The New York Times (NYSE:NYT) reported its earnings for Q1 2012, with a slight decline in overall revenue compared to 2011, after adjusting for discontinued operations linked to the sale of the Regional Media group, which it sold off in January 2012. While it saw a decline in operating profit, its net profit increased from $5.2 million in Q1 2011 to $42 million in Q1 2012, mainly due to gains from selling off its stake in the Fenway Group, and income generated through discontinued operations like the Regional Media group.
Going forward, we expect the New York Times to continue to focus on online advertising and digital subscription products, revenue growth from which should compensate for the declining revenue from print advertising. NYT competes with giants like Facebook, Google (NASDAQ:GOOG) and Yahoo (NASDAQ:YHOO) in the online advertising space.
Digital Subscriptions & Online Advertising to drive growth
NYT reported a total of 472,000 paid subscriptions to all of the company’s digital packages, e-reader editions as of March 2012. Its average digital subscriber base was around 278,000 in 2011, and we expect it to be more than 500,000 in 2012.
Going forward, we expect NYT to focus on refining its digital offerings, and generate more revenue from digital subscriptions.
We also expect it to generate more revenue from digital advertising as it continues to attract more visitors and readers to its website. Attracting a large audience enables NYT to monetize its digital content either via advertising, or subscriptions.
Print Advertising & About.com lag behind
On the other hand, NYT’s print advertising revenues have continue to see a decline. Despite maintaining is print ad market share, its revenues have taken a hit as the overall print advertising market continues to shrink, as advertisers divert more of their ad spending to online mediums.
NYT has started shedding some of its non-core print properties like the Regional Media group, and is expected to increase its focus on online content, while reducing its reliance on the print medium.
About.com saw yet another decline in overall revenue, due to a decline in traffic. We expect the About’s audience to continue to shrink in the coming years.
We are updating Trefis price estimate for The New York Times in light of earnings.