NYTCO Ad Revenues Up 5.5% In 3Q

by Erik Sass, Oct 24, 2007, 4:00 AM

• Comment
• Recommend
• Tweet
• 

The newspaper business received an unaccustomed bit of good news on Tuesday with the New York Times Company's announcement that ad revenues rose 2% to $754.4 million and earnings 6.7% to $13.4 million in the third quarter of 2007, compared to the same period last year. These good results came as something of a surprise to many analysts, easily beating Wall Street's earnings forecasts for the quarter. But other industry observers are warning that NYTCO executives shouldn't break out the champagne yet.

The strong third-quarter results were largely the result of major increases in national ad spending in September, which offset continuing declines in classified revenue. Total ad revenues rose 5.5% in September, compared to a 3.5% decrease in July and a 4.6% decrease in August. The New York Times Media Group, centered on the flagship paper, enjoyed revenue growth of 11.3%--driven by national advertising in studio entertainment, financial services, fashion, education, and hotel services.

Also contributing to the bottom-line growth was an increase in circulation revenue, which grew 3.9% in the quarter to $223 million, due to increases in the newsstand and subscription prices for the print edition.

These results stand out in an otherwise dismal newspaper environment--but Ken Doctor, a newspaper analyst with Outsell, Inc., warns that the company's new success is fragile--and may prove fleeting. "The increases in national advertising and circulation revenues are both affirmations of its strategy," Doctor allowed, noting that national advertising is crucial as the paper positions itself as a national standard. But he said both revenue areas are vulnerable.

In national advertising, the two main contributors to growth--studio entertainment and financial services--could well be transient. "Movie advertising tends to be quite episodic, so you don't want to bet the farm on that," says Doctor. "You can't necessarily count on financial, because the spending there could just be a bump related to the credit squeeze."

During this period, Doctor explained, financial providers decided to boost communications with jittery consumers through advertising, but it remains to be seen whether that's a permanent increase.

Circulation revenues are also problematic, as the long-term effects of price increases are still unknown.

While the NYTCO has correctly identified a demographic of older readers who prefer print to online news and are willing to pay more for it, Doctor calls it a "chancy strategy," adding: "We've still got to see their numbers on churn." As news is increasingly free on the Web, and Rupert Murdoch threatens to undercut the Times with new circulation and online strategies, the price increases may backfire after a few years.

That's especially dangerous, Doctor noted, because NYTCO is more dependent on circulation revenue as a percentage of revenue than other newspaper companies--"27%, compared to 20% for most."

• Comment
• Recommend
• Tweet
• 

Be the first to comment on "NYTCO Ad Revenues Up 5.5% In 3Q"

Leave a Comment