NY Times Outlook Disappoints - Analyst Blog

The ongoing slump in advertising market continues to weigh upon The New York Times Company (NYT), the publisher of The New York Times, the International Herald Tribune, The Boston Globe and 15 other daily newspapers.

This prompted the diversified media conglomerate to revisit its third-quarter 2010 outlook. The company now expects total revenues to decline between 2% and 3% compared to a growth of 1.2% registered in second-quarter 2010, as advertisers still remain shy due to the fragile economic condition.

The newspaper publisher is registering a fall in print advertising and circulation revenues, besides slowing growth in digital advertising.

The New York Times now forecasts print advertising revenues to decline by 5% in third-quarter 2010 compared to a decline of 6% experienced in the prior quarter. Circulation revenues are expected to drop by 5% compared to a growth of 3.2% witnessed in second-quarter 2010.

The company hinted a decelerating growth in digital advertising revenues to 14% in the quarter under review from a growth of 21% recorded in second-quarter 2010. The company also noted a 1% to 2% rise in operating costs in the third quarter. For the fourth quarter, management anticipates operating costs to be similar to the prior-year quarter, irrespective of higher newsprint prices.

Consequently, management expects to post third quarter earnings (excluding one-time items) in the range 3 cents to 5 cents a share. Including one-time items, The New York Times expects a loss of 5 cents to 7 cents a share.

We observe that the company faces a significant risk of high dependence on advertising revenues, which are driven by the health of the economy. To mitigate this, The New York Times is transmuting its business model by adding diverse revenue streams, which include a circulation pricing model and a pay-and-read model for NYTimes.com (in 2011).

The company is also adapting to the changing facet of the multiplatform media universe, which currently includes mobile, social media networks and reader application products in its fold.