Selling Deckchairs on the Titanic: How the N.Y. Times Actually Lost $50M in Q3

The New York Times (NYT) turned a profit in Q3 2011 and earned some positive coverage for an uptick in digital subscriber revenue. But don't believe the hype: This mammoth media brand isn't really profitable, and the entire business remains in decline.

The "profit" it recorded came only because the Gray Lady is taking one-off gains on asset sales, and because it continues to lay off staff. In other words, The Times is selling deck chairs on the Titanic -- nice while it lasts, but it rather ignores the fundamentals.

Here are the significant numbers from NYT's Q3 statement:

• Net income: $16 million, up from a net loss. On the surface, that looks like good news. Management has turned the ship around and the paper is finally making money again. Or is it ...?

• Total revenues: down 3.1 percent to $537 million. Yikes.

• Ad revenues: down 8.8 percent to $262 million. Overall, the NYT remains in decline despite the fact that ad revenue in the broader economy is only increasing. The tide is coming in, but NYT's ship is sinking.

• Sales, general and admin costs: down $14 million to $242 million. This, essentially, is the staffing budget. I said back in 2008 that the NYT would need to lay off hundreds of its newsroom staff to survive in the long term. That is what's happening now, and will continue to happen.

• The About.com group: down 20.8 percent to $25.7 million. About.com seems to be approaching the point where publisher Arthur Sulzberger may be required to make a "pull the plug" decision.

• N.Y. Times Group revenues (the paper itself): down 0.5 percent to $357 million. Not too bad, but still struggling for growth.

• A $65.3 million gain on the sale of 390 share units in Fenway Sports Group (owners of the Boston Red Sox and Liverpool F.C.).

A Times spokesperson responded that if you back out other special charges such as unusual debt prepayment fees then NYT still makes $5.4 million after tax. You can fiddle with the special cash and non-cash charges any way you want, before and after tax, but in my opinion no matter how you calculate it, NYT's net income comes out as substantially less than $16 million.

Can the growth in digital subscriber and ad revenue rescue the Times? The Times is still losing its print ad/circ revenue base faster than it is gaining new revenues from digital advertising and subscribers. Print ad revenues declined 10.4 percent. Digital revenues increased 6.2 percent. The Times, frustratingly, doesn't specifically break out digital/print subscriber revenue or digital/print ad revenue for its NYT division, so we can't see exactly what's happening. (I wonder why that is?)

But the paper appears to be losing a total revenue base worth about $357 million per quarter, and replacing it with digital advertising worth $50.3 million per quarter, plus subscriptions which at most -- if you assume its 324,000 paid digital subscribers all bought the most expensive sub at $8.75 -- bring in $34 million per quarter.

Certainly, you can run a fantastic news operation on revenues of about $85 million per quarter. Most news businesses can only dream about that kind of coin. But The Times would have to shrink its staff by about 75 percent to live within those revenues.

*Correction: Originally, this item said incorrectly that the loss was $60 million, due in part to the sale of a paper mill. The paper mill sale occurred in Q1, not Q3. Apologies for the error.
Related:

• If the NYT Is in Such Great Shape, Why Are Its Revenues Sinking?
• Good News for The New York Times (But It's Still Mostly Doomed)
• Advertisers Abandon The New York Times, Further Threatening Jobs There