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Are NY Times (NYT) Efforts Enough to Counter Soft Ad Demand?

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The U.S. newspaper publishing industry has been grappling with sinking advertising revenues. The downturn in the industry witnessed in the last few years aggravated with a fall in print readership, as readers started opting for online news, consequently making the print-advertising model increasingly redundant. The New York Times Company (NYT - Free Report) has been contemplating new avenues of revenue generation to counter the dwindling advertising revenues.

Waning Advertising Revenue a Concern

The New York Times Company’s print advertising revenue fell 20.1% in the third quarter of 2017, following a decline of 10.5% in the preceding quarter. Total advertising revenue decreased 9% during the quarter under review. The company hinted that total advertising revenue in the final quarter is likely to decline in the high-single digits.

The company is fast acclimatizing to the changing face of the multiplatform media universe, and has already included mobile and reader application products in portfolio. Other publishing companies such as New Media Investment Group Inc. (NEWM - Free Report) , Gannett Co., Inc. (GCI - Free Report) and The McClatchy Company (MNI - Free Report) are also trying to adapt to different revenue generating ways.

Strategies Undertaken

The New York Times Company has been realigning cost structure and streamlining operations to increase efficiencies. It had offloaded assets that bear no direct relation with the core operations in order to concentrate on online activities. These endeavors have led the stock to increase roughly 37.6% so far in the year compared with the industry’s growth of 21.2%. Let’s analyze the endeavors undertaken.

Pay As You Read

The New York Times Company is concentrating on online activities, as evident from its pay-and-read model. Its pricing system for NYTimes.com was launched on Mar 28, 2011. The company notified that the number of paid digital subscribers reached 2,487,000 at the end of the third quarter — rising 154,000 sequentially and 59.1% year over year.

Subscription revenue grew 13.6% to $246.6 million, primarily due to increase in the number of subscriptions to the digital-only products and a rise in the home delivery price of The New York Times. Revenue from digital-only subscriptions jumped 46.3% to $85.7 million. Management now projects total subscription revenue to increase in the high-teens in the fourth quarter.

Digital advertising revenue surged 11% to $49.2 million, after witnessing an increase of 22.5% in the preceding quarter. Higher digital advertising revenue came on the back of rise in revenues from mobile platform, programmatic buying channels and branded content, partly offset by a fall in traditional website display advertising.

Focus on Other Verticals

The company is not only gearing up to become an optimum destination for news and information but is also now focusing on service journalism, with verticals like Cooking, Watching and Well. In this regard, it recently acquired The Wirecutter and its sister site, The Sweethome that recommends people about technology gear, home products and other consumer services. The company also acquired a digital marketing agency and portfolio company, HelloSociety, from Science Inc., which complements its T Brand Studio that helps in creating digital ad innovation and branded content. Further, it has launched digital subscriptions for NYT Cooking, its popular recipe site and app.

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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