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New York Times Co (NYSE:NYT)
Q2 2020 Earnings Call
Aug 5, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to The New York Times Company's Second Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Harlan Toplitzky, Vice President, Investor Relations. Please go ahead.

Harlan Toplitzky -- Vice President, Investor Relations

Thank you, and welcome to The New York Times Company's second quarter 2020 earnings conference call. On the call today, we have Mark Thompson, President and Chief Executive Officer; Meredith Kopit Levien, Executive Vice President and Chief Operating Officer; and Roland Caputo, Executive Vice President and Chief Financial Officer.

Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call and our actual results could differ materially. Some of the risks and uncertainties that could impact our business are included in our 2019 10-K, as updated in subsequent quarterly reports on Form 10-Q. In addition, our presentation will include non-GAAP financial measures and we have provided reconciliations to the most comparable GAAP measures in our earnings press release, which is available on our website at investors.nytco.com.

With that, I will turn the call over to Mark Thompson.

Mark Thompson -- President And Chief Executive Officer

Thanks, Harlan, and good morning, everyone. Good morning and goodbye, because as everyone in the room must know by now, this is not just my 35th quarterly earnings call as Chief Executive of The Times, but also my last. Meredith takes the helm in just a few weeks time, which is great news for the company and its shareholders. She is a unique talent and will be a bold and brilliant CEO, but one of the changes she's going to bring is to the language Times' executives use on these calls.

Let's take the word lumpiness, a rather fine expressive would useful in so many contexts, but never more so than when applied to advertising. Now, I've tried. God knows I've tried, to coach Meredith in the use of the word lumpiness, but frankly, it's hopeless. It turns out that unless you've spent decades steeped in true gnarly and above all British lumpiness, you just can't pronounce it with any conviction. Roland, needless to say, is a lost cause, but no more lumpiness, indeed, no more Queen's English at all. From now on, it's all going to be in American.

To paraphrase George The Third in Hamilton, good luck with that. But I do want to thank all of you and particularly, our analysts for your engagement and courtesy to me over the past eight years. You're testing of the company's strategy and performance has helped us improve both and as someone new to the public markets when I arrived in 2012, I've learned a lot from you. I also hope you will forgive me before I hand over to Meredith and Roland to tell the story of the quarter, if I say that it's a source of some pride to me that my last full quarter as CEO of The Times was not only our best ever for new digital subscriptions, but the quarter in which total digital revenue exceeded print for the first time. 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 remain so resilient. But it's clearly, a watershed moment in the transformation of The Times.

In revenue now as in everything else, we are a digital first company and won't look back from here. The story of The New York Times over this period is partly a complex saga of new digital tactics, new skills, new structures and processes, but it's also a very simple story of a shared belief across the organization in the value and power of great journalism. The packaging and selling is important of course and we've made great strides in both, but the secret sauce is the journalism itself. It's the critical element in the virtuous circle of audience engagement, subscription and long-term loyal retention and it's also the point of The New York Times. That's why we've invested in it so consistently in recent years. Nothing gratifies me more about my years in the company than the fact that in such a difficult moment for journalism as a whole, our newsroom is so strong and that at a time when the public need great journalism more than ever, they can still rely on The New York Times.

But let me hand over now to Meredith, who's played such a major part in all these successes and who I will believe will take this company to even greater heights to take you through the quarter. Meredith?

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

Thank you, Mark. While you have indeed been ineffectual at working your particular views of English intellect to come at The Times, you have thoroughly succeeded in leaving the company far better than you found it. So on behalf all of your colleagues, let me say that we are immensely grateful to you for your inspired and steady leadership over the past eight years. You led us over the major chasm of transformation to become a global digital-first, subscription-first company and in doing so, you raised the ambitions, not just for this place but for the business of journalism everywhere.

Having total digital revenue overtake print in your last quarter is a perfect punctuation to your incredible run. Journalist Ken Doctor had it just right last week when he said that you've had one of the most transformative runs of any publishing executives in modern times. And I personally could not be more grateful for the seven years of strong partnership and getting to work with you and learn from you for much of it.

