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Tuesday, November 14, 2006

The New York Time Company Struggles With Its Jewel

The New York Times Company (NYT) has more than its share of trouble. One of its largest shareholders want to change the voting rights of the company’s shares, probably to throw out the descendants of the founder, the Sulzbergers.

The company’s results have been poor, and this has shaved the share price by almost half, from $40 in early 2005 to just under $25 now. The stock has actually come up a bit as other media companies like the Tribune are stripped of their best clothes and left for dead.

A look at the NYT 10-Q shows that operating profit in the September period was $20.5 million, down from $39.4 million in the same period a year ago.

It is hard to tell whether the company’s newspapers actually make money. The segment called the News Media Group, which is the papers and their online counterparts, had an operating profit of $25.5 million during the last quarter. Revenue for the group is divided into advertising, circulation and “other”. Other revenue for the unit was $58.2 million. “Other” is probably revenue from online operations. NYT has another small internet operation called During the September quarter, it had revenue of $18.3 million and operating profit of $6.4 million. If the “other” revenue in the news group is indeed online operation and runs at a similar margin to, it would put out roughly $20 million in operating income. That is, almost all the operating profit of the newspaper group.

Since the New York Times newspaper contributes most of the revenue for the News Media Group, its financial fate is critical to the company. It finds itself painted into a corner. Over the years, the daily has become a national paper.

In doing so, it has given up about 30% of its circulation in the New York City area and has taken on more readers outside the nation’s largest city. To keep these national readers, the Times must maintain a large newsgathering operation in the US and abroad. It is an editorial organization that a barely profitable print operation cannot afford, especially one that is experiencing ongoing circulation losses.

The New York Times is now the third largest paper in New York City as measured by circulation in the NY area. The New York Post and The New York Daily News are ahead of it.

A retreat to local coverage to cut editorial costs, which is something that is already happening at big dailies in Philadelphia and Los Angeles, may not help the Times. It would put off too many of the newly minted subscribers outside NY.

The Times can’t afford its current news budget, and it can’t afford to cut it.

Stange business.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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