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New York Times' Ad Revenue Returns to Decline

Sagging Print Sales Offset a Rise in Digital Advertising

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The New York Times Building.
The New York Times Building. Credit: Renzo Piano Building Workshop

Second-quarter advertising revenue at The New York Times Co. fell 4.1% from the quarter a year earlier, a decline driven by sagging print-ad sales, the company said Tuesday.

The drop is a return to the long-term pattern for the Times, where an ad-sales increase in the first quarter broke a three-year streak of ad-sales declines. The company said then that it expected to see ad sales go back to declines in the second quarter.

Overall second-quarter revenue was off 0.6% to $388.7 million, compared with $391.0 million in the second quarter of 2013.

Operating profit for the quarter slipped 21% to $55.7 million from $70.7 a year earlier, with costs up 5.2% partly because of increased marketing outlays.

Despite the declines in revenue and profit, the Times reported a 3.4% boost in digital advertising revenue to $41.5 million in the second quarter. Digital sales reached $79.3 million in the first six months of the year, up from $77.1 million during the same period last year.

Referring to digital advertising as a "long-term growth driver of our business," the company singled out its sponsored articles as a bright spot online. "We are particularly encouraged by the growing success of Paid Posts, our native advertising solution, which we launched in January," Times CEO and President Mark Thompson said in a statement.

During an earnings calls later Tuesday morning, Mr. Thompson noted that "client demand and reader engagement" of Paid Posts was "encouraging" in the second quarter. Digital video advertising is expected to double in 2014 compared with the prior year, he added, though he also acknowledged that video sales remain modest overall.

In May, the Times hosted its first NewFront presentation to preview its slate of digital video programming to ad buyers.

Ad sales in print led the company's overall decline in revenue. The company blamed limp sales on "secular forces" affecting print advertising. "Tech advertising was very weak in print, but very strong in digital," Meredith Kopit Levien, exec VP-advertising at the Times, said as an example.

The Times also reported growth in circulation revenue, which was up 1.4% on the strength of its new digital products, including subscription apps like NYT Now, Times Premier and NYT Opinion, all of which rolled out this year. Digital circulation revenue totaled $41.7 million in the second quarter of 2014, the company said, up 13.5% compared with a year earlier.

It added 32,000 digital subscribers in the second quarter, an 19% increase over the quarter last year. Digital subscribers now total 831,000.

Times executives noted that apps drove the growth in circulation but declined to break out subscription numbers for individual products.

The company was disappointed in the number of subscribers added to its core digital subscription package, according to Denise Warren, exec VP of the Times' digital products group. She blamed this partly on cannibalization from the subscription apps, as well as the ongoing shift among readers from desktop to mobile devices.

But the Times also said it needs to better market the new subscription products. Its initial offer for NYT Now, an iPhone app where Times editors select top stories from not only the Times but also other sources, "didn't quite resonate how we would hope," Ms. Warren said. The company is now testing alternative offers, she said.

The company is trying to solve a "marketing puzzle" in its promotion of the new subscription apps, Mr. Thompson added.

When the Times introduces a cooking app this fall, it will be free to start, with the aim of building a large audience before the Times begins charging readers to access it, the company said.

Meanwhile, revenue from other sources -- such as events, the Times' online retail store and content licensing -- rose 7.7%, the company said.

Revenue from other sources, such as events, rose 7.7%, the company said.

Mr. Thompson said the Times plans to enact the recommendations of its internal Innovation Report, issued this year to help strengthen digital readership. "We saw continued growth in digital advertising and circulation revenues during the quarter," he said, "but know that we still have more work to do to transform our business and deliver long-term sustainable revenue growth for the company."

The Times expects ad revenue to decline by a percentage in the mid-single digits in the third quarter and circulation revenue to remain flat, the company said.

When asked during the earnings call when the company plans to emerge from its self-described transition period, Mr. Thompson remarked: "We are doing stuff here where we're on our own. We're doing things no one has tried in our industry, so it will be difficult to be precise."

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