Now, I'll have more to say in the coming quarters, but you can largely expect that we will forge ahead and execute on the strategy that has guided us over the past five years. That means continuing to invest in our newsroom, our products and our brand. It also means continuing to increase our focus and emphasis on our product itself, both the journalism and the way that people find and uniquely experience it as the central engine of our business with plenty of work still ahead to build the world-class product and tech-operation to enable that. And it means investing in our people during all that it takes to attract and retain top talent in all of our major disciplines and ensuring that The Times is a place where talented people can do their best work that includes thinking and acting ambitiously about diversity, equity and inclusion to ensure that The Times' both reflects the world we were pulled on on and there is a workplace that feels inclusive and rewarding to all of our colleagues.

Now, let me talk about the quarter. This has been an extraordinary period in our the world. Protest against police violence, racial injustice, tens of millions unemployed, political divisions that only seem to deepen as Election Day nears and a pandemic that continues to ravage the country. Through it all, Times journalists have helped readers and subscribers make sense of it. Our ongoing investment in our newsroom has enabled our national desk to dispatch reporters across the nations to chronicle events on the ground as new pandemic hotspots emerged.

They have used visual and investigative journalism to tell the story of how the virus spun out of control and our reporting has movingly underscored the staggering human toll, racial disparities and the tragic impact, particularly on healthcare and essential workers. The Times has a long history of journalism that explores race in America, from clubs that is pioneering work on the Civil Rights Movement in the 1960s to last year's Pulitzer Prize-winning 1619 Project, which was downloaded an additional 4 million times in the weeks since protest began in the U.S. after the death of George Floyd.

The way we reported on these protests showcases the full arsenal of modern times journalism involving everything from visual investigation to audio, photography and of course, the written word. It's this exceptional journalism that has continued to yield big audiences. In the second quarter, we saw an average of 130 million U.S. readers monthly according to Comscore. While the audience gains moderated somewhat from the first quarter surge, they still represented 32% increase over the same period last year.

The gains in audience and our improved ability to engage readers and turn them into subscribers led to a second consecutive quarter of historic numbers of total net digital subscription addition. Q2 was our best quarter ever with 493,000 net additions to our core news product and 176,000 to our other digital products, for a total 669,000 net new digital subscriptions. Readers are responding to the breadth and the depth of our offering. The second quarter represented a largest number of subscription additions we've seen to our Cooking and Crossword products as well as to core news. The end of the quarter marks the first full year of our registration-based customer journey in our core news product.

The new journey has been effective in its own right in driving growth and it's been an important foundation for ongoing engagement and conversion optimization. We also continue to experiment more aggressively and successfully with news product innovation and deepened engagement, including further expansion of our live news offerings. These initiatives are positively impacting profitability. In the quarter, digital subscription revenue grew by 30%, driven by the rapid growth in subscription additions, promotional subscriptions graduating to higher prices and the benefit we saw from our digital price increase. At the end of Q2, The Times had 5.7 million total digital-only subscriptions and 6.5 million total subscriptions, well on the path to 10 million.

We're making steady progress on the levers and drivers of subscription, though the unusual market conditions are clearly amplifying their effect. We do not give forward guidance on subscription because the numbers are generally difficult to predict, that's particularly true at this moment. As we said on the last call, we don't expect the exceptional piece for the audience we saw on the early months of the corona virus story to last forever, but we also know we're about to enter the crucial last months of the Presidential Election. It's also worth noting that while it's been our strategy and our plan to increase the percentage of starts from organic measures versus paid marketing over time, the more pronounced increases in organic of the last two quarters were in part a reflection of these unusual market conditions. You can therefore expect that we will return to more paid marketing in the back half of the year as we find efficient opportunities to do so.

Our results in advertising while substantially off prior years, were somewhat better than expected. We're continuing to evolve our ad organization to reflect an acceleration of underlying trends and lean even further into our strategy of drawing competitive strength and value from our brand, audience and direct relationships. While in the second quarter that had the consequence of reducing the overall size of our ad piece and closing our stand-alone marketing services business, we did so entirely with our future ad business in mind. That future will be increasingly driven by differentiated digital ad products, including fewer ads but in larger format, 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. We expect that our large print and traditional display advertising business will continue 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.

