the audit

The NYT’s paywall overtakes digital ads

Meantime, the Globe's drag on the Times, quantified
November 1, 2013

It was only a little more than two years ago that the conventional wisdom said The New York Times shouldn’t—or couldn’t—charge online.

You don’t hear that anymore with the massive success of the Times‘s paywall, which hit 727,000 subscribers in the quarter, up 28,000 in three months.

Even bigger, the Times‘s paywall revenue has soared past its digital ad revenue. Digital subscriptions brought in $37.7 million in the third quarter, while digital ads brought just $32.9 million. When you consider the print-boosting effects of the paywall, which I’d estimate very (very) roughly at several million dollars a quarter, the paywall looks even better.

As Ken Doctor writes, “The reader revenue strategy is working. Period.”

NYT revenue actually increased 2 percent in the 3rd quarter thanks to higher reader revenue and slower ad losses. The shocking digital-subscriber growth of the first two years has slowed, though, which means the paper’s upcoming expansion of its digital subscription model will be critical to continuing its stabilization.

The other big news here is that the Times‘s ad decline was less than 2 percent in the quarter, the smallest decline since June 2011 and a dramatic improvement over the 1st quarter, which saw a 11 percent plunge, and the year-ago quarter, which also fell double digits.

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But the future of the Times depends in large part on digital advertising, too, and that was again dismal last quarter. Digital ad sales actually fell faster than print ad sales in the third quarter. Print was down just 1.6 percent but digital dropped 3.4 percent.

It sure sounds like the NYT needs to invest in its ad sales department, particularly after reading this Bloomberg report. But maybe that wouldn’t matter. The NYT says the decline was due to an “increasingly complex and fragmented digital advertising marketplace”—read: programmatic buying, which is effectively the digitalization of digital-ad sales.

A robot doesn’t care if you take it to the Four Seasons or the Little Caesars.

This report is also the first by The New York Times-only Company and it gives us a better look at the true health of the paper.

While the NYTCo has long broken out revenues for its divisions, it never broke out operating profits, which meant it was difficult to tell how the flagship paper was really performing. Was it being dragged down by the Globe et al.?

We always figured that, but now we know they were indeed weighing on the Times.

While the Times posted a $68.3 million operating profit in the first nine months of last year, the Globe and Worcester Telegram & Gazette put up a $1.3 million operating loss.

For the first nine months of this year, the Times‘s operating profit jumped to $87.2 million, while the New England papers lost about $1.5 million (excluding a $34.3 million accounting charge for selling for less than its book value).

Meantime, revenue is actually increasing—slightly—at the Times, but the New England papers have shed another 5 percent of sales so far this year.

You can see why the NYTCo wanted to unload those papers.

That’s not to say things are bright for the Times. Its operating margin is a measly 6 percent. Its net margin is less than 2 percent—and that’s after backing out the New England writedown.

But they’re a bit better without the Globe and Co., and moving in the right direction for now.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.