Times reports digital circulation gain, but what’s driving it?

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New York Times homepage. (NYTimes.com)
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The New York Times Company continued its upward circulation trajectory in the second quarter of 2014 while advertising revenues dipped once again.

The company announced this morning that it had added 32,000 new digital subscribers in the quarter, a 39 percent increase over the same period in 2013, which contributed to a modest 1.4 increase in circulation revenues.

Chief executive Mark Thompson said in a statement that the majority of new subscriptions came from signups to a suite of specially tailored apps that were introduced earlier this year.

The new apps are NYT Now, which delivers a stream of select curated news content to mobile devices for $8 a month; NYT Premiere, a premium subscription that comes with bonus material on top of unlimited access to Times content for $45 a month; and NYT Opinion, which provides access to op-ed content for $6 a month. Standard all access digital plans start at $15 a month.

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The additions brought the total number of people paying to read the Times on web browsers and mobile devices to around 831,000, up from 799,000 as of the end of the first quarter.

The apps are seen as crucial to the growth of reader revenue at the Times. The company now makes more money from print and digital subscriptions than it does from advertising, which has been struggling throughout the industry as readers leave lucrative paper products for digital platforms that don't command advertising rates that are as high as print.

The Times, however, did not specify how many people have subscribed to each of the apps individually, suggesting the totals have fallen below internal projections.

“Those are very important numbers in telling us how much more the Times can rely on reader revenue—now more than 60 percent of total revenue—going forward,” media analyst Ken Doctor told Capital ahead of this morning's financial results. “If the Times doesn't share any numbers, that would tell us the introductions have been subpar.”

While Thompson said the company was "encouraged by the reaction of users to the products, especially the high consumer satisfaction levels we’re seeing with the NYT Now app," a metric that does not address the number of sign-ups, he also cited a desire to "accelerate the rate of growth in subscription sales." As a result, they will be tweaking some of the apps in the coming months, he said.

On the advertising front, revenues declined 4.1 percent year on year, with print advertising revenues sliding 6.6 percent. This follows a brief respite during the first quarter when advertising revenues enjoyed a moderate increase for the first time in three years.

One bright spot was digital advertising revenues, which increased 3.4 percent to $41.5 million in the quarter, the second during which the Times has offered its new native advertising platform to marketers.

Total company revenues were down .6 percent to $388.7 million while adjusted operating profit took a 21-percent tumble from $70.7 million to $55.7 million. The company attributed the decline to investment in its strategic initiatives, which include the new apps as well as enhanced video offerings and conferences.

The results come as the Times is shoring itself up on the digital front following an internal report this spring that warned it was lagging in areas such as audience engagement.

"We plan to implement the recommendations of the report across the Company and believe that we can significantly grow our digital audience, which in turn will contribute to improved digital subscription and advertising monetization," said Thompson.

The Times also has a new executive editor, Dean Baquet, following the ouster of Jill Abramson several months ago.