We discontinued providing Times' content to Apple News at the end of the second quarter. The decision is consistent with the core principles we have adopted in how we engage with the platforms that quality news publications must be named and differentiated from other sources, that the end customer relationship and data should belong to publishers and that the original creator of content must be sufficiently compensated for it's work. There are other important ways we'll continue to partner with Apple through a variety of their products beyond Apple News.

Last month, we acquired Serial Productions, the company that produces the groundbreaking Serial Podcast. We've also entered into an ongoing creative and strategic alliance with This American Life, a radio program that transformed the genre. Among the other things, we will sell This American Life's podcast advertising beginning next year. As we have said in previous calls, we are big believers in the power that audio can have in building deeper connections with the audience and we're committed to bringing you at most the best audio journalism in the world. We launched The Daily in 2017 and it's quickly become the most listened to news podcast in the country. Our goal is to continue to expand our audio offerings and to chart an ambitious course for high quality immersive audio journalism.

We also accelerated our progress of bringing The Times to new audiences through film and TV this past quarter. In the last month alone, we premiered Father Soldier Son, our first feature documentary on Netflix directed by Times reporters Leslye Davis and Catrin Einhorn and The Weekly has been replaced by The New York Times Presents on FX and Hulu, a new monthly documentary series. We also announced the 1619 Project partnership with Lionsgate, Oprah Winfrey and Nikole Hannah-Jones, which will be adapted into a limited series for Amazon Studios.

I'll close by thanking Times employees around the world for their extraordinary work in extremely trying times and once again thank you, Mark, for all that he's done for The New York Times Company. And with that, I'll turn it over to Roland.

Roland A. Caputo -- Executive Vice President, Chief Financial Officer

Thank you, Meredith, and good morning. I'd also like to take a moment to acknowledge Mark's upcoming departure and to thank him for his partnership over the past eight years. While, I will surely miss working with Mark, I am equally excited by the prospect of continuing to work closely with Meredith in her new role. As I said last quarter, although we expect short-term results to be negatively affected by a decline in advertising, our subscription business, which represented nearly three-fourths of our revenue in the second quarter provides a source of strength and resilience through a recurring revenue stream that we expect to grow further as we continue to excel at our core mission.

Adjusted diluted earnings per share was $0.18 in the quarter, $0.01 higher than the prior year. We reported adjusted operating profit of approximately $52 million in the second quarter, which is approximately $3 million lower than the same period in 2019. Total subscription revenues increased approximately 8.5% in the quarter with digital only subscription revenue growing nearly 30% to $146 million. This represents a further acceleration in the sequential rate of quarterly growth, largely as a result of the large number of new subscriptions we have added in the past year, strength in retention of the $1 per week promotional subscriptions who have passed the year-long promotional period and have graduated to higher prices and the impact from our first ever digital subscription price increase, which began late in the first quarter.

Quarterly digital news subscription ARPU declined approximately 11% compared to the prior year and approximately 3% compared to the prior quarter, consistent with the rates of decline we reported for the first quarter of 2020. For both sequential and year-over-year ARPU trends, the historically large number of newly acquired subscriptions mostly on the $1 per-week promotion domestically and a deeper promotional rates in many areas outside of the U.S., more than offset the benefit from subscriptions graduating from the introductory promotion to either step-up or full price as well as the benefit from price increases on our more tenured full price subscriptions.

ARPU related solely to domestic news subscriptions declined 8.5% in the quarter versus prior year and 1.4% versus the prior quarter. We continue to expect strong subscription additions largely at the $1 per-week promotion as well as growth in international subscriptions, which monetize at a lower rate than our domestic ones to continue to weigh on ARPU in the third quarter. International subscriptions continued to make up approximately 18% of our digital only news subscriptions at quarter end. On the print subscription side, revenues were down 6.7%, largely due to a decline in single copy and international bulk sales as many sales outlets were closed throughout much of the quarter. Revenue from domestic home delivery print subscriptions was flat in the quarter as a home delivery price increase implemented early in the year offset year-over-year subscription decline.

