If the NYT Is in Such Great Shape, Why Are Its Revenues Sinking?

The New York Times is back, baby, according to longtime Grey Lady chronicler Seth Mnookin in this week's New York magazine. The piece suggests there is nothing but "good financial news" coming from the NYT: The debt is paid off! It's making a profit! All the naysayers can suck it! Turnaround complete! Even The Atlantic recommended its readers check the story out to see how the paper has "brought itself back from the precipice."

The problem is that Mnookin's story is premature. There is nothing in the NYT's finances to suggest that the company is grappling successfully with the declines in its advertiser base, its paper circulation or the macroeconomic switch to digital news publishing. Here is the Times' own assessment of its finances for Q1 2011:

Revenues declined 4 percent to $566 million.
A 4.5% increase in digital advertising revenues did not offset the 7.5% decline in print advertising revenues.
In March 2011, total advertising revenues further softened partly in response to the uneven economic climate. There was some improvement in April.

Mnookin's story is actually misleading when it comes to NYT's finances. He writes:

In March, after several years of planning and tens of millions in investments, the Times launched a digital-subscription plan--and the early signs were good. In fact, less than 48 hours before my interview, the Times announced it would finish paying back the Carlos Slim loan in full on August 15, three and a half years early.

Slim had lent NYT about $475 million, according to Mnookin's own numbers. Is it really possible that its new digital subscribers could generate that much new revenue? Um, no. The Times says it gained 100,000 paid digital subscribers by April. Even if you assume that they all bought the most expensive sub ($8.75 per week) and paid a year's fees in advance, the most NYT could have gained in revenues is $45.5 million. The Times' online subscribers are not paying off its debts, in other words.

And although Mnookin says that "much of the lost revenue was made up for by doubling the newsstand price, from $1 to $2," that has not been enough to actually grow NYT's subs revenue. Total circulation revenue declined 3.7 percent in Q1, the company reported.

Spot the turnaround
Here's a look at NYT's total annual revenues going back to 1999. See if you can spot the turnaround:

The scary thing about NYT's business is that even during boom years it can barely get its growth line into positive territory. It's just come off four straight years of revenue declines in a period when many advertising businesses first saw new growth a year or more ago.

The good news
Is there any good news at the Times? Possibly. Revenues may be stabilizing at around $2 billion a year. Digital advertising revenues grew 14.19 percent in Q1 2011 in the News Media Group unit of the company, which houses the paper itself.

More importantly, the Times' allure as the dominant media brand on the planet tempted Rupert Murdoch to spend $5 billion acquiring the Wall Street Journal and then millions more to make it a general news competitor to the Times on the national level. During this period, the Times stuck to its knitting, incurring no such extra expenses.

With Murdoch on the ropes, and succession at News Corp. (NWS) all but certain in the next few years, it is likely that more rational management at News will demand a better return on investment from the WSJ. That will lead to cuts and a possible retrenchment of the Journal's operations. (It may even be forced to start covering businesses again!)

Should that happen, the Times will be able to pat itself on the back -- drawn like a moth to a flame, Murdoch's wasteful spending may have hobbled the Times' main competitor.

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Image by Flickr user jphilipg, CC.

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