Six years ago the New York Times shocked the newspaper industry by rolling out a paid-digital strategy. Since then, online subscriptions have been on an upswing, helped by Donald Trump's rise to the U.S. presidency. But income from print advertising is drastically down, adding to angst over job cuts. A Breakingviews analysis suggests that killing the costly paper product altogether would be radical – but not absurd.
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Revenue from the classified, retail and national ads that once fattened the Gray Lady's editions fell nearly 25 percent from 2014 to 2016. With the trend continuing, the company – due to report second-quarter earnings on Thursday – is in the midst of cutting newsroom staff. Yet the print-ad decline makes it less critical to keep the physical presses humming. Although print-advertising and circulation revenue made up two-thirds of the Times' top line in 2016, the proportion is declining and print also accounts for a huge chunk of expenses.
The numbers are getting to the point where going all-digital is plausible. Start with estimated revenue for this year, pegged at over $1.6 billion by Barclays, up from 2016 thanks to another chunky increase in online subscribers. Then strip out print: that removes 58 percent of forecast 2017 revenue and, on a back-of-the-envelope estimate, 40 percent of operating costs.
Last year, revenue at the Times exceeded operating costs by nearly $150 million. With no additions to the top line beyond what's forecast, the print-free picture in 2017 would be an operating shortfall of a similar size. Making up the $300 million-odd difference would, by Breakingviews calculations, call for selling some 1.4 million new digital subscriptions at about $130 apiece on average, with each of those subscribers generating roughly $90 in digital ads – in line with current figures.
That's ambitious. It's more than a 50 percent increase from the estimated number of online subscribers in 2017. Yet there are over 1 million print customers, many of whom might be persuaded to convert. And the company controlled by the Ochs-Sulzberger family managed to add over 750,000 digital users in 2016, and is on track to top that figure this year, too.
Maintaining growth becomes harder as subscriber numbers swell, and executives at the newspaper group have warned that the Trump-fueled bump in paid digital subscriptions may taper off. The biggest hurdle to the New York Times going all-digital, though, could be its history. After all, its motto since 1896 has been "All the news that's fit to print."
Commentary by Jennifer Saba, a New York-based columnist covering media, Silicon Valley and Wall Street for Reuters Breakingviews. Follow her on Twitter @jennifersaba.
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