NYT Earnings: The Emerging Double Whammy

I'm little surprised by the results, though I wish I were. The Times is barely profitable. (See comments at end of post from NYT spokesperson Catherine Mathis to this point.)

With ad spending overall down just under double digits at 9% for the first quarter, the New York Times' results -- most likely foreshadowing those of Gannett (April 21) and McClatchy (April 23) -- are the result of the double whammy afflicting newspaper companies. The two-headed assault on revenues -- a recession-like pullback in spending compounding the already-in-progress movement of dollars from print to interactive marketing.

We know advertisers are pulling back. Gross estimates are trending downward, with the latest projecting 3.7% ad dollar growth in the US, that from Zenith Optimedia on March 31. That projection knocked .4 off an estimate made just a few months earlier. Expect, in this gyrating economic landscape, for it to go lower still. That 3.7% -- in an otherwise stable time -- might about match inflation, but it's not a stable time for newspaper companies.

The biggest factor of course is where those $21 billion dollars in US interactive revenues (2007) is coming from, and we know many of them are coming out of print hides. Will it get worse? I'm inclined to agree with Eric Schmidt, with his admittedly self-serving statements that recession-caused ad dollar movement will aid Google. Newspaper advertising is still disproportionately expensive. Companies are more prudent with their spending in perceived downtimes, just as consumers are.

The Times reported an 11% increase in Internet revenues. Barely double-digit, below the growth of web advertising overall -- and of course insufficient in volume to make up print declines.

Beyond the immediate impact of the year, newspaper publishers have to ask themselves whether dollars that are going to the new medium, and being spent in other experimental ways, will come back to print, as the economy turns more positive. Or is this a one-way street: out?

The bigger point of this morning's announcement pops out of two continuing dramas at the Times Company:

----It is in public anguish about its newsroom cutbacks. The 7.5% cutback (100 of 1300) is the biggest deal out of all the newsroom cutbacks we've seen. It's the New York Times cutting back. Now, we've seen enough reports to know that too few will accept buyouts, and layoffs are appearing inevitable. The Times is not a stable ship.
----Second, of course, is the coincident boardroom drama. Two outside directors are joining the Times' board. The impact has got to be a more urgent review of asset sales -- the Globe and the regional newspaper group. With significant layoffs in the Times' newsroom and this further turndown in earnings, the urgency (noted here in February) for action is even clearer than it was when Harbinger/Firebrand began its push on the Times.

From Catherine Mathis, NYT spokesperson:

Comment:
While The New York Times Company had a challenging quarter, I don't think that saying we are barely profitable really tells the story. There were a number of items that made this quarter unusual -- a writedown of assets, a shift in the timing of equity grants, a negative foreign currency translation and expenses for the consolidation of two printing plants. In 2007 the Times Company earned more than $200 million and Wall Street analysts estimate that 2008 will be another profitable year. Is this a tough time in the media business? Absolutely. But I think it's important to also remember that these are businesses that are making money.

Content Bridges' NYT posts, here

Comments

[Mike Maisel]

Too little, too late. Certainly, newspapers' fiddling while circulation and ad revenues burn (sic) evaporate will be future B school case studies.

Hey, I still listen to the 60s channel on XM, but I KNOW those are oldies. It seems the newspapers are still living there.

[Catherine Mathis]

While The New York Times Company had a challenging quarter, I don't think that saying we are barely profitable really tells the story. There were a number of items that made this quarter unusual -- a writedown of assets, a shift in the timing of equity grants, a negative foreign currency translation and expenses for the consolidation of two printing plants. In 2007 the Times Company earned more than $200 million and Wall Street analysts estimate that 2008 will be another profitable year. Is this a tough time in the media business? Absolutely. But I think it's important to also remember that these are businesses that are making money.