Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

NYTimes May Have To Sell About.com

Posted by Tom Foremski - February 10, 2010

Niki Scevak, over on Bronte Media has a knack for delving into financial numbers and coming up with a new angle on familiar stories.

Here, he takes a look at the New York Times Company's recent financial quarter, which was generally considered good in that Internet advertising did not decline - the first time in more than a year. And the company beat analyst earnings estimates of 38 cents a share with earnings of 44 cents a share.

But a closer look at the numbers reveals that About.com, which is a site that some people have compared to Demand Media, because it pays writers very little to produce content, was responsible for the majority of the improvement in the company's numbers.

The important point here is that the New York Time's least journalistic editorial product is its most profitable. Yet the majority of its business costs are related to it being able to keep hundreds of highly trained journalists and editors working on news stories and related articles.

How long can this continue? The New York Times is carrying a lot of debt and will have to pay around $90 million this year in interest expense, while its revenue minus operating costs, is around $100 million.

Mr Scevak writes:

About.com is currently propping up the firm and will likely generate about $60 million in gross profit but unless the News operations stabalize at a greater rate then the company will be forced to sell the crown jewel (the irony of calling a site filled with 'how to boil an egg' type articles the 'crown jewel' vs the wider nytimes group is not lost on me).

Clearly, a lot more cost cutting is needed. The New York Times might also need to move more quickly with its paywall plans, which are currently set for next year.

This is a graphic example of how the economics of online news are unable to support an established, professional news organization, even one that has the brand power, and the high traffic, of the New York Times.

It's another example of 'you can't get there from here,' how the old media cannot transition to the new media world. This is why there is a huge amount of disruption still to come in newspapers, TV, and radio.

- - -

Please see:

A Massive Hole in New York Times' Paywall Plan - Here's A Better Plan...

NYT: Charging Ahead (Slowly) - Paywall in 2011

The Times Company Acquires About.com for $410 Million


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