New York Times profit down, digital subscriptions up

The New York Times Co. on Tuesday reported a sharp drop in profits as lower advertising revenues offset gains in digital subscriptions.

Net profit for the second quarter fell to $9.2 million from $20.1 million in the same period a year ago.

Total revenues fell slightly to $389 million, with circulation revenues up 1.4 percent and ad revenues down 4.1 percent.

The bottom line was also hurt by higher operating costs, which the company attributed to increased investments in boosting the digital profile of the prestigious newspaper publisher.

Digital advertising revenues were up 3.4 percent but that failed to offset a 6.6 percent drop in print advertising revenue.

"We saw continued growth in digital advertising and circulation revenues during the quarter," said Mark Thompson, president and chief executive officer.

"But (we) know that we still have more work to do to transform our business and deliver long-term sustainable revenue growth for the company."

The Times added 32,000 digital subscribers in the quarter, helped by newly released subscription options including NYT Now, NYT Opinion and Times Premier.

The NYT Now app is designed for mobile device users, and Times Premier is a premium news and information service that adds to the cost of a regular subscription.

"We're encouraged by the reaction of users to the products, especially the high consumer satisfaction levels we're seeing with the NYT Now app," said Thompson, the former BBC chief who became president and chief executive in late 2012.

"But, while we expected the portfolio to take time to build, we want to accelerate the rate of growth in subscription sales, so over the coming months, we will refine some of the offers and the way we market the portfolio to accomplish this."

Like other media firms, the Times is shifting its focus from print to digital as it strives to adapt to a decline in readership and competition from other sources of news online.

Thompson told a conference call that "we continue to keep a good grip on core costs even though investments in our latest round of products and services meant the profits for the quarter were down year-over-year."

He added, "We believe however that investment spending is essential to secure long-term, sustainable growth for the company."

Shares in the New York Times Co. fell more than eight percent to $12.89 on the weaker-than-expected results.

Ken Doctor, a media analyst with Outsell, said the revenue drop put a damper on the results.

"The 0.6 percent downturn in revenues is a minor, mostly psychological setback. It does, though, point to a big problem for all dailies -- the great decline in print advertising continues to swamp much of the other progress news companies are making," Doctor said in a blog post.

"It's that awful 6.6 percent print decline that's the Times' big issue. If the Times, and others, can moderate losses, then they have a fighting chance to transform the business to digital."