The New York Times’ efforts to focus on digital over print may finally be running out of steam. The company reported that profits in the second quarter slid 52%, as digital subscription growth slowed and advertising revenue continued to sag.
Digital subscriptions, which had grown to 799,000 at the end of the first quarter, from zero in 2011, increased by 32,000 in the second quarter. But that was less than the 39,000 increase in the first quarter.
Any growth would normally be a positive sign in an industry that has been buffeted by readers abandoning print in droves, and a prolonged advertising slump, but in the case of the Times, the growth underscored the longer-term issues the paper is facing.
The growth in the second quarter was largely driven by new subscriptions to the NYT Now option, which costs just $8 a month compared to the $15 plans that most subscribers had been opting for previously. This has resulted in a lower revenue mix and slowed overall circulation revenue to a paltry 1.4% increase in the quarter, down from 2% in the first quarter.
What really killed profits at the Times was the 6.6% drop in advertising revenues, which more than wiped out any circulation revenue increase.
This is not lost on Times president and chief executive officer Mark Thompson, who said the company still has more work to do to deliver long-term sustainable revenue growth.
But how they will do that is a big question mark. The company has done far better than I predicted it would with regard to building a substantial digital subscriber base, but as with all things, the demand is finite. The slowing growth was inevitable as the “low hanging fruit” was picked off, providing much needed financial relief. But now the Times faces a much tougher task of convincing people why they should pay for news that can be obtained elsewhere for free.
With growth slowing and advertising still sliding—the company predicted a decrease in the third quarter in the mid single digits—the Times still needs to figure out how to remain relevant in a fast-changing news landscape, which won’t be easy to do in the face of fierce competition.