NYT Bets On Virtual Reality To Bolster Its Digital Segment

The New York Times Company (NYSE:NYT) has made an attempt to bring virtual reality (VR) closer to homes with the recent launch of its app, NYT VR. ^[1] With the NYT VR app, New York Times plans to lay a foundation for using virtual reality as a mode of storytelling in journalism. We believe that this technology can add some value to the company’s already growing digital segment by adding subscribers, and consequently revenues. However, NYT’s progress in this domain may not be swift, considering the various challenges in the VR space that are limiting its adoption.

Our price estimate for NYT of $14 is just below the current market price. In the calendar year 2015, NYT’s stock price has fluctuated from a low of $11.48 to a high of $14.53.

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How Would VR App Help?

In a bid to popularize virtual reality as a journalistic medium, NYT recently distributed 1 million Google Cardboard virtual-reality viewers to its home-delivery subscribers, before it launched its free VR app. The app allows users to turn their smartphones into virtual-reality players. With the app, NYT has forayed into untested waters, and is pioneering virtual reality journalism with its short movies. The first movie shown on the app, The Displaced, took viewers inside the lives of three children who have been displaced in the global refugee crisis, while its latest movie, Take Flight, received tremendous customer response. ^[2] VR movies can provide more depth to reporting, and corresponds with  NYT’s mission to not just report a story, but bring its readers into the story. This method holds massive appeal for the digitally active population, and could potentially drive subscriber growth.

The trend away from print to digital has created waves in the media industry. In line with this change, NYT has been making strides in the digital media arena to keep its business afloat. According to the company, 32% of its overall revenues are now derived from the digital segment, where revenues have doubled over the past five years ($400 million in 2014). ^[3] Building on this, NYT recently announced its goal to double its digital ad and subscription revenues again to $800 million by 2020. If the company succeeds with VR journalism, it stands to gain immensely in terms of revenues and get a step closer to its goal.

However, The VR Domain Is Challenging

Virtual reality has been around for some time, but it has failed to make a significant impression among users. The high cost of technology and related infrastructure is among the factors that have limited VR usage, along with other issues such as inconvenience caused by unwieldy headsets and “simulation sickness,” which refers to a feeling of dizziness experienced by users.

However, steps are being taken to address these varied problems. The introduction of the Google Cardboard viewer helped slash costs considerably, and now even sophisticated VR headsets can potentially be had for less than $1,000, owing to a drop in the cost of sensors and HD displays. ^[4] Also, the technology has been improved to avoid the feeling of dizziness. With efforts underway, VR is likely to be slightly more affordable and user friendly in 2016, and NYT stands to gain from this trend.

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1. Virtual Reality Is Finally Here, nytimes.com, December 2015 [↩]
2. Take Flight With Virtual Reality, nytimes.com, December 2015 [↩]
3. The New York Times Company Reports 2015 Third-Quarter Results, NYT, October 2015 [↩]
4. Virtual reality offers promise and problems, psych.org, July 2015 [↩]