11 Takeaways From the Latest Media Organization Earnings

Three of the biggest American media organizations continue to see massive traffic and record-breaking digital subscription growth, which has helped them navigate a drop in advertising brought on by the pandemic. “It’s all about the pace of decline,” said Brian Wieser, global president, business intelligence at GroupM. Here are 11 takeaways from The New York Times, Gannett and News Corp.'s earnings from the most recent quarter. The pace of decline slowed as the quarter closed There were “diminishing pacers of decline,” Wieser said. In any other year, they could’ve accounted for record lows, but numbers began to narrow slightly toward the end of the quarter. “It feels pretty good if you were hitting your head with a rubber mallet, if you were previously using a metal hammer,” he said. At Gannett, overall revenue was down 28% this quarter compared to last year, but began to recover slightly toward the end. April revenue was down just over 30%, Reed said as an example, but June revenue was comparatively only down by about 24%. At the Times, total revenues decreased 7.5% compared to last year. Revenue for News Corp., including Dow Jones properties—The Wall Street Journal (reported separately for the first time) and Barron’s Group titles—was down 22% compared to last year. Changing of the guard This was the last earnings report for Mark Thompson, president and CEO of the Times, as he announced his departure, making way for Meredith Kopit Levien to fill the role. British-born Thompson, who worked most of his career in the U.K., joked that future earnings would not be given in “Queen’s English” but rather would be “in American.” “To paraphrase George III in Hamilton, good luck with that,” Thompson said. Digital subscriptions continue to grow Gannett saw a 30% increase of digital-only subscribers compared to last year, reaching 925,000 in the second quarter. The company is poised to surpass 1 million digital-only subscribers in “the next few months,” Reed said, and will become a “major driver” for the business as subscription revenue is already the largest income category. This was a record-setting quarter for digital subscriptions at the Times, with 493,000 new subscriptions added and a total of 669,000 net new digital subscriptions. In all, the Times has 5.7 million total digital-only subscriptions and 6.5 million total subscriptions. Its subscription business represented nearly 75% of revenue last quarter. “We are making steady progress on the levers and drivers of subscription, though the unusual market conditions are clearly amplifying their effect,” said Kopit Levien. The Wall Street Journal grew to 3 million total subscriptions for the quarter, with digital-only subscriptions growing 23% to more than 2.2 million. Digital revenue outperformed print revenue at the Times For the first time, the Times earned more money online than it did in print—a promising hurdle to overcome as readers change their consumption habits. “Now, this is taking its time coming, not because we've been slower than others to execute our digital strategy—quite the contrary—but because our great print platform has remained so resilient. But it's clearly a watershed moment in the transformation of the Times,” Thompson said. Advertising revenue hit hardest Gannett CEO Mike Reed acknowledged advertising was “the hardest hit category" for the company, as it was for other media organizations. Alt-weeklies and local news outlets have been hit hardest as local businesses cut their own marketing budgets as Covid-19 continued to spread across the U.S. “Their ad base has just evaporated,” Wieser said, pointing to categories such as retail. “That’s where it’s helpful for those publications to invest in new products.” Print advertising decreases Gannett reported print advertising decreased by 4% compared to last year. Kopit Levien said she expects The Times’ large print advertising business (and display) to be “under pressure.” “While the ad business will go on being very important to the company's economics and profitability, it is unlikely to be a significant growth driver in the near term,” she added. The Times saw a 55% decrease in most print ad categories. This happened as circulation declined: There was a nearly 20% daily decrease compared to last year, while Sunday circulation declined 9.7%. The closures of hotels and businesses as stay-at-home orders persisted led to a decline of 7 percentage points to the daily edition and 3 percentage points to the Sunday edition, said the Times’ Roland Caputo, executive vice president and chief financial officer. Additionally, losing Starbucks as a carrier of the paper in August 2019 was responsible for about 2 percentage points of the decline. At Dow Jones, print advertising was down 43%, including the cancellation of live events. Digital advertising decreases Digital advertising and marketing services revenue dropped more substantially for Gannett, which reported a 26.7% decrease. “Lower demand for premium display advertising coupled with pressure on programmatic CPMs contributed to the decrease for our digital media and digital classifieds products,” said Gannett chief financial officer Doug Horne. The Times, meanwhile, saw a 32% decline in digital advertising last quarter. The Times will invest in “differentiated” ad products, Kopit Levien said, including fewer ads but in larger formats “substantially better targeting of our audience using first-party data in privacy-forward ways, insights for marketers about what audiences are interested in, and audio." In audio, the Times will capitalize on its acquisition of Serial Productions and begin selling podcast ads on This American Life later this year. Meanwhile, Dow Jones digital advertising fell 7%, which was boosted by “strong growth in programmatic,” said Susan Panuccio, News Corp.'s chief financial officer. Cuts due to the Covid-19 pandemic Media organizations acknowledged the budgetary cuts made due to the Covid-19 pandemic. Gannett, as an example, saved more than $125 million last quarter in staff cuts, furloughs, wage reductions and budget freezes, Reed said. The Times’ Kopit Levien acknowledged that it shuttered Fake Love, its experiential marketing agency, “entirely with our future ad business in mind.” The Times also decreased its own marketing expenses by about 36% last quarter, largely driven by lower media spend. “The extremely strong news environment and the continued improvement of our digital products proved to be a strong combination in demonstrating that we have become less reliant on acquisition spend as a means to drive subscription growth,” said the Times’ Roland Caputo, executive vice president and chief financial officer. The Times has developed award-winning marketing strategies in years past, and its digital subscription growth, among those seen at other organizations, has led some to wonder what strategies it'll use to retain those paying customers. “It goes back to any marketing lesson: It’s not just the messaging, but what is the value you’re delivering to consumers,” said Joseph Goodman, associate professor of marketing at Ohio State University’s Fisher College of Business. However, the Times doesn’t expect its Q2 marketing spend to be indicative of future spend given Q2’s “special circumstances,” Caputo said. Continued traffic increases Gannett reported continued surge in traffic over the past few months. Since late February, Reed said, Gannett saw over 885 million views on coronavirus content, and in late May and early June, local properties saw a 45% daily average traffic increase, compared to last year, surrounding protest coverage. Likewise, the Times acknowledged that traffic “moderated” compared to what the organization saw last quarter. Still, the audience increased 32% year-over-year. In the second quarter, the Times reported an average of 130 million U.S. monthly readers. Investment in virtual events Gannett held 91 virtual events during the most recent quarter “on almost no notice,” according to Reed. Event revenue was still down 37% compared to last year, but the company fared better than competitors, Reed said. He added that the pandemic pushed the media company to “dramatically increase the scope and scale of our virtual events.” Post-pandemic, the organization hopes to have 40% growth annually in virtual events. Investment in film The Times noted its investment in reaching audiences on TV screens with its first feature documentary, Father Soldier Son, on Netflix. A new monthly docuseries, called The New York Times Presents—instead of The Weekly—is coming to FX and Hulu. The Times’ 1619 Project, in partnership between Lionsgate, Oprah Winfrey and Nikole Hannah-Jones, will be made into a limited series for Amazon Studios. These forays into film and TV, Kopit Levien noted, were “less an economic driver” as they were a brand marketing opportunity.