Total daily circulation declined nearly 20% in the quarter compared with prior year, while Sunday circulation declined 9.7%. The closure of hotels, universities and other outlets as a result of stay-at-home orders across the country contributed approximately 7 percentage points to the daily decline and 3 percentage points to Sunday, while the loss of Starbucks as a distribution outlet in August of 2019 contributed approximately 2 percentage points to the decline. Total advertising revenues declined approximately 44% in the quarter, as both digital and print were severely impacted by lower market demand during the pandemic. Digital advertising declined approximately 32% in the quarter compared with the prior year, somewhat better than the guidance we gave on our first quarter earnings call largely as a result of higher levels of spending from the technology category.

Print advertising declined approximately 55% across most categories with entertainment and luxury hit hardest. Other revenues declined approximately 5% compared with the prior year to $43 million, primarily as a result of the conclusion of the first season of The Weekly television series as well as lower revenues from live events and commercial printing. These declines were partially offset by licensing revenue related to Facebook News and an increase in affiliate referral revenue from Wirecutter.

Adjusted operating cost decreased 8% in the quarter, significantly lower than the guidance we originally issued as we attempted to partially offset lower expected advertising and other revenues as a result of the pandemic. Cost of revenue decreased approximately 6% as lower print production and distribution costs and advertiser servicing cost more than offset higher digital content delivery and journalism costs.

Sales and marketing cost decreased approximately 36%, largely driven by lower media spend, which we reduced during the initial months of the coronavirus pandemic. The extremely strong news environment and the continued improvement of our digital products proved to be a strong combination, it demonstrates that we have become less reliant on acquisition spend as a means to drive subscription growth. However, we do not view Q2 marketing spend as representative of future spend, given the special circumstances under which we were operating in the second quarter.

Continuing with the second quarter results. Product development cost increased by approximately 22%, largely due to growth in the number of employees engaged in digital subscription strategic initiatives. We recorded a $6 million severance expense in the quarter, largely as a result of workforce reductions, primarily affecting our advertising department. Our effective tax rate for the second quarter was 19.6%. On a going-forward basis, we continue to expect our tax rate to be approximately 25% on every dollar of marginal income we record with some variability around the quarterly effective rate.

Moving to the balance sheet. Our cash and marketable securities balance ended the quarter at $757 million, an increase of $70 million compared with the first quarter. The company remains debt free with a $250 million revolving line of credit available. As I said last quarter, the consistently conservative approach we have taken in managing our balance sheet in tandem with the continued strong results produced by our subscription-first business has provided us the financial flexibility and confidence to continue pursuing our growth strategy even as we manage through the economic fallout of the COVID-19 crisis.

As Meredith noted, we announced the acquisition of Serial Productions, which closed last week and included an approximately $25 million cash payment at closing. Let me conclude with our outlook for the third quarter of 2020, which is based on our current knowledge and assumptions and could be impacted by the evolving effects of the pandemic. Total subscription revenues are expected to increase approximately 10% compared with the third quarter of 2019, with digital-only subscription revenue expected to increase approximately 30%.

Overall, advertising revenues are expected to decrease to 35% and 40% compared with the third quarter of 2019, and digital advertising revenues are expected to decrease approximately 20%. As a reminder, September typically plays an outsize role in third quarter advertising revenue, which when combined with uncertainty arising from the COVID-19 pandemic, makes this year's third quarter especially difficult to predict.

Other revenues are expected to decrease approximately 10% as licensing revenue from Facebook News is expected to be more than offset by lower revenues from our television series and as a result of the pandemic's impact on both commercial printing and our live events business. Both operating costs and adjusted operating costs are expected to be flat or to decrease in the low single-digits compared with the third quarter of 2019, as we pull back on non-essential spending, while continuing to invest in the drivers of digital subscription growth.

And with that, we'd be happy to open it up for questions.

Questions and Answers:

Operator

[Operator Instructions] First question comes from Alexia Quadrani of J.P. Morgan. Please go ahead.

Alexia Quadrani -- J.P. Morgan & Co. -- Analyst

Thank you very much. And Mark, we will miss you and your accent, so best of luck ahead.

Mark Thompson -- President And Chief Executive Officer

Thanks, Alexia. Thank you.

