The New York Times Company (NYSE:NYT), one of the leading newspapers in the United States, is set to report its fourth quarter and full year earnings Thursday, February 7. As we’ve reiterated in the past, the secular decline in the print advertising industry means that New York Times will have to move away from its core competencies as a print publisher and move to a digital product offering. Therefore, during this quarter’s earnings announcement we will continue to focus on New York Times’ digital subscriber growth, which will be the primary driver for any revenue growth going forward. Additionally, we will be closely watching the strategy that New York Time’s new CEO Mark Thompson’s lays out in the earnings call as we are keen to know his plans to grow NYT’s digital business.
- How Severe Is The Print Newspaper Decline?
- How Will New York Times’ Digital Business Grow In The Next Four Years?
- NYT Earnings Review: Growth In Digital Subscriptions Offset By Declines In Print
- NYT’s Q1 Earnings Likely To See Some Weakness On Account Of Print Media
- How Much Of NYT’s Value Comes From Digital Subscriptions?
- How Important Is The Digital Advertising Business Becoming For NYT?
NYT posted a net loss for the third quarter, which caused the stock to drop over 20% after the earnings announcement. The firm reported a slight 0.6% decline in overall revenues compared to 2011 driven by an 8.9% decrease in advertising revenues, partially offset by a 7.4% increase in circulation revenues. The company also reported a year-over-year decline in operating profit to $8.5 million 2012, compared with $42 million in 2011. 
Overall, the decline in revenue was not too surprising as it was driven by a 10.9% decline in print advertising. However, what was encouraging was that the company posted healthy growth in their digital subscriber base, which increased to 592,000 subscribers, an increase of 11% from the second quarter.
Previously the Director-General at the British Broadcasting Corporation (BBC), Mark Thompson, was appointed as the new New York Times CEO in November. We think he was a good choice since the company now has a top executive with extensive experience in a digital media company, and Thompson’s appointment should help NYT focus on innovation in digital media.
Since this will be Thompson’s first earnings call as CEO, we are interested to know his thoughts on NYT’s digital strategies. We expect more emphasis on social and mobile media platforms, but will have to wait and see to know more on specific initiatives, if any.
Watching Digital Subscriber Growth
It is imperative that New York Times shows some improvement in online subscriptions since digital subscriptions will be its primary business driver going forward. We expect the company will reach approximately 550,000 digital content subscribers by the end of 2012, and about 1.35 million subscribers by 2019, the end of our forecast period.
However, we believe these numbers are only achievable if New York Times is able to maintain the quality of its content offerings since it faces stiff competition from competing sites such as Huffington Post. If Thompson’s growth strategies are unsuccessful and NYT digital subscribers only grow to 1 million by 2019, we would see approximately 10% downside to our price estimate.
We currently have a $7.54 price estimate for New York Times, which is approximately 15% below the current market price.