This Media Giant Changes With the Times, but Its Potential Is Limited

Prior to the new millennium, if anyone wanted to read important information about what was going on in the world, they would likely read The New York TimesThe New York Times (NYSE: NYT  )  as a company is still a reliable source of information, and through various innovations has improved the quality of information it delivers. At the same time, it has two problems.

One, competition has greatly increased. Two, The New York Times is highly reliant on the advertising market, which is more fragmented and complicated than in the past as well as in secular decline.

Recent results
In the third quarter, The New York Times saw revenue improve 1.8% year over year, with circulation revenue increasing 4.8%. Digital subscriptions jumped 28% to approximately 727,000. The increase in digital subscriptions is a major positive, indicating that The New York Times is changing with the times.

Looking at online exposure, the company is also more impressive than you might think. According to website analytics company Alexa.com, NYTimes.com sports a global traffic ranking of 111 and a domestic traffic ranking of 35. To put these numbers in perspective, consider that Gannett's (NYSE: GCI  ) USAToday.com maintains a global traffic ranking of 239 and a domestic traffic ranking of 71. Therefore, more sets of eyeballs stare at content on The New York Times' site.

News Corp.'s  (NASDAQ: NWS  ) WSJ.com, the Web home of The Wall Street Journal, also falls behind The New York Times when it comes to online exposure, sporting a global traffic ranking of 229 and a domestic traffic ranking of 86.

The New York Times' site also surpasses its online competition in three important online metrics. NYTimes.com's bounce rate (i.e., when a visitor only visits one page and then leaves) of 62% isn't good, but it's still lower than USAToday.com's at 64.8% and WSJ.com's at 63.8%.

The average visitor to NYTimes.com views approximately 2.4 pages, higher than USAToday.com at 1.9 pages and WSJ.com at 2.0 pages. Furthermore, The New York Times manages to keep its visitors on-site longer, with an average time on site of 3:40, versus 2:46 at USA Today, and 3:11 at WSJ.

The best part is that The New York Times still looks poised to thrive.

Innovative measures
If you think The New York Times is just some old newspaper company fighting against industry trends by primarily relying on its print publications, you would be incorrect. The New York Times is highly innovative, and it's constantly searching for ways to match consumers' current wants and needs.

For instance, the company uses metadata to find articles that relate to each other, to determine what and whom is being covered in the news and on social media, and to discover what combination of topics would be interesting to readers. Additionally, through its research and development department, The New York Times is using its innovative technologies to match specific reader trends.

In other words, The New York Times would ultimately like to find a way to put up digital content that would match news that you would most be interested in as opposed to offering a broad range of categories that cover recent news.

All of this might sound intriguing, but you can't ignore the headwinds.

Other recent results
In the third quarter, advertising revenue declined 2%. This was the lowest quarterly decline in three years, but it's still a negative. Ad print revenue slid 1.6%, and digital ad revenue dropped 3.4%. Therefore, it's imperative that The New York Times continue to increase its digital subscriptions.

Theses mixed results make The New York Times somewhat of an enigma when it comes to investment potential. On one hand, it has demonstrated a great deal of online exposure and increases in digital subscriptions. On the other hand, there's no stopping a downward-moving advertising market.

The New York Times is doing everything it can to maximize its potential on both the top and bottom lines. In regard to the bottom line, it recently sold New England Media Group for $70 million. This has aided the balance sheet, and it will reduce costs. The New York Times is now focusing on high-potential businesses. It also currently yields a dividend of 1.1%.

However, this isn't quite as generous as Gannett's 3% yield. News Corp. doesn't offer a dividend, but with $2.7 billion in cash and no long-term debt, it's more than capable of adding a dividend in the future, and it has plenty of available capital for reinvestments in its business.

The bottom line
The New York Times is a highly respected brand, which will always give the company value. It's in the process of making itself more aligned with industry trends. However, the suffering advertising market is a negative that will limit the company's upside potential.

The New York Times is a well-run company with long-term investment potential, but there are risks -- and there are many better investment options out there. 

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