Alexia Quadrani -- J.P. Morgan & Co. -- Analyst

To -- just a couple of questions, pretty straightforward. Can you provide a bit more color on the digital sub growth in the quarter? I guess, any sense of how it trended as we sort of progressed? Usually, I know you usually don't comment month-to-month, but curious given all the volatility and all the news, if it would heightened in certain months versus others? And I guess, just on that same point, I guess any color you can give us in terms of engagement in the quarter with -- are people still just very engaged with COVID news or is it really broadened out?

Mark Thompson -- President And Chief Executive Officer

Sure. I mean, Meredith just -- I'll let Meredith answer all of it, just to say, we don't disclose very much in this area. One -- or completely obvious point is the major news stories and it has been a very busy period for news, obviously drawing audiences, both at the unique user level and also in terms of engagement. But Meredith, can you help Alexia at all on this?

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

Yeah, I mean, what Mark has said is obviously right, but we won't comment on quarter-to-quarter, but it is probably worth saying, we do see some audience fluctuation based on what's going on with news and we see that within a quarter. And sort of force in the opposite directing is a work on the new registration based customer journey and our work on engagement and -- has kind of a sort of underlying, stabilizing effect to that. So while audience plays a big role, it's the driver in the model, it's not the only one and more we are focused on registration and conversion and engagement of registered users, that had sort of a smoothing out effect.

Alexia Quadrani -- J.P. Morgan & Co. -- Analyst

And then any thoughts when you may resume the tenured price increases? I know, you put a pause on it during the crisis here.

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

I'm getting a signal that my sound could be better, so I picked up my phone. My colleagues will let me know if that's not working. We -- I'm getting a thumbs-up from Roland. So we paused, we did a big chunk -- that the price increase and then we paused when COVID hit just because we felt like given what was going on, it was the right thing to do and we will resume on that price increase this fall to a smaller but still substantial cohort of people.

Alexia Quadrani -- J.P. Morgan & Co. -- Analyst

And then just lastly, a quick question on your investments in sort of the TV side as well as in the audio sort of the podcasting. Any really comments you can give in terms of what the returns are like in maybe the TV video versus the audio? I mean, does it make sense to put more of an incremental dollar in one versus the other?

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

I would say we've got -- as I said in my remarks, we've got really big ambitions for audio journalism and for what The Times can do in audio, particularly now that we've got sort of triple thread of The Daily and Serial Productions and a new partnership with This American Life. We -- those aren't the only things. We just moved Kara Swisher's main interview podcast here as well. So I think you can expect to see us continue to invest in audio for a number of reasons. And I would say, in contrast on TV and film that we're pleased with what we're doing there, but I would say it's less an economic driver and more about how we get Times journalism to more audiences and how we get people to connect with our brand.

Alexia Quadrani -- J.P. Morgan & Co. -- Analyst

Thank you very much.

Operator

The next question comes from Kannan Venkateshwar of Barclays. Please go ahead.

Kannan Venkateshwar -- Barclays Capital, Inc. -- Analyst

Thank you. Mark, obviously congratulations on a fantastic tenure. And I guess, it begs the question, now the company is doing phenomenally well and as you highlighted it's -- the trends over the last four quarters have accelerated significantly. So the question -- I guess, it begs the question of why now from a timing perspective.

Mark Thompson -- President And Chief Executive Officer

Yeah, no, fair question, Kannan, I mean I told the Board when I arrived in 2012, I thought that between five -- and ever went well, between five and eight years, it was about right as a run from my point of view. I like to -- I think we will have a big fresh strategic puzzle to work on and to work through it. And I think, I mean, one of the really important things to this company, it's a long transition as it's got many years to go, is fantastic momentum. And I think, the idea that from time-to-time, you bring leaders with fresh ideas and a new kind of energy to apply to the puzzle in terms of you make sense. And I think, you've probably seen a bit like a relay race, we've been trying to make sure that the next runner is up to speed and running at full pelt by the time the baton passes. Meredith, -- although obviously Meredith has done a lot of snow [Phonetic], you've got to bring fresh impetus, fresh ideas. I mean, I've had eight years to play out all my ideas and I think, broadly, I'm satisfied with the way things have gone. But I'm a believer that you maintain momentum by -- in most of the key jobs, changes from time-to-time. And by the same token, personally, it means that potentially I don't know what it's going to be yet, but I can also apply myself to a big new juicy strategic problem or series of problems in other places. So to me, this is one of the healthy ways of keeping the momentum of a given company going, especially when you're in the middle of such a gigantic transition.

