Summary:

The New York Times Co. used to rely on About/com for good news; now overhauling the info site is dragging down earnings. Meanwhile, reliance on digital revenue is increasing even as the company works to stem declines in digital advertising revenues.

NYT Building, New York Times Building
photo: Getty Images / Mario Tama

For a time, About.com, acquired for $410 million in 2005, was the bright spot in New York Times earnings season. Those days are a blur in the rearview mirror, reflected in the second-quarter earnings released Thursday with a $194.5 million writedown of good will. The non-cash charge helped NYTCo to a $143.6 million loss for the quarter compared with a profit of $31.5 million for the same quarter in 2011.

But the company said favorable trends at About.com, particularly in cost-per-click advertising, helped improve digital advertising results and kept its overall advertising decline down compared to Q1. From Chairman and acting CEO Arthur Sulzberger Jr.’s statement: “Although we recorded a non-cash charge in the quarter, the About Group continues to execute on its turnaround strategy and we expect it to be on track to post continued meaningful improvement in the second half of the year.”

The About.com charge stole some of the afterglow from the Q2 sale of the company’s remaining shares in Fenway Sports Group for $63 million; the total sale over two years was $225 million.

Sans special items, NYTCo increased profit 6.5 percent to $78.1 million from $73.4 million and turned in earnings per share of 14 cents compared with 11 cents in Q211.

Digital circulation up

The company reported reported 532,000 paid digital subscribers across its News media Group, up 13 percent from 472,000 at the end of Q1. The company attributes the uptick to its decision to cut the number of NYTimes.com free articles in half (as Sulzberger puts it: “our decision to move the gate on NYTimes.com from 20 to 10 free articles a month”) and to a marketing push.

The digital circ is reported in two clusters:

  • the NYT and International Herald Tribune had roughly 509,000 subscriptions for digital packages, e-readers and replica editions at the end of Q2, up 12 percent from Q1.
  • the Boston Globe, which launched pay site BostonGlobe.com in the fall is slowly adding subscribers, hitting 23,000 for the site and e-reader/replica editions, up 28 percent from Q1. It may be tempting to compare its progress to that of NYTimes,com but it would be a mistake. It’s a smaller paper and a different model.

Digital advertising

As mentioned above. About.com is credited for stemming the overall digital advertising revenue decline — but decline is still the operative word and About.com played a big part in that. Excluding the writedown, About.com operating profit dropped 30.4 percent to $10.2 million from $14.6 million, while advertising revenues dipped 8.7 percent to $25.4 million from $27.8 million on display and cost-per-click declines.

Digital advertising increased as a percentage of overall ad revenues for NYTCo to 31.4 percent from 30.5 percent in Q211. Digital now accounts for nearly one-fourth of the News Media Group’s advertising revenues. Total NYTCo digital ad revenues dropped four percent to $76.7 million from $79.9 million, while the News Media Group kept it to a 1.6 percent dip.

The earnings webcast is at 11 a.m. EDT.

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