Record digital growth at New York Times

NYT Ad Revenue

(BI Intelligence)

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The New York Times (NYT) beat analyst expectations in both quarterly revenue and profit, propelled by record breaking digital subscriptions.

Here are some key takeaways and implications from The New York Times’ Q4 earnings report:

• The NYT added the most digital news subscriptions in five years. In Q4, the Times added 276,000 net digital news customers, which marks the most digital subscription additions in a single quarter since the company launched its pay wall in 2011, according to NYT CEO Mark Thompson. Overall, digital subscribers increased 46% YoY in Q4 to 1.85 million.

• This was largely fueled by coverage of the election. The company saw an increase of 41,000 paid subscriptions for both print and digital in the week that followed the presidential election on November 8.

• Digital advertising revenue also impressed. The NYT digital ad revenue jumped 10.9% in Q4 to $77.6 million, and 6% for the full year 2016 to $208.8 million. The Times cited smartphones, branded content, and programmatic advertising as major digital ad growth areas in the quarter. Digital advertising now accounts for 41.9% of the company’s total advertising revenue, up from 34.1% in Q4 2015.

• However, despite digital growth, print declines remained punishing. Print advertising revenue continued to slide in Q4, falling 20% and driving a 9% drop in total advertising revenue in 2016. Declining print advertising revenues, primarily from a drop in display advertising, drove the company’s total revenue down 1% YoY in Q4 2016 to $440 million. For the full year, they fell 2% to $1.6 billion.

The New York Times has also been aggressively investing in its digital content portfolio. This past quarter alone, the NYT launched three separate digital formats to enhance its storytelling:

• 360-degree content. This past November, the NYT debuted its own standalone 360-degree offering (The Daily 360), which brings viewers a new 360-degree video every day. The new offering looks to capitalize on the emerging immersive video trend and the success of its VR enabled app NYT VR, which saw more than 600,000 initial downloads.

• Audio content. As of this week, correspondent Michael Barbaro will be the host of a 15-minute podcast, simply called The Daily, outlining the most important news of the day. The move follows in the footsteps of other legacy firms like the Guardian and the Wall Street Journal, which are both taking advantage of the recent podcast explosion.

• Social content. On Thursday, the NYT announced that it will be launching its own Discover section on Snapchat, with the aim of capturing younger demographics. On average, Snapchat reaches 41% of all 18 to 34 year olds in the US, compared to an average US TV network that only reaches 6% of the same age group, according to Nielsen data.

Many digital media companies have embraced monthly and annual subscriptions. This business model allows digital media companies to provide a premium experience that offers more than the basic, often ad-supported service level.

Subscriptions are enjoying a new prominence as a revenue model for digital content and apps. Internet companies are exploiting the opportunity to boost ARPU (average revenue per user), thanks to recurring payments from a subscriber base.

BI Intelligence, Business Insider's premium research service, has compiled a detailed report on subscription revenue that looks at how prominent players in five separate categories have tried to build a subscription-based revenue stream alongside ad-based businesses: the categories are video, music, news publishing, social networks/messaging, and dating apps.

Here are some of the key takeaways:

• Most companies operate on a "freemium model." Subscriptions typically operate alongside an advertising business.

• Success in freemium boils down to offering a core audience exclusive value that can only be accessed beyond a paywall. The key is to target the most loyal audiences, and sell them on an expanded offering — bundles of features or content — that they find irresistible.

• Some publishers and apps have had mixed results with subscriptions, and vary in terms of how hard they have pushed them. Part of the problem is that ad-dependent companies are worried about limiting audience if they pack away too much value into a subscription tier.

• The proportion of paying subscribers within the total user base varies considerably across digital media industries. Each category is obviously different, and won't face the same challenges and opportunities in dialing up the percentage of subscribers and subscription revenue. Here are some of the proportions of subscribers in apps' user bases: Spotify (25%), WhatsApp (21%), Pandora (5%), Match Group (5%), The New York Times (3%), and LinkedIn (2%).

In full, the report:

• Analyzes the most common subscription-based digital media revenue models

• Explores the drivers that allows some subscription or freemium business models succeed

• Explains the revenue mix and business opportunity in several key digital media industries

• Outlines companies that have succeeded with subscription-based business models

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP

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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of subscription revenue models.

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