Kannan Venkateshwar -- Barclays Capital, Inc. -- Analyst

Thank you, Mark, and all the best. And Meredith, from your perspective, in terms of strategic priorities, obviously there are a lot of areas that have still growth opportunities. You highlighted podcasting and video as potential areas for expansion. But when you think about this, I guess, there are two strategic questions that you'll probably be working through in the near term. One is the distribution strategy. You have the choice of using services like Spotify or Hulu or the Legacy TV networks for distribution or given the brand of New York Times, you yourself can be an aggregator. An aggregators, in general, have seen a lot more value creation over the last few years when it comes to digital business models. So it would be great to get your thoughts on how you think your newer businesses from a distribution strategy perspective could evolve. And in terms of the content cost itself, I mean, podcast, you've made some investments but on the video side, you've relied more on partnerships in order for -- in order to defray the production costs. Is there a cell-phoned model for content going forward, where you could essentially use some more investment dollars? Thanks.

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

I'm probably going to have to have you clarify the last bit of the question, but let me try the first two. I would say, in general, you can -- as I have said in my remarks, you can expect us to continue at least broadly with the strategic deals we've been at for five years now. One of those big themes is we believe in the power of New York Times being a destination and being something that people come to you directly and is asked for by name and at the same time, we are very conscious of the fact that we operate in a broader ecosystem and in many cases, habits are formed based on some of the biggest players in that ecosystem. And I think a lot of that in, let's say, audio or in film and TV kind of remains to be seen what distribution will look like, but you can expect, we'll take the learnings that we've had so far, which is really powerful aspect of our business that we've been focused on our own destination. And I'll say in the audio space, it's not clear yet what a destination is. In many cases The Daily, which is a program is a destination. It's in and of itself, something that people ask by name when they come to you every day and it's a distribution channel for us to launch other great work into the world and could imagine the same of Serial Productions or any of the other podcasts that we're doing as they mass very large audiences.

So long-winded way to say, we've learned a lot about what it means to be and build a destination. I think, we're going to continue to be very focused on doing that, on being something that people come to directly and ask for by name. But we also operate with them with a healthy sense of reality that there is very big players in the ecosystem, who are very important to driving our funnel. Google, Facebook, others in the case of our news business. Apple, Spotify and others in the case of audio. And you've seen, based on what we've done in television that there are places where we assume that the best way to building audience for Times journalism, Times content is that other distribution outlet to not fly. We had our first major foray into regular television with FX and Hulu as the distribution partners and I think, we've learned a lot from that. We'll continue in that partnership with the new production. I'm not sure, I understood the last bit of the question, so you may have to ask it again.

Kannan Venkateshwar -- Barclays Capital, Inc. -- Analyst

Yeah. It's mainly around the investment strategy for content. Is it going to be more on your balance sheet versus maybe a shared model like you've done with video?

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

I would say, you have seen us now apply a mix of organic development. So for a -- using our capital to build things, and I think, we've done quite successfully in the gaming space and in lifestyle space with our cooking product. And you've also seen us use our capital for -- in inorganic way and I'll point -- we haven't talked a lot about the Audm acquisition, but I'll point to that as an important experiment in two ways. Audm is a destination in and of itself, so just going back to the point I made earlier about the importance of destination and subscription, but it is also an aggregator of other audio. So spoken word audio from now The Times, but when we acquired it, it was spoken-word audio, warm journalism from The Atlantic and The New Yorker and New York Magazine and it continues to be that. So among other things, the Audm acquisition gives us a great experiment in aggregation about the content.

Kannan Venkateshwar -- Barclays Capital, Inc. -- Analyst

Got it. Can I ask one question on subscriptions? If you could just help us think through the channel shifts in terms of origination and also the mix shifts. New cycle is obviously important to generate more subs as we've seen over the last couple of quarters, but I'm sure there is different consumer behavior when it comes to churn across different cohort. So if you could just help us think through how this has evolved over the last maybe three or four years, that subscription growth has accelerated in terms of growth contribution from the top of the funnel versus the bottom of the funnel, that would be very helpful. Thanks.

