NY Times: Earnings Good, Survival Still in Doubt

Yes, the latest earnings report from The New York Times contained plenty of good short-term news. But that only raises a much larger question: How viable will this company be in the future?

Like all print publishers, the very survival of the Times depends on how quickly and effectively it can transition from its old ways of doing business to a digital, multi-platform future -- a challenge that includes adapting to the great consumer migration to mobile devices.

And, as the industry leader -- not only in the U.S. but in many ways around the world -- it would not too strong to say: As goes the Times, so goes the entire traditional newspaper industry.

Looking at all the latest financial data, I'd have to say that the long-term prospects for the Times remain decidedly mixed.

The immediate financial news was pretty rosy. Operating profits were up around 10.9 percent for Q-4 '09, with operating costs down roughly 16.3 percent over the same period, reflecting widespread layoffs and sales of some assets.

More importantly, the Times reported an impressive overall reduction in debt since the end of 2008 of almost 27. 4 percent -- from $1.059 billion down to $769 million at the end of 2009.

This is significant because the Times remains heavily leveraged from its expansionist period -- a buying spree that included the acquisition of the Boston Globe and questionable investments like a stake in the Boston Red Sox baseball team. That debt load means management's ability to invest in new technologies that might improve the company's long-term prospects will remain extremely limited.

Thus, when evaluating the Times' overall performance and prospects, two factors stand out as key indicators.

First, just how quickly is the company managing to transition from its legacy as an entrenched print publisher to a multi-platform digital media player?

One way to measure this is by the percentage of revenue collected from digital. "As we continue to transition from a company that operated primarily in print to one that is increasingly digital and focused than multi-platform and delivery, online advertising revenues are becoming a more important part of our mix," CEO Janet Robinson acknowledged. "They made up 23% of our ad revenues in the quarter, up from 18% in the same period in 2008."

While approaching the 25 percent level is better than much of the competition, the Times clearly still has a long way to go to re-juggle its revenue mix toward more digital and less print.

Second, that dangerously high level of debt remains. Despite attempts, the company failed to unload the Globe or its stake in the Red Sox last year, and nothing in today's earnings call or report hints at any developments in those areas anytime soon.

So while reducing its debt load by a quarter in a down market is no small feat, it remains true that the lion's share -- three-quarters of a billion dollars, at least a third of which is held by Mexican billionaire Carlos Slim & family -- remains on the books.

The only good news on debt is the great majority of it does not come due until 2015, providing a critical window during which the Times has one last opportunity to reinvent itself.

Most pressing, as we've noted here previously, is the threat/opportunity presented by the rapid emergence of e-readers as the news device of choice for consumers.

This is the year when the Times -- and other traditional media companies -- must adapt to mobile devices to avoid a repeat of what happened in the mid-nineties when the Web arrived and it became apparent to those outside of the industry the old ways of publishing were doomed. Newspaper content moved to Web, but subscription revenue didn't follow. This time around, will the Times be able to charge for mobile access to its product?

Meanwhile, even as the company struggles with these long-term issues, Robinson and the other Times execs warned that the short-term outlook for ad revenue is hardly a bed of roses.

"Looking ahead, visibility remains limited for advertising," Robinson stated during her earnings call with analysts. "In the first quarter of 2010 we expect the rate of decline for print advertising to continue to improve modestly from the fourth quarter of 2009."

The same is true for the business as a whole: visibility is most definitely limited.

Image: Rubin421
For more context, please check out these related BNET Media links:
The True Test of the NYT's Paywall Plan Will Be e-Readers "Since The New York Times has elected such a long runway ("the beginning of 2011," according to Arthur and Janet*) until it erects its content paywall, there will be plenty of time to agree or disagree with the company's plans..."

The New York Times Cuts 100; Adds Bay Area Section "The New York Times launched a new two-page section called "The Bay Area" this past week, and as I was preparing to critique it yesterday, the news broke that the troubled newspaper company will be eliminating another 100 jobs (or 8 percent) from its newsroom between now and the end of this year..."

NYT's Ongoing Struggle: "Cash, $37 Million; Debt, $1 Billion" "So, The New York Times' Q-2 numbers are in and they're not good -- everything is down. Near the end of the narrative portion of the company's 8-K is this unsettling..."

NYTimes Considers Asking for Foundation Grants "In its continuing search to expand its business model toward some new mix of revenue that might help sustain its expensive news-gathering system, The New York Times is actively considering approaching foundations for the kinds of grant support that helps non-profit news organizations stay afloat..."

What Does the NY Times Want From Boston? "A cynic might say the Times got exactly the result it wanted from this vote..."

The NY Times Gambles by Raising Prices "Dear Home Delivery Subscriber, "Effective Monday, June 1, there will be an increase in the price of the home delivery of The Times--We regret"

Creditor Slim Expects NYT Print Version To Disappear, etc. "Trying to sort through today's pile of industry reports to discern the trend lines is much like having to redesign a cranky website from the bottom up, though layers of spaghetti code..."

Mexican Billionaire Puts the Squeeze on The NY Times "Remember the news back in January about the sudden arrival of Carlos Slim Helu and his extended clan from South of the Border as the purported saviors of The New York Times, then staggering under a debt load that was threatening to break the back of the old gray lady?"