NYTCO Ad Revs Dip 5.5%, Circ Rev Slowdown Added Worry

The fourth quarter of 2013 brought no relief for the newspaper industry, judging by early results from several big publishers. This week the New York Times Co. revealed that total revenues fell due to declines in both advertising and circulation revenues.

Adjusting for an extra week in the fourth quarter of 2012, circ revenues would have risen slightly in the fourth quarter of 2013 -- but this relatively modest increase suggests that gains from the NYT’s digital paywall strategy may now be tapering off.
 
NYTCO’s total revenues fell 5.2% from $468 million in the fourth quarter of 2012 to $444 million in the fourth quarter of 2013. Advertising revenues fell 6.3% from $226.5 million to $212.1 million, while circulation revenues slid 3.9% from $216.1 million to $207.7 million. 

Taking into account the extra week in the fourth quarter of 2012, total revenues would have increased 0.4%, thanks mostly to a 2.7% increase in circ revenues (again excluding the extra week), while advertising revenues would have decreased 1.3%.
 
The slowdown in circulation revenue growth is of particular concern, considering the major role assigned to circ revenues from digital subscriptions in the company’s long-term strategy. According to NYTCO, the total number of digital subscribers increased 19% year over year, from 640,000 to 760,000, while revenues from digital subs increased 22.1% to $39.1 million, when the extra week is excluded. But over the course of the last two years, the rate of increase has fallen rapidly.
 
Excluding the New England Media Group, divested last year, the year-over-year percentage increase in circulation revenues at the flagship New York Times Media Group was 12.8% in the first quarter of 2012, 10.6% in the second, 9.3% in the third, and 18.1% in the fourth. But over the four quarters of 2013, the corresponding growth rates fell to 8.2%, 6.6%, 4.8%, and 2.7%, respectively.
 
Over the same period, the number of net quarter-to-quarter additions in digital subscribers has also declined. Over the four quarters of 2012, the company added 66,000 digital subscribers in the first quarter of the year, 60,000 in the second, 34,000 in the third, and 74,000 in the fourth, to end the year with 640,000 digital subs -- up 234,000 from 406,000 at the end of 2011.

By comparison, in 2013, the net quarter-to-quarter additions were 36,000 in the first quarter, 23,000 in the second, 28,000 in the third, and 33,000 in the fourth, to end the year with 760,000 -- a gain of 120,000 over the end of 2012.
 
Print circulation -- still the main source of circulation revenues -- continues to decline, forcing NYTCO to raise prices for home delivery repeatedly, including a 5% bump in January 2013 and another 5.6% increase that took effect on January 6 of this year.
 
NYTCO isn’t the only big newspaper publisher to see diminishing returns from its digital sub strategy. Earlier this week, Gannett Co. announced that its total circulation revenues fell 1.6% to $288 million in the fourth quarter, reflecting difficulty in maintaining subscription renewals for its digital All Access Content Subscription sales.
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