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

I'll take a crack at it and tell me, if I'm actually getting at your question and Roland may want to come in here as well. I would say, I mean I said a version of this in my remarks, but audience continues to be a really important aspect of how we think about our funnel and as audience grows, that's -- the audience story of the last two quarters have been a very important part of the story. And I think, we've said in the last call that we -- as we see sort of a step function change in audience, I think we see the opportunity grow and change. But behind that, where our new customer journey that we launched a year ago, which is registration based, opens up, I think sort of new stabilizing function. We bring people in, they register, we're much -- we are more effective at getting them to come back and reengage and to stimulate further views and that's a really important part of the puzzle. So I think the broad answer to your question is our own organic means of engaging people become more important in a wedgie model. So can we get you to come back and engage through the newsletter, can we message you in a more commercial way and get you to come back engage or can we get you to download the app. If you do that, you're more likely to subscribe. So I would say, our own organic channels and a Wedgie model become that much more important. But Roland, you may want to add to the answer.

Roland A. Caputo -- Executive Vice President, Chief Financial Officer

Kannan, did you have a retention question inside that question? I can address that, if you'd like.

Kannan Venkateshwar -- Barclays Capital, Inc. -- Analyst

Yeah.

Roland A. Caputo -- Executive Vice President, Chief Financial Officer

So...

Kannan Venkateshwar -- Barclays Capital, Inc. -- Analyst

Yeah, the question was, if you look at the churn across different cohorts, as you base price -- as people have rolled off of promos, I'm sure that behavior has changed. So if you could just help us think?

Roland A. Caputo -- Executive Vice President, Chief Financial Officer

So we're now 22 months into the first offerings of the $1 a week, so nearly two years. That retention curve for the folks on a $1 a week, you could almost sit it right on top of their retention curve at 22 months for the prior offers and at each point of that curve that it's almost identical to slope the a little dips and -- in it etc., are almost identical. When we peel that back a little bit further, the folks who we stepped up to an intermediate price, they retained a little bit better than the folks we step up to full price. And then if we look at more recent cohorts, if we look at the COVID cohort, so back in Q1, you have a massive number of people subscribing and you are curious to how that will retain. And while it's still early, you could sit that -- you could sit that curve on top also. So we are seeing a retention that makes us quite happy, no matter how we split these cohorts. And we -- as we've been growing and growing and growing the base, our overall churn numbers have been within one or two tenths of a percent either way, the entire times for many, many, many quarters. So the retention story is very good for new cohorts. It is very good for folks who came in on a discount and get stepped up and it's also very good for the tenured folks who got a price increase -- base price increase last quarter.

Kannan Venkateshwar -- Barclays Capital, Inc. -- Analyst

That's great. Thank you so much.

Operator

The next question comes from Vasily Karasyov of Cannonball Research. Please go ahead.

Vasily Karasyov -- Cannonball Research -- Analyst

Thank you. Good morning. I was wondering, if you would like to comment on the 10 million subscriber goal that you put forward several -- some time ago and given how strong the sub base is growing, maybe the timeline for it or the order of magnitude? Anything would be -- very interested to hear, what you have to say?

Mark Thompson -- President And Chief Executive Officer

So I'll go first and I think Meredith again should address it. Well, I mean, I announced that though I think in the earning report for Q4 '18, so in February 2019 with a milestone of 10 million by 2025. At the time, quite a few people -- other executives on the call, let alone in the wider world, thought it was slightly crazy number. 18 months later -- I mean, the company's clearly close to two-third the way they are already with more than five years still to run. So it looks now, I think like assuming the strategy continues to deliver strong gains. It looks probably like an underestimate. I do want to say about a 10 million, it was always a milestone. It was not kind of like a terminal target or a prediction of when the model would plateau. We don't know when it's going to plateau. I -- my own view is that the opportunity the company has is immense, given both the ecosystem, the falling away of a lot of competition, but also the attractiveness of the products and the kind of virtuous circle that we've got going in terms of of great journalism and audience engagement. So the answer is, I think what felt as recently as 18 months ago, like a really stretching milestone for the company now feel that it wasn't in our grasp, because obviously there are several million more subscribers to get, but feel eminently achievable and achievable well within the the timetable I set. But Meredith, you should -- because you -- and literally as we pass the baton to you on this call pretty much, you should talk about this as well.

