The New York Times Co. seemingly is back on track after posting a profit in the latest quarter, but they are not out of the woods yet.

From Forbes.com

For a news business short on good business news, The New York Times Co. earnings report this morning seemed a welcome ray of hope.

The Times posted earnings of $0.16 per share, trouncing predictions of a $0.01 per-share loss. True, one-time cost cuts, like the shuttering of a distribution arm, drove most of the gains. And the division that houses The New York Times and the International Herald Tribune reported that circulation revenues rose 6.7%, eclipsing advertising revenues for the first time, suggesting that the Times is transforming to a reader, rather than advertiser-based business. That’s hardly a sign of health for publishers traditionally, but these are extraordinary days for media companies. Against what could have happened, and what’s happened in the recent past, America’s paper of record did OK, and its stock climbed accordingly.

But beyond today’s numbers, there’s a much bigger problem. Publisher Arthur Sulzberger Jr. and chief Janet Robinson seem truly confused by what to do next. They’re far from alone in debating the future of the news business these days, a trend that’s turned industry blog Romenesko into the day’s most depressing read. But the Times Co. sold almost all of its non-news assets to keep afloat in recent years, and lacks the backing of a diversified, big media mothership, as Dow Jones has with News Corp. ( NWS – news - people ). They face far greater risks from dawdling as a result.

Sales from ads appearing on Times Co. Web sites, long believed to be the future economic engine for the paper, fell 7.2% last quarter. Strip out reference and advice site About.com, which posted a 7.2% gain in revenue thanks to advances in its cost-per-click ad program, and Times Co. digital performance looks even worse. Its news sites, including NYTimes.com and Boston.com, posted sales declines of 18.5%. Across the broader Web, display ad sales were flat over the first half of this year compared to 2008, according to a report by the Interactive Advertising Bureau.

That drop is especially frightening because the Times Co. is the gold standard for pricey online marketing campaigns for big brands like Apple ( AAPL – news - people ). The company has one of the Web’s most desirable readerships of 17.5 million monthly unique visitors. The company also employs a team of programmers who craft flashy ads, some of which integrate the Times’ editorial content, an unusual offering in the Web journalism business. (See: “Gray Lady Juicing Up Digital Ads.”)

 

Advertising revenue is the lifeblood of every newspaper but thanks to a prolonged recession that has both advertisers and consumers trimming spending papers like the Times have to find other ways to make up for the lack of ad revenue.  In the Times’ case it was a large jump in the subscription cost of the newspaper and while circulation numbers are down revenues are up.  But just how long can the paper push through increases before readers revolt in droves pushing circulation and revenues down?

Also since the company has leveraged itself to the hilt and sold off non-core assests it is now lacks any diversity in its revenue stream and is almost entirely reliant on the newspaper business for income.  That’s a one trick pony with a very bleak future in my book and will give the Times’ executives a lot of heartburn and indigestion in the months and years ahead.

 

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