The New York Times expects ad revenue to continue to decline in 2024

The Times missed its Q4 outlook on advertising sales, with ad revenue decreasing by 8.4% year over year to $164.1 million. In its Q3 earnings report, the company’s guidance expected ad revenue in Q4 to change between a decrease in the mid-single-digits to an increase of low-single-digits. The Times doesn’t seem to expect this to get better in Q1 2024, with an outlook of an expected decrease in the mid-single-digits for total advertising revenues year over year.

Digital ad sales fell by 3.7% to $107.7 million in Q4 2023, down from $111.9 million in Q4 2022.

During the Wednesday call, Times CEO Meredith Kopit Levien blamed a few factors for this decline, including advertisers’ avoidance of hard news coverage, declines in podcast and creative services revenue and that there were five fewer days in Q4 2023 compared to Q4 2022.

“Our digital performance, including podcasts, was impacted by marketers avoiding some hard news topics like the Middle East conflict,” she said.

Subscription revenue continued to grow, however. Digital-only subscription revenues increased by 7.2% year over year to $288.7 million. The company said it ended the year with a total of about 10.36 million subscribers, 9.7 million of which were digital-only. The Times has a goal to reach 15 million by 2027. 

By the numbers: 

• Total revenue in Q4 2023 was $676.2 million, roughly flat compared to Q4 2022.
• Adjusted operating profit was $154 million, up 8.5% year over year.
• Total subscription revenue grew 3.9% year over year.
• Total digital-only average revenue per user (ARPU) was $9.24, up 3.5% year over year. This was primarily due to subscribers moving up from promotional offers to higher prices and price increases on tenured, non-bundled subscribers.
• Other revenues were $74 million, up 10% year over year. This was driven by higher licensing and affiliate referral revenues from Wirecutter, according to the company.
• The publisher added about 300,000 digital subscribers in Q4 2023, compared to 210,000 in Q3 2023 (and 240,000 added in Q4 2022).
• The Athletic continued to lose money in the fourth quarter, but its operating loss shrank to $4.4 million, from $9.6 million a year earlier. 
• Revenue at The Athletic was $38.5 million, up 31.3% year over year.
• The Athletic’s subscription revenue was $26.9 million, an increase of 14.3% year over year. 
• The Athletic’s advertising revenue increased to $9.9 million from $5.3 million in Q4 2022.
• The Times reported that this is the first time it’s made more than $1 billion in annual revenue for digital subscriptions.

Ad revenue decline blamed on news avoidance 

Kopit Levien said marketers’ “news avoidance” in Q4 – primarily due to the war between Israel and Hamas in October – had a negative effect on both display and audio ad revenue.

The solution? “We are extending our ad products very aggressively to other parts of the portfolio beyond news,” she said, meaning sellers will push advertisers to the company’s other verticals, such as The Athletic, Games, Cooking and Wirecutter.

Vasily Karasyov, a stock analyst at Cannonball Research, told Digiday he thought this was a smart strategy, especially as changes in advertiser demand “happens now and then,” especially around different news cycles.

Overall, Karasyov didn’t seem too concerned by the missed ad revenue expectations. “Everyone has a bad quarter now and then. It’s not even that bad, it’s a soft-ish quarter,” he said.

Subscription bundle boom

Despite the less than ideal advertising performance, the bright spot in the Times’ business was its subscription bundle. The Times added about 430,000 net bundle and multiproduct subscribers in the quarter.

Bundle and multiproduct subscribers now make up 41% of the Times’ total subscriber base, compared to 38% in Q3 2023 and 26% in Q4 2022. About 4.22 million of digital-only subscriptions were bundle and multiproduct subscribers. The goal is to get multiproduct subscribers to make up 50% of the Times’ subscriber base, Bardeen said in the earnings call.

The fourth quarter was the largest number of bundle subscribers transitioning to higher prices to date, Bardeen added. 

Compared with the end of Q4 2022, there was a net increase of 880,000 digital-only subscribers.

NYT testing generative AI

Kopit Levien also made it clear that the Times isn’t necessarily against partnering with AI companies and other tech platforms – despite the Times suing Microsoft and OpenAI in December, alleging its copyrighted articles were used to train AI models. Kopit Levien said in the earnings call that the Times is “talking to potential generative AI partners.”

When it comes to evaluating content licensing deals with AI companies or platforms like Apple News, Kopit Levien said, “we are open to that, as long as there is fair value exchange and in support of a broader business model.”

She also said the company is “actively experimenting” with generative AI tools in its ad products for contextual ad targeting and other products.

In Q4, the Times released an experiment to augment Spanish language translation for its content. Kopit Levien said she expects to release this quarter a new product around synthetic voice to allow people to listen to written Times articles.

Analysts seem to see this as an opportunity, though not one that has been reflected in the market yet. A report from JPMorgan’s Media, Entertainment and Advertising team (led by senior research analyst David Karnovsky) published on Jan. 23 noted that since filing its lawsuit against OpenAI and Microsoft, Times shares were up just 4%.

However, “we view the licensing prospect as a net positive” given the Times receives financial compensation “in addition to broader reach and product enhancement,” they wrote.

Q1 outlook

The Times’ also released its revenue and costs guidance for Q1 2024, compared to Q1 2023:

• Increase of 11-14% in digital only-subscription revenues
• Increase of 7-9% for total subscription revenues
• Increase low- to high-single-digits for digital ad revenues
• Decrease in mid-single-digits for total advertising revenues
• Increase in mid-single-digits for other revenues
• Increase of 5-7% for adjusted operating costs

Bardeen noted the company doesn’t expect uncertainty in the ad market to go away anytime soon, however, and that earnings growth would likely be “weighted to the back half of the year, due to the seasonality of advertising and affiliate revenue.”

Doug Arthur, managing director at media research and advisory firm Huber Research Partners, called the guidance “somewhat cautious,” in his report on the Times’ Q4 earnings that was shared with Digiday.

The most important thing, according to Karasyov, is for the Times not to miss revenue expectations two quarters in a row.

“They missed this quarter [but] you don’t want to miss two quarters in a row,” Karasyov said. “You can come back from one miss.”