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

Yeah, I don't have a whole lot to add. I think, you got most of it, Mark. I'll just say, we see the market for subscription journalism to be large. We think it's at least 100 million people you have to have globally. And we think the opportunity is big for us and others to participate in that market.

Vasily Karasyov -- Cannonball Research -- Analyst

All right. Thank you.

Operator

The next question comes from John Belton of Evercore. Please go ahead.

John Belton -- Evercore ISI -- Analyst

Thank you. First, Mark, I'm going to miss you. Good luck and congrats to Meredith. So I have a couple on pricing. So first, Roland, given all the comments you just made about retention across all these different subscriber price cohorts, have you changed the strategy in terms of the number of $1 per-week customers you're stepping up to full price versus intermediate at the one-year anniversary? On a related note, I think you said in the prepared remarks, 8.5% in the quarter. Should we expect that to continue to improve sequentially on a year-over-year basis moving forward? And then what does that imply for international ARPU in the quarter and just any update on international pricing strategy? Thanks. Sorry for all the questions.

Roland A. Caputo -- Executive Vice President, Chief Financial Officer

I will see if I can retain all of them. So in terms of the strategy on the step up pricing, meaning presumably the percent that we are asking to move to a step up price or intermediate price and those we are stepping up to a full price, we are still targeting approximately 50-50 on that. Where we're making progress on AI is the amount -- the percentage that the model is picking, but at this point, we don't have evidence that we should come off the 50-50. So that's still in place. Right, I did reveal for the first time the domestic ARPU change versus the international and obviously, intentionally, to expose the fact that we are discounting pretty heavily internationally. We think that's the right pricing strategy in a lot of countries. It's not one price in all countries. So countries with lower GDP or where a basket of similar goods is priced low, we want to price to sell in those markets. On the domestic side, so yes the ARPU is down 8.5%, but John, the key here is depending on how many new subs we bring on and we're going to continue to use the $1 week promotion. It's been very successful both in bringing on new subscribers and we've been able to step the prices up. We've proved that also in the last few cycles. So as long as we're bringing on these very large amounts of new subscribers, I don't expect ARPU to stabilize quite yet.

John Belton -- Evercore ISI -- Analyst

Got it. All right. Thanks and talk to you soon.

Roland A. Caputo -- Executive Vice President, Chief Financial Officer

Alrighty.

Operator

The next question comes from Craig Huber of Huber Research Partners. Please go ahead.

Craig Huber -- Huber Research Partners, LLC -- Analyst

Yes. Good morning. Thanks. Mark, I wanted to say you did a heck of a job in the last eight years. We're going to miss you and congratulations, Meredith on the new position.

Mark Thompson -- President And Chief Executive Officer

Thanks, Craig. Thank you.

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

Thank you.

Craig Huber -- Huber Research Partners, LLC -- Analyst

My questions, Mark, where was the number of journalists at the -- the number you have, when you first started the company eight years ago, where is it right now and maybe if Meredith could just speak about maybe on a go forward basis, I assume you guys want to continue to invest in that area, the content side, especially.

Mark Thompson -- President And Chief Executive Officer

Sure. Yeah, of course, Craig. So I haven't got the exact number in front of me, but I want to say that we're at about 1,750 at the moment in -- across newsroom and opinion. So 1,750 and that's probably 250 or slightly more than 250 more than then when I walked into The times. So we've been able -- a move we had -- in the first couple of years, we had some buyouts and layoffs and we've had some since, which have been about organizational change in shifts, which new leadership themselves have wanted to make to pivot to their new strategy. But obviously, it's encouraging that we've been able to build our strength at a time when and this is nothing to be pleased about, so many other newsrooms are obviously being depleted, but Meredith will tell you about -- her view about what's going to happen from now on.

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

Yeah, I'll say a few things. The first one to say is on the -- I think, the single most important driver of what the company has been able to do in its business strategy and particularly, it's subscription strategy in the last eight, nine years has been the continued investment in the newsroom and journalism and the expansion of formats and we've been putting more reporters, more journalists, more editors in more places. So you can assume that we are going to continue to invest heartