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NY Times' (NYT) Digital Ad Revenues Likely to be Soft in Q4

Zacks Equity Research

Advertising remains a significant source of revenues for The New York Times Company NYT. The U.S. newspaper publishing industry has been grappling with declining print readership and advertising revenues for a quite long time now. Readers’ preference for accessing news online, mostly free, has made the industry’s print-advertising model increasingly redundant.

Total advertising revenues fell 6.7% year over year during third-quarter 2019. Management expects the same to decline in the mid-teens during the fourth quarter. Print advertising revenues fell 7.9% in the quarter under review, following a decline of 8% in the preceding quarter.

Management had earlier informed that the second half of 2019 is likely to be challenging for digital advertising. It expects digital advertising to be “fairly challenging” in the fourth quarter as a result of comparisons with the prior-year period’s sturdy performance.

Digital advertising revenues decreased 5.4% during the third quarter, following an increase of 13.7% in the preceding. The fall in digital advertising revenues were due to reduce direct-sold advertising on core digital platforms, partly offset by growth in podcasts. Management anticipates digital advertising revenues to fall in the in the mid-teens during the fourth quarter.


 

Nonetheless, The New York Times Company is constantly making efforts to rapidly acclimatize to the changing face of the multiplatform media universe. With growing inclination of readers toward the Internet, advertisers followed suit, and so did the newspaper companies. Trimmed print operations paved the way for online publications that led to the development of a pay-and-read model.

Notably, the number of paid digital subscribers reached roughly 4,053,000 at the end of third-quarter 2019 – rising 273,000 sequentially and 31% year over year. Of the 273,000 additions, 209,000 came from the company’s digital news product, while the remainder came from the Cooking and Crossword products.

Subscription revenues grew 3.7% during the third quarter due to increase in the number of subscriptions to the company’s digital-only products. Revenues from digital-only subscriptions products (comprising news product, as well as Crossword and Cooking products) rose 14.5%. Management projects total subscription revenues in the fourth quarter to increase in the low to mid-single digits, while digital-only subscription revenues are likely to rise in the mid-teens. The company has set a goal of reaching 10 million subscriptions by 2025.

The New York Times Company is diversifying business, adding new revenue streams, realigning cost structure and streamlining operations to increase efficiencies. The company has been making concerted efforts to lower dependency on traditional advertising and focus on digitization. The company is not only gearing up to become an optimum destination for news and information but is also focusing on lifestyle products and services.

As a result of above, shares of this Zacks Rank #3 (Hold) company have increased 13.5%, outperforming the industry’s rally of 11.7% in the past three months.

3 Stocks to Consider

Gray Television GTN, which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 10%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nexstar Broadcasting Group NXST, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 10%.

Fox Corporation FOXA reported positive earnings surprise in the last reported quarter. The stock carries a Zacks Rank #2.

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