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Summary:

Each quarter, the New York Times Company tells a familiar story about digital revenue on the horizon that will one day offset its print declines. Here are three questions that can reveal whether the company’s digital promises will come true.

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The New York Times Company’s   latest earnings, announced today, reiterated its story of long-term print decline, unstable advertising and a nucleus of hope based on digital subscriber growth.

On a call with investors, executives repeated their mantra that it’s “early innings” and reminded listeners that digital strategy is a long-term game. This may be true, but the “wait and see” response is frustrating for those awaiting more specifics about its strategy.

A clearer picture may emerge next month when incoming CEO Mark Thompson takes the helm. Here are three questions he will have to answer:

Question 1: Just what explains that subscriber growth?

Subscriber growth is as an ongoing bright spot for the Times. To wit: overall circulation revenues (print and digital) rose 7.4 percent from a year ago, while the number of digital subscribers (to the New York Times, the International Herald Tribune and the Boston Globe combined)  was up 11 percent in the last quarter alone, to 592,000.

The figures appear promising but it’s unclear just how much of that is organic digital growth. That’s because the Times is not breaking out how much of that 7.4 percent revenue growth is from digital sales and how much comes from higher print prices. Keep in mind the company has hiked home delivery prices and also boosted newsstand copies to $2.50. Meanwhile, it’s not clear how many of the approximately 60,000 new digital subscribers (added via the New York Times, the IHT and the Boston Globe) are paying full fare and how many signed up instead through one of the company’s myriad promotions.

The point is: The digital subscriber narrative is promising but it may not be permanent.

Question 2: What will the New York Times do with its bulging cash hoard?

In the last year, the Times has been slimming down fast by divesting regional papers and non-core properties like About.com. The result is that the company is sitting on around $1 billion in cash (Bloomberg estimated in August the Times’ cash reserve to be $840 million, including the About.com sale, and today, the company said it will earn $167 million from the sale of Indeed.com).

This cash pile and a stable debt structure mean the Times is well poised to invest for the long term. Indeed, the company already has a minority interest in a dozen new media companies.

Investors are baying for the company to resume issuing dividends, which it suspended in 2009 at the height of the financial crisis. And it’s not only investors clamoring for a payout. As New York magazine reported this summer, many of the Sulzberger-Ochs clan who control the Times through preferred shares rely on the dividends for a personal allowance and want the payouts to resume ASAP. This means that incoming CEO Mark Thompson is likely to face informal but intense pressure to restart the dividend machine.

Question 3: How much longer will the Times keep the Boston Globe?

The Boston Globe is a storied paper with a smart pedigree but that doesn’t mean it will survive the digital age. The paper launched a major redesign protected by a paywall one year ago but the results have been underwhelming to say the least.

The Times’ today bravely announced that the Globe’s digital subscriptions had risen 13 percent — glossing over the fact the total number is a mere 26,000. For a major American city, and a newspaper one at that, this figure doesn’t seem sustainable.

These numbers drive home the fact that we are likely to be left with a handful of super-newspaper brands like the NYT, the Wall Street Journal and the Financial Times. The fate of regional papers like the Boston Globe is increasingly tied to online sports, community and events pages that have proven harder to monetize through subscriptions. The Times will have to decide soon whether it will continue to carry the Globe going forward or go forth on its own.

  1. Well thought out article – kudos.

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  2. The Boston Herald is doing fine. The Boston Globe is out of step with its community.

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  3. Greg Golebiewski Friday, October 26, 2012

    Thank you Jeff for asking those questions. It is so tiring to read about “robust” increases in the number of digital subs without any qualifiers. The numbers might be growing, but how much revenue they generate. And, equally importunate, at what cost?

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  4. Nice work Jeff! Indeed, good questions to put some balance and context.

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