The sluggish advertising trend is weighing upon The New York Times Company (NYT), the diversified media conglomerate, prompting an update on its third-quarter 2010 outlook.
The publisher of The New York Times, International Herald Tribune, The Boston Globe and 15 other daily newspapers now expects total revenue to decline by 2% to 3% compared with a growth of 1.2% witnessed in second quarter 2010, stemming from the uncertainty among advertisers influenced by the sluggish economic recovery.
The New York Times is witnessing a fall in print advertising and circulation revenues, as well as slowing growth in digital advertising. The Zacks Consensus Estimate for third quarter 2010 revenues was $564 million, reflecting a fall of about 1% from the prior-year quarter – better than the company’s current outlook.
The newspaper publisher now expects print advertising revenues to drop by 5% in third quarter 2010 versus a decline of 6% registered in the previous quarter. Circulation revenues are expected to fall by 5% compared with a growth of 3.2% in second quarter 2010.
The New York Times indicated a decelerating growth in digital advertising revenues to 14% in the quarter under review from a growth of 21% experienced in second quarter 2010. The company also noted a 1% to 2% rise in operating costs in the third quarter. For the fourth quarter, management anticipates operating costs to be similar to the prior-year quarter, irrespective of higher newsprint prices.
Consequently, management expects to post third quarter earnings (excluding one-time items) in the range 3 cents to 5 cents a share that dovetails with the current Zacks Consensus Estimate of 5 cents. Including one-time items, The New York Times expects a loss of 5 cents to 7 cents a share.
We observe that the company faces a significant risk of high dependence on advertising revenues, which are driven by the health of the economy. To mitigate this, The New York Times is transmuting its business model by adding diverse revenue streams, which include a circulation pricing model and a pay-and-read model for NYTimes.com (in 2011).
The company is also adapting to the changing facet of the multiplatform media universe, which currently includes mobile, social media networks and reader application products in its fold.
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