The New York Times (NYT) blew away earnings expectations in the third quarter, thanks to aggressive cost cutting.
EPS of $0.16 per share beat consensus of a loss of $0.01 per share. Revenue was basically in line: $571 million versus estimates of $562 million.
Ad revenue fell 26.9% overall–still ghastly, but a slight improvement. Last quarter the drop was 30.2%.
The News Media Group saw ad revenue drop a horrifying 29.6%, with print falling 31.2% and online dipping 18.5% (even more scary).
The only bright spot for ad revenues was About.com which had a 7.2% revenue gain to $30.8 million from $28.7 million.
Importantly, however, circulation revenue is doing very well, up 7% per year. People still love the NYT and Globe enough that they’re willing to pay hundreds of dollars a year to get them when the same content is available online for free. This is HUGE for the company, and it will save the NYT’s bacon. NYT media columnist David Carr observes that, for the first time, NYT subscription revenue is now bigger than ads.
The earnings number is a pleasant surprise for the Times. The one problem is that it will make it harder for the paper to explain the latest round of newsroom cuts.
As we noted last quarter, the company’s aggressive cost cutting and emergency loan from Carlos Slim eliminated the near-term bankruptcy risk. The NYT’s financial position is still very weak, but the crisis has passed, and the next big hurdle won’t come until 2011 when the company’s credit line comes due. After that, there’s $500 million of debt due in 2015, and there are also pension and severance obligations that will chew up cash in the meantime.
Long-term, the company still needs to figure out a survival strategy. Based on the fact that Internet ads are now also collapsing (mostly due to classifieds), simply saying it is “transitioning to a digital model” won’t cut it. The strength of the circulation revenue suggests that people are still willing to pay a lot for the company’s content, and it should certainly be able to build a long-term business on the back of that. Ultimately, however, we expect that the newsroom will have to be cut in half.
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