New York Times expects ad revenue to plummet 50% in Q2, but broke its record for net new subscriptions in a quarter
- The New York Times Company said it expects advertising revenue to fall between 50-55% year-over-year in the second quarter.
- But the media company, which gets two-thirds of its revenue from subscriptions, said said it added 587,000 net new digital subscriptions, resulting in its highest number of net new subscriptions in a quarter in its history, despite relaxing its paywall on coronavirus-related coverage.
- The company's stock rose nearly 6% Wednesday morning after reporting first-quarter earnings.
The New York Times Company said Wednesday it expects advertising revenue to fall between 50-55% year-over-year in the second quarter as impacts of the pandemic are hitting demand for advertisers. But the media company, which gets two-thirds of its revenue from subscriptions, said it added more than half a million net new digital subscriptions in the quarter.
The company's stock had risen nearly 7% Wednesday after reporting first-quarter earnings.
Many ad-based businesses have warned about a big impact to the second quarter because of declining demand from advertisers. Lots of online publishers in the U.S. have said advertisers are canceling or pausing ad campaigns as the coronavirus pandemic and lockdown impact advertisers.
It has resulted in widespread layoffs and cost cuts in the media world even as media consumption is skyrocketing.
The Times said it added 587,000 net new digital subscriptions compared to the end of the fourth quarter of 2019, resulting in its highest number of net new subscriptions in a quarter in its history, despite relaxing its paywall on coronavirus-related coverage. The company's subscription revenue grew 5.4% in the first quarter to $285.4 million year-over-year. At the end of April, the Times had more than 6 million total subscriptions across digital and print, it said.
But that came as advertising started falling off at the end of the quarter. Its ad revenue in the first quarter fell 15.2% to $106.1 million year-over-year. The company's first-quarter digital ad revenue decreased 7.9%, while print advertising decreased 20.9% as the pandemic further impacted advertisers in the areas of luxury, media, entertainment and financial categories.
And it's expected to decelerate further: The company said it believes advertising in the second quarter will fall between 50-55% compared to a year ago "with limited visibility beyond that."
The company said it expects subscription revenues in the second quarter to increase in the mid-to-high single digits compared with the second-quarter of 2019. In a statement, the company said its growing focus on digital subscription growth and diminishing reliance on advertising is well-positioned to weather impacts of the pandemic and beyond. CEO Mark Thompson said Wednesday on CNBC's "The Exchange" that though advertising is an important revenue stream, it's less than a quarter of its economics.
"We have this very strong growing revenue from, in particular, digital subscriptions and the reason the market has broadly welcomed our results today is because they can see that engine of strategic growth is also working really well," Thompson said on CNBC.
He said the circumstances of the moment have brought in a broad swath of new audiences for the media company. Readers first flocked to the site for details on the lockdowns and now are showing immense interest in recipes and food coverage, crossword and games and its Wirecutter site as consumers are shopping from home.
"What's interesting is both the millions of new registered users we're getting and the many hundreds of thousands of new subscribers, far more than we've ever had before, what's so interesting is amongst these are definitely younger, definitely ethnically diverse, more geographically widely spread people than we've seen, so one of the things we're seeing is a real broadening, not just of the total Times audience … but the engaged audience is a broader audience. It's a much more diverse and a younger audience than we've seen before."
During an earnings call, Thompson said lower ad revenue will put pressure on profitability for some time and that the company is planning cost reductions, including likely job cuts. He said the company doesn't expect any of those job reductions will be in journalism.
On the call, the company's chief operating officer Meredith Levien said the company is expecting a pronounced downturn in advertising for at least the next quarter "and likely beyond." But she noted the company has been working to transform its ads business and that current circumstances will hasten that. The company is working to concentrate its ads business in a smaller number of growing categories, like tech or financial services, where the NYT can build multi-platform collaborations with companies like Alphabet's Google or Verizon.
It's also working on ad products based on first-party data collected from its readers. And though the company expects softening in demand for audio during a recession, it said podcast revenue in the first quarter grew 30% as "The Daily" podcast became an "even larger and more sought-after platform for our advertisers."
CNBC's Kevin Stankiewicz contributed to this report.