U.S. Markets closed

NY Times Offloads Assets

Zacks Equity Research

The current economic situation doesn’t seem all well for publishing companies, who are bearing the brunt of waning advertising demand. So, the companies are streamlining their cost structure, strengthening their balance sheet, and rebalancing their portfolio. Moreover, they are looking for new revenue generating avenues to lessen their dependency on traditional advertising revenue.

Publishing companies have been divesting assets that have no direct relation to the core operations. The New York Times Company (NYT) recently completed the sale of About Group, which it acquired in 2005, to InterActiveCorp (IACI) for a consideration of $300 million. The About Group segment comprises the websites About.com, ConsumerSearch.com and Caloriecount.com, along with other related businesses.

The decision came on the back of declining revenues. About Group’s revenue dropped 8.7% in the second quarter of 2012 due to fall witnessed in both cost-per-click and display advertising. During the first quarter, the revenue declined 23.1%.

Prior to this, in May 2012, The New York Times Company divested its remaining stake (210 Class B units) in the Fenway Sports Group, the owner of the Boston Red Sox and the Liverpool Football Club, for $63 million.

Another example of shedding the assets by the company is the sale of Regional Media Group in December 2011, – consisting of 16 regional newspapers, print publications and associated ventures – to Halifax Media Holdings LLC, the proprietor of The Daytona-Beach News Journal in Florida, for approximately $143 million.

The publishing industry has been struggling with sinking advertising revenue as more readers are gradually choosing free online news, thereby making the print-advertising model increasingly irrelevant. To curb shrinking advertising revenue and seek new revenue avenues, the publishing companies contemplated charging readers for online content.

Despite hiccups in the economy, what still promises a guaranteed revenue generation avenue is The New York Times Company’s pricing system for NYTimes.com, which was launched on March 28, 2011. The company notified that the number of paid digital subscribers for The Times and the International Herald Tribune reached 509,000 at the end of the second quarter of 2012, reflecting a jump of about 12% since March 18, 2012.

The company also launched a pay and read model for BostonGlobe.com for a weekly subscription of $3.99. The number of paid digital subscribers reached 23,000 at the end of the quarter, representing an increase of 28% since March 18, 2012.

Currently, we have a long-term “Neutral” recommendation on the stock.

Read the Full Research Report on IACI

Read the Full Research Report on NYT

Zacks Investment Research

More From Zacks.com