The New York Times Sticks to Its Brand Power for Now
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With the recent Gannett-Belo deal, investors are paying attentions to newspaper publishers again, including The New York Times Company (NYSE: NYT). The New York Times Company operates in two divisions: the New York Times Media Group, which includes The New York Times and the International Herald Tribune, and the New England Media Group, which includes The Boston Globe.
The New York Times is rebranding its International Herald Tribune to International New York Times to leverage its Times brand. The company is also selling its New England Media Group division.
As total revenue declined by 2% in the First Quarter (Q1) of 2013, due to continuous weakness in advertising revenue, the company needs to come up with stronger growth strategy.
First, the New York Times’ strategy includes lower-priced paid products designed to allow access to the Times’ most important and interesting stories, allowing consumers stay informed. Second, the company will re-brand the International Herald Tribune to The International New York Times this fall to grow its international subscribers. Third, the company will continue to develop and invest into video coverage to boost its video presence. Lastly, the company will leverage the brand of The Times to generate incremental revenues by selling goods and services.
The management has achieved a 3% increase for the operating profit for Q1 as compared to the same quarter in 2012 with well-executed cost management. Despite the declining advertising revenue for both print and digital media, the company’s circulation has grown. revenue from circulation increased 7% for the company and 8% for the Times Media Group in Q1.
Starting June 12, the newspaper will charge $10 a month for access to desktop and mobile content, and $15 for an all-digital package. Despite the negative initial feedback from readers with the new subscription charge, the management indicates that it will modify the model depending on reader feedback. The company continues to experiment to find the right balance between accessibility for readers and sustainability for the business. On the other hand, as the readers continue to go mobile, there is a substantial revenue gap to be filled as online advertisements are much cheaper than the traditional print advertisements. Fortunately, Washington Post is no longer a traditional newspaper paper as it has diversified into education and broadcasting operation. Although the education division, Kaplan, has suffered recently due to higher restructuring cost, Washington Post's broadcasting division continues to grow.
On June 13, the share price of Gannett (NYSE: GCI) jumped over 34% with the news that Gannett, the publisher of USA Today, will acquire Belo Corp. for around $1.5 billion. This deal will make Gannett the fourth-largest owner of major network affiliates, nearly doubling its number of stations from 23 to 43, giving Gannett more leverage with cable and satellite distributors when negotiating license fees.
Gannett continues to diversify from the newspaper business, whereas the consolidation also picks up in the broadcast-TV industry. While Gannett bets big with its “All-Access Content Subscription Model” or “paywall” roll-out, its risk is buffered by its broadcast division, which already accounts for 52% of its annual operating income.
While newspaper publishers continue to struggle with declining advertising revenue, diversification seems to be the most effective strategy, and welcomed by investors. Gannett’s acquisition of Belo should give other publishing giants an example to follow. For now, new growth drivers for the newspaper publishing media are yet to be identified. As for The New York Times, its long-term focus remains on building and leveraging its brand while adapting to the new media trends. Until The New York Times is able to show the positive results for its growth strategy, other diversified players, such as Gannett and Washington Post are safer bet in the newspaper publishing industry.
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