New York Times Reaches 8 Million Subscriptions

From a New York Times story by Edmund Lee headlined “The New York Times Reaches 8 Million Subscriptions”:

The New York Times Company said in its quarterly earnings results that it has eight million subscriptions and expects to add as many this year as it did in 2019, when President Donald J. Trump dominated headlines and a pandemic had yet to melt the global economy. The company estimates that it will have 8.5 million paid print and digital subscriptions by the end of 2021.

Meredith Kopit Levien, the chief executive, put the potential market size of Times readers at 100 million, adding that there was an opportunity to continue to invest while “daily habits are up for grabs.”

The Times Company reported modest growth in the April-to-June quarter — typically its weakest — adding 142,000 new digital subscribers, with 77,000 for the News app and 65,000 for Cooking and Games. At the end of June, The Times had 7.9 million total subscribers, with 7.1 million paying for its digital products. Of the digital subscribers, 5.3 million subscribed to the News app….

Wall Street investors and news executives across the country consider The Times to be both a bellwether and a stand-alone: The company’s digital performance shows what’s possible for a news media organization in the age of Facebook and Google, but not everyone in publishing (digital or print) will be able to emulate its success. Online revenue at The Times — specifically advertising and subscriptions — jumped 41 percent, to $261 million.

For the current quarter that ends in September, the company expects digital subscription revenue to rise 25 to 30 percent from a year earlier and online ad sales to increase 40 to 45 percent. Total subscription revenue should bump up 13 to 15 percent and advertising 30 to 35 percent.

This fall, The Times said it will offer a subscription product for its popular Wirecutter site, which makes money every time a reader buys a recommended product through commission agreements it has with businesses like Amazon and Walmart. The site is currently free, but the company plans to experiment with a metered model, allowing readers some access to articles before being prompted to pay.

Digital subscription revenue has been steadily increasing, but the average revenue per account was $8.89 a month during the second quarter. That’s up from last year as readers who were paying a cheaper promotional rate graduated to full-cost subscriptions, but it’s down from 2019 when the company booked an average of $9.74 per account each month.

The company is intensely focused on increasing subscriptions and has been experimenting with how to convert its 100 million registered readers into paying readers (it’s free to register). The Times is also encouraging people who pay for at least one of the company’s digital products to subscribe to another, part of its bundling strategy.

That’s most likely why the company’s stock, like that of a Silicon Valley behemoth, trades at a hefty premium.

Investors are paying about $41 for every $1 of expected profit to own Times stock. That’s more than what people are paying to own Facebook, at $21, and Google, at $25. Rupert Murdoch’s News Corp, which publishes The Wall Street Journal, trades at a commensurate $40 for every $1 of expected profit. Shares in Netflix (another subscription service priced similarly to The Times) cost more, at $62 for every $1 of future income.

Even so, Times stock has dropped nearly 17 percent this year as a new administration took over the White House in January. The S&P 500 index, by comparison, has risen nearly 18 percent.

The Times continues to invest in its digital business and expects costs to increase 18 to 20 percent in the current quarter, with capital expenditures for the full year totaling $50 million. That pales next to the cash the company holds: $947 million at the end of June.

Holding that much cash is typically seen as an inefficient use of capital that could be put to better use in investments or acquisitions — in other words, use it or lose it. The company does pay a quarterly dividend that costs about $40 million a year, but its approach to mergers and acquisitions has been relatively conservative. It spent $25 million last year to acquire Serial Productions, the company behind the hit podcast “Serial.”

“In general, our preference is to use the strong balance sheet that we have to invest in our strategy and maximize the value of our product,” Ms. Levien said in the earnings call with investors following the report.

Edmund Lee covers the media industry as it grapples with changes from Silicon Valley. Before joining The Times he was the managing editor at Vox Media’s Recode.

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