 a year, the Times may find renewals, new subscriptions (and newsstand copies) a tougher sell — especially as a range of much cheaper digital options are available.
- About those executive changes. Thompson had little to add to the announcement earlier this week that 26-year veteran Denise Warren was leaving the company after her chief digital officer job was split in two. But he did drop a hint, saying the Times would be looking for “an injection of specialized digital expertise.” Warren was an experienced and talented generalist who moved from overseeing advertising to the successful completion of the Times paywall strategy. But deeper digital roots may be needed in the executive suite for the next round of growth.
- Women in leadership. Warren’s is the third high-level executive departure in three years, following the firings of Thompson’s predecessor as CEO, Janet Robinson in December 2011, and Executive Editor Jill Abramson this May. The Times did add a woman in its top advertising job, hiring Meredith Kopit Levien away from Forbes in July 2013.
- Mobile advertising progress. Kopit Levien said mobile advertising is finally gaining some traction, accounting for about 10 percent of digital ad revenue. On the other hand it lags mobile audience which now accounts for more than 50 percent of the digital visits to Times’ sites and apps.
- Newsroom hiring. Thompson said he expected a modest wave of hiring following the well-publicized downsizing by 100 jobs. But as at many publications, the newly hired will have different job duties like audience development rather than traditional reporting and editing roles.
- Lower revenue per customer. Several questions and answers in the earnings conference call focused on so-called ARPU, jargon for average revenue per user (or unit). With the changing product mix, ARPU is falling at the Times, though Follo said by only about 5 percent year-to-year.
That spotlights a huge financial challenge for the industry. As business moves down the price chain (both ads and circulation) from print to desktop/laptop to smartphone, a company can end up running fast just to stay even in revenues. And that’s likely to persist for years not just quarters.
New York Times shares traded down about 5 percent at market close.