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The New York Times Company (NYT), Gannett Co., Inc. (GCI): This Newspaper Company Can Still Make You Money

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There’s an economic recovery happening, but the future of the recovery is rather uncertain. In such a scenario, advertisers are reluctant to make any upfront commitments for advertising, and the first thing that this does is make things worse for the publishing industry, which has long been impacted by declining advertising revenue. The New York Times Company (NYSE:NYT), a well known name in the news and publishing industry, seems to be making the right moves so far, as it struck the right chord with investors when it released its 2Q 2013 results recently.

A good performance

The New York Times Company (NYSE:NYT)Including one-time components, quarterly earnings were $0.13 per share and beat consensus estimates by a few pennies. This compared well with the year-ago quarter’s earnings of $0.11. The company is putting efforts toward cost cutting, a quick realignment with changing market dynamics, and most importantly, the digital-subscription model seems to be working well.

Times now discloses results through one reportable segment – the News Media Group. This consists of The New York Times Company (NYSE:NYT) Media Group and the New England Media Group. Revenue decreased slightly to $485.4 million. This fell short of the consensus estimate of $489 million due to a decline in advertising revenue. The New York Times Media Group’s revenue inched up 0.8% to $391 million, and New England Media Group’s revenue fell sharply by 7.4% to $94.4 million.

The success of digital-only subscribers has come as a breather, and it is in this area that the company is now planning to grow. The total adjusted operating profit rose by 13% to $77.8 million, whereas the adjusted operating margin expanded 190 basis points to 16%. The growth reflected sturdy circulation revenue and effective cost management.

The road ahead

Most of the media conglomerates are diluting their exposure to print and divesting non-core operations or centers of operations that do not gel well with the new vision. Times has already completed the sale of About Group to IAC/InterActiveCorp in September 2012 for a sum of $300 million. In October, it sold its stake in indeed.com, a job portal, for $167 million. A few days back, it sold its New England media group in order to focus more on its core operations.

Times is focusing on video content and plans to create significantly more high-quality content to entice more advertisers and subscribers to digital subscriptions. There are a few projects in this segment that the company plans to announce moving forward. To spread the awareness regarding its video presence, and to grow its revenue streams, Times began offering free unlimited access to the Times online video section during the second quarter.

The company is also planning to produce a whole package of new paid digital products and services in order to expand its subscriber base by attracting a wider audience of subscribers. This is because digital subscribers continue to grow and this model has helped largely offset advertising losses. The number of digital subscribers continues to grow and hence, this is one of the thrust areas for the company now.

Times plans to re-brand International Herald Tribune as International The New York Times Company (NYSE:NYT) at the beginning of the fourth quarter. The first edition of the International New York Times will be released on Oct. 15. The cost of these new strategic initiatives will accelerate in the second half of the year and into 2014, as the company begins to market these efforts domestically and internationally.

The company has been working on cost-cutting initiatives, and this brought in a reduction of $14 million to operating costs. Times will continue to be diligent in cutting down expenses and managing legacy costs, but will also not shy away from investing whenever required.

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