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New York Times Circulation Gains Make Up for Print Losses

Times Gets More Revenue From Subscribers Than Ads for First Time
Circulation sales at The New York Times and the International Herald Tribune, which are counted as one unit, will exceed advertising when the full year is measured, according to an average estimate of three analysts interviewed by Bloomberg News. Photographer: Michael Nagle/Bloomberg

Dec. 21 (Bloomberg) -- The New York Times newspaper, hit by ad declines that have dragged down the entire industry, will make more money this year from subscriptions than advertising for the first time, offering the promise of a return to growth.

Circulation sales at the Times and the International Herald Tribune, which are counted as one unit, will exceed advertising when the full year is measured, according to the average estimate of three analysts surveyed by Bloomberg News.

The move by a bellwether for the newspaper industry has turned the traditional business model on its head. Publications used to seek to get 80 percent of their revenue from ads and the rest from subscription sales, according to Ken Doctor, a media analyst with Outsell Inc. The milestone also shows the power of so-called paywalls, which spur Web readers to buy subscriptions.

“Online subs have had a huge impact,” said Douglas Arthur, an analyst for Evercore Partners Inc. in New York.

Subscription sales are growing faster than ad revenue is falling. Should New York Times Co. sell off the Boston Globe, its remaining asset outside the Times newspaper, the company would be recording sales growth instead of a decline.

New York Times Co., led by new Chief Executive Officer Mark Thompson, has struggled with a slump in newsprint advertising, leading to six straight years of shrinking sales. The newspaper started charging readers to access its articles online at the end of March 2011 and has invested more heavily in its digital research and development department to attract newer readers, especially those coming out of college who have become accustomed to computers, tablets and smartphones.

Paywall’s Power

The paywall will more than make up the difference between circulation and ad sales this year, bringing in about $91 million in revenue, Arthur said. That will help boost total circulation sales for the Times newspaper group to $768.3 million, $52.9 million more than advertising, he estimates.

“The paywall has been significant,” Arthur said. While Times Co.’s advertising sales normally get a seasonal boost in the fourth quarter because of the holidays, the increase won’t be as pronounced this year, he said.

The advertising slump is still taking its toll. The company said this month it would cut 30 newsroom jobs out of a total of 1,100 because of declines in ads. The business side of operations has already been reduced by more than 60 percent in the past few years.

“These are financially challenging times,” Chairman Arthur Sulzberger said in a memo to employees. “The advertising climate remains volatile and we don’t see this changing in the near future.”

Sales Increases

Still, the subscription gains show a way forward. The company’s New York Times Media Group unit has recorded annual increases in sales in all but one quarter since it introduced the paywall. Revenue at the New England Media Group division, mostly made up of the Boston Globe, has continued to decline year over year.

Kannan Venkateshwar of Barclays Plc and William Bird of Lazard Capital Markets LLC also estimate the company’s balance between circulation and ads will tip toward circulation.

In the four quarters since the paywall was implemented, the Times and the Herald Tribune increased circulation dollars 7.1 percent from the previous 12-month period, while advertising fell 3.7 percent. Circulation sales growth more than compensated for the ad losses, surpassing them by $19.2 million in the first 12 months since the newspaper started charging readers online.

Lower Rates

Online ads sell at much lower rates than print advertising, making the paywall more important to the newspaper’s business.

Times newspaper’s total weekday distribution, including print and digital, rose 40 percent this year to 1.61 million, according to the Alliance for Audited Media. The company reported 566,000 paying digital subscribers as of the end of September, an 11 percent increase since June.

The digital subscription business isn’t the only reason for the increase in distribution sales. The Times raised print delivery prices by 4 percent this year and plans to increase prices again next year by 5 percent. Print distribution has slipped, with Sunday circulation falling 1.6 percent to 1.25 million in September from a year earlier, while weekday circulation dropped 6.9 percent to 717,513, according to the Alliance for Audited Media.

The publisher has yet to prove if the digital subscription model will be able to keep growing quickly enough to sustain the initial surge in circulation revenue, said Edward Atorino, an analyst with Benchmark Co.

“You have to wait and see if they can keep that up,” he said.

To contact the reporter on this story: Edmund Lee in New York at

To contact the editor responsible for this story: Nick Turner at

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