Thursday, February 11, 2010

NYT company earnings: quality content is expensive, probably unsustainable

the NY Times company released their quarterly results this week. They show an increase in online advertising (after a drop in the past few quarters) and show again that online advertising's share of the total pie is increasing. That is good news, except of course, it happens† because the pie is shrinking.

http://techcrunch.com/2010/02/10/new-york-times-rebound-internet-advertising-fourth-quarter/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29

Techcrunch's analysis shows that about.com, a NYT company property, is more profitable than the main newspaper site (5% of revenue and 13% of profits). This is not surprising. Cheap content is more profitable on a unit basis - same logic that led NBC to put Jay Leno in primetime.

In the case of NYTimes.com, the situation might be even worse. I don't know for a fact how they allocate costs, but I assume that they don't load the online unit with content creation costs (e.g., a share of the newsroom salaries). Once they do, the situation will be even grimmer on a unit level. As less and less people buy the paper edition, and the pie keeps shrinking, profitability of the online business will suffer more.

The company has famously announced they plan charging for content on their site. I personally have no intentions of paying, but I hope enough people do. Otherwise we will be left with about.com to provide information and analysis on major news events.

Jonathan Shulman

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