NYTCO Revs Slip in 3Q, Digital Up

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The modest turnaround in the fortunes of the New York Times Co. earlier this year appeared to lose steam in the second half, as total revenues slipped 2.7% from $569.5 million in the third quarter of 2009 to $554.3 million in the third quarter of this year.

This was due to a 1% drop in advertising revenues from about $290 million to $287 million, and a 4.8% slip in circulation revenues, from $240.7 million to $229.1 million. The decline in ad revenues resulted from a 5.8% decrease in print ad revenues, to $208.7 million -- offset somewhat by a 14.6% increase in digital ad revenues, to $78.3 million.

As in previous quarters, the print advertising losses were spread evenly across most major categories, with retail falling 9.3% to $58.8 million and classifieds falling 9.6% to $46.1 million. The classified losses included an 8.9% drop in real estate to $15.8 million, and a 20.7% drop in automotive to $9 million.

Help wanted was basically flat at $9.3 million. The major exception in terms of print ad categories was national advertising, where total revenues increased 4.6% to $141.1 million in the third quarter.

The big increase in digital revenues was a bright spot on the NYTCO spreadsheets in the third quarter, as Internet advertising and other digital ad platforms now contribute about 14% of the company's total revenues. That's up from 10.8% in the third quarter of 2008 and 11.9% in the third quarter of 2009.

But these positive comparisons are tempered by the fact that much of the apparent increase is due to the steep decline in overall revenues. If total revenues had remained the same as in 2008, the proportion contributed by digital advertising would be just 11.4% this year.

The decline in circulation revenues is an ominous development, undermining one of the main strategies pursued by NYTCO to achieve financial stability.

Over the last few years, the flagship New York Times has raised newsstand and home delivery prices, taking advantage of loyalty among older print readers to pump up total circulation revenues 7% from $874 million in 2005 to $936 million in 2009.

More significantly, the proportion of total NYTCO revenues contributed by circulation revenues jumped from 25.9% to 38.4% over the same period. However, the reversal in circulation revenue growth in the third quarter of this year suggests this strategy may have finally run its course.

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