The New York Times Co.’s first-quarter earnings fell 58 per cent as a decline in print advertising revenue outweighed an increase in digital advertising revenue.
Quarterly declines in print ad revenue at the Times Co. and other publishers narrowed through most of last year. But the Times Co.’s latest results suggest the improvement may be stalling.
The company said Thursday that it earned $5.4 million, or 4 cents per share, during the three months ending March 27. That compared with net income of $12.8 million, or 8 cents per share, a year ago. The latest earnings matched the average estimate of analysts polled by FactSet.
After stripping out one-time items in both quarters, such as severance payments and tax-related adjustments, this year’s performance looked even worse: earnings of 2 cents per share, compared with 11 cents a year ago.
Revenue fell 4 per cent to $567 million, about $7 million below analysts’ projections.
Times Co. shares fell 20 cents, or 2.2 per cent, to close Thursday at $8.92.
The Times Co.’s print ad revenue dropped 7.5 per cent in the first quarter compared with a year ago; the decline was 7 per cent in the fourth quarter.
Print advertising remains the major source of revenue for most newspapers, even as their publishers focus on expanding offerings on the Web and mobile devices to draw digital advertising.
The New York Times newspaper is seeking additional digital revenue by charging readers for full access to its website and mobile services. The new fees, which range from $15 to $35 every four weeks, started in Canada on March 17 and expanded to the rest of the world on March 28, the day after the first quarter ended.
The Times Co. said Thursday that it has attracted more than 100,000 subscribers so far. The company said those numbers exceeded expectations but cautioned it was too early to estimate how many it will retain after their promotional periods expire. Times Co. CEO Janet Robinson said the fees have also attracted more print subscribers because they get online access for free; she didn’t provide specifics during a conference call Thursday.
Ken Doctor, a newspaper industry analyst at Outsell Inc., said the initial response to the Times’ new digital fees is encouraging, even though he believes most people may have been lured by sharp discounts. “Just getting all those people to click on something showing they are willing to pay is meaningful,” he said.
Publishers have experienced strong growth in their digital ad revenue. But the gains haven’t been nearly enough to offset the deterioration of print advertising, where rates generally have been 10 times higher than digital ads.
Publishers are hoping digital ad rates will improve eventually, especially if people keep buying tablet computers such as Apple Inc.’s iPad. Publishers believe readers will spend more time with newspapers on tablets than they do on a desktop computer, giving them the leverage to charge advertisers higher rates on tablets.
For now, the gap between print advertising losses and digital ad gains remains substantial.
Digital ad revenue at the Times Co., for instance, totalled $83.6 million, an increase of 4.5 per cent, or $3.6 million, from last year. But the 7.5 per cent drop in print advertising translated into about $17 million less than last year. That left the Times Co.’s print advertising at $215 million in the first quarter. By contrast, print ad revenue totalled more than $460 million in the same period five years ago.
Executives said the decline worsened in March because advertisers got more worried about consumer spending because of higher gas prices. Japan’s massive earthquake and nuclear plant crisis also contributed to broader economic uncertainty.
Although executives said the trends have been better in April than March, it seems unlikely to lead to higher ad revenue in the current quarter. The Times Co. said ad revenue this month is down about 4 per cent from last year. Ad revenue in March fell 9 per cent.
Like other publishers, the Times Co. has been raising its subscription and newsstand prices in recent years to help offset losses in print advertising. Those price increases have caused the Times Co.’s circulation revenue to surpass its print advertising revenue in some recent quarters, an industry rarity. It happened again in the first quarter. Circulation revenue was $228 million, about 6 per cent more than print ad revenue.
But the higher prices have driven away some readers. The Times Co.’s first-quarter circulation revenue declined 4 per cent because fewer newspapers were sold. Robinson said The New York Times’ weekday circulation averaged 905,000, a 4 per cent drop from last year, while Sunday circulation averaged 1.3 million, a 3 per cent drop.
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