Ad Sales, Pay Walls, and Absolutely Nothing About iPads at the New York Times Earnings Call
The New York Times said things got better–or, if you like, no worse–during the last quarter of 2009. But investors are disappointed that the publisher isn’t more optimistic about 2010, and they’re pushing shares down this morning.
Let’s see if the paper’s executives can turn that around during their earnings call. We’ll also be looking for any updates the Times can provide on its pay wall plans, and, of course, its role in the launch of the Apple iPad.
UPDATE: As I noted below, though the New York Times (NYT) was a featured partner at the launch of Apple’s (AAPL) iPad, even sending a small team to Cupertino to create an app a few weeks before the event, there was zero discussion about iPads today.
CEO Janet Robinson made a generalized comment about the growth of the Times’s mobile distribution, but that was it. And not a single analyst showed any interest in this stuff–a good reminder that neither the Times nor Wall Street expects the iPad to be material to the company’s business for quite some time.
On the call: CEO Janet Robinson, CFO Jim Follo, Times Media Group boss Scott Heekin-Canedy, and Digital boss Martin Nisenholtz
In a preamble, CEO Robinson highlights cost-cutting, balance sheet repair, and asset sales (radio station, but not the Boston Globe; the company is still looking at selling its stake in the Boston Red Sox–the process is “complicated” and is “taking longer than anticipated”).
Robinson recaps the pay wall plan, metered approach, etc. Nothing new here so far.
The paper is waiting until 2011 to deploy the pay wall, she explains, because it wants to make “subscribing as smooth and easy as possible….It will take some time to build, deploy and test the best systems.”
Robinson offers a few revenue details, primarily a recap of the earnings release.
Ads by category: National ads down 12 percent, retail down 23 percent, classifieds down 27 percent.
News media online grew four percent, primarily from display advertising (the rest of online growth comes from About.com).
Print ad category decreases came from Hollywood, among others. Ad category increases: Print auto, health care, packaged goods.
Circulation revenue is up because of newsstand, price increases. The Times is benefiting from declines at other papers, because as local papers cut back, it is offering more info than ever. Robinson notes expansion by the paper into local news in the Chicago and San Francisco markets, adding that there are plans on going local in “several” other key markets
Time to brag about new mobile products and applications. The paper counted 75 million page views from mobile and apps in December, and the iPhone app has been downloaded three million times since launch.
Back to digital: Display ads are up, classifieds down; they improved “significantly” as Q4 progressed.
About.com is still the Times’s digital cash machine: Revenue is up 22 percent, and operating profit grew from $10 million to $18 million.
Overall, Internet businesses are up 10 percent and accounted for 15 percent of revenue for the quarter. Online advertising revenue accounted for 23 percent of ad revenue of the quarter.
“Limited” visibility for 2010, which is what’s upsetting The Street, supposedly. But the paper is still “realigning” its cost base.
CFO Jim Follo’s comments may not interest all readers except for this part: The Times is continuing to reduce headcount, he notes, which dropped by 18 percent in 2009. The company is also looking at the benefit structure for both employees and retirees. It froze that awesome supplemental retirement plan that pays certain retirees a very lucrative pension.
We’ve been benefiting from a drop in newsprint prices last couple years, Follo notes, though suppliers are trying to raise prices again, but there’s a supply glut, so we think they’ll have a tough time doing that.
No big capital spending projects are planned. [Presumably, the pay wall is not that expensive to build.]
[Aside: Interesting that NYT.com GM Denise Warren, who's normally on these calls, isn't on today's.]
Questions and Answers
Question: More color on advertising, please.
Scott Heekin-Canedy: We have some optimism, but advertisers are “guarded,” and ads are still bought–or retracted–at the last minute, as they were last year.
Tech, media, health care, and auto ad categories all look promising. The mix is “definitely different” from last year “when it seemed like every single category was down.” Now, many categories are showing “flat to significant growth.”
Question: Are you still optimistic that you can reach a deal on the Red Sox?
Robinson: “Yes we are.” Lots of due diligence, lots of different properties (stake in team, stadium, network, etc.).
Q: What are incremental costs of setting up a pay wall?
Robinson: “We feel this is an elegant solution,” but we want to wait the year and make sure we’re well prepared, etc. Again, integrating home delivery and digital is crucial.
Nisenholtz: Regarding cost, there will be a “modest operating cost” to deploy the tech. We’re hiring a “handful” of people to do that and deploying “modest” capital, but it’s not material.
[Apology: I missed a question on ad categories, though it seems to reprise the earlier question.]
Q: Can you give us a sense of additional cost-savings you can extract this year?
Q: Will your headcount go down again in 2010?
[Missed another question here.]
Next a question about the tax rate, which I can’t imagine anyone reading this cares about.
Q: Can you tell us more about January ad trends, i.e., how much is national vs. local?
Robinson: We won’t break that out (anymore).
Q: Was it materially better than Q4?
Robinson: She repeats her earlier comments from the release. “Very good performance” on the digital side of business. December was particularly good, but we’re not going to be more specific about January.
Heekin-Canedy: That said, we don’t think January is much of an indicator about the rest of the year, anyway. Different beast, not much connection between December [when people were dumping leftover dollars].
[There's a giant disconnect between analysts and the chattering classes here. If the latter ran the call, this would be about nothing but iPad, iPad, iPad. But we're 48 minutes in, and zilch so far. Which is a good reminder: No matter what launches with the tablet this year, this stuff isn't going to have a big impact on Big Media for quite some time.]
Q: Where is growth coming from at About.com?
Robinson: Both consumer packaged goods and display ads. We’ve upgraded the sales channel to go after display and that’s helped a lot.
Nisenholtz: Strong categories include CPC, travel, education and financial services. There’s also retail strength.
Q: Are CPGs new to About.com?
Nisenholtz: Yeah. Well, not exactly. It’s a big site, lots of reach. But we’ve updgraded the sales team and the increase there is part of the payoff. We reach a lot of moms. The Web site skews female.
Q: You may end up paying $60 million to $80 million back into the pension plan. When could that come? Q4?
Follo: Could be sooner than that. We’re in a good position regarding liquidity.
[The final question is about joint ventures that you don't care about.]
And that’s it for the call.