VALUATION HIGHLIGHTS
- Subscription constitutes 65% of the Trefis price estimate for New York Times's stock.
- Advertising constitutes 14% of the Trefis price estimate for New York Times's stock.
- Other Revenue constitutes 12% of the Trefis price estimate for New York Times's stock.
WHAT HAS CHANGED?
NYT Saw A Mixed Q4 2024
The New York Times' adjusted earnings per share (EPS) of $0.80 surpassed the analysts' consensus forecast of $0.75 in Q4. However, total revenue of $726.6 million came in slightly below the estimate of $726.8 million. The quarter highlighted continued digital growth and robust subscription expansion, despite facing challenges in print advertising and rising operating costs.
Its digital-only subscription revenue rose 16% year-over-year to $334.9 million. The Athletic continued its upward trajectory, contributing to a 29% increase in digital advertising revenue. However, the company faced a 7.1% decline in print subscription revenue, consistent with industry trends toward digital preferences. Operating costs increased by 6%, with marketing and sales expenses notably rising by 21.3%. This reflects higher promotional activity aimed at bolstering subscription memberships. One-time items impacting the quarter included costs related to litigation over AI usage of its content.
Outlook
Looking ahead, The New York Times Co. forecasts digital-only subscription revenue growth of 14% to 17% for Q1 2025, with a mid-single-digit increase anticipated in other revenue streams. Meanwhile, adjusted operating costs are expected to grow by 5% to 6%, reflecting planned investments in technology and content enhancements.
The company's legal stance on its intellectual property and technological investments will also be key areas of focus as it looks to maintain its competitive edge and sustain subscriber engagement.
Athletic Continues To Lose Money
The Athletic, which the company acquired for $550 million in 2022, continues to lose money. The Athletic’s adjusted operating loss decreased 84.1% to $5.0 million in 2024 from $31.4 million in 2023, primarily as a result of higher digital subscription and other revenues, partially offset by higher adjusted operating costs. However, The Athletic’s revenues increased 31.1% y-o-y to $172.1 million in 2024, due to growth in digital-only subscribers with The Athletic.
Legal Battle Against OpenAI
The newspaper company spent $3.2 million on legal fees in Q4 for its legal battle against OpenAI, the company behind ChatGPT, and Microsoft. This money was related to its copyright infringement lawsuit against the tech companies, which the paper filed in late 2023. For all of 2024, The Times spent $10.8 million on legal fees tied to the lawsuit. It claims that OpenAI unlawfully used the paper’s content to improve its AI models and products.
BUSINESS SUMMARY
The New York Times Co. (NYT) is a media company focused on creating and distributing high-quality news and information. Currently, the company makes money through print newspapers, online advertising, and newspaper circulation fees. In 2011, the company launched its paid subscription service for NYTimes.com, adding a digital circulation revenue stream. A growing number of digital subscribers - subscribe to more than one of The Times’s products, which include the The Times, games, recipes, the Wirecutter review site, and The Athletic, a sports news website. As of December 31, 2024, the company had approximately 11.43 million subscribers.
KEY TRENDS
Digital content increasingly gaining relevance
Online media provides more abundantly available information, at a faster rate and at cheaper prices when compared to print media. This has effectively rendered print newspapers obsolete, and online reading is made further easier by tablets/smartphones, both physical circulation and print advertising within newspapers should see a decline going forward.
Social and Mobile to drive future growth
Social networking leader Facebook has initiated a unique concept of "frictionless sharing" through their Open Graph tools, which enables publishers to instantly get their articles/content shared across a user's network of friends. Various media companies like Yahoo! and Washington Post have adopted the Open Graph to increase user engagement. We expect more websites to join the bandwagon if they increase both web traffic and user engagement. Additionally, the growing penetration and bandwidth capabilities of smartphones and tablets would play a major role in increasing traffic and viewership for media companies. NYT has also made headway in this segment by releasing smartphone and tablet-specific apps.
Last Price Hike For Digital Subscription Service in 2020
The price of the digital-only subscription to the main news product every four weeks increased to $17, from $15, the company mentioned during the Q1 2020 report. It was the first increase in the digital subscription price since The Times decided to charge readers for online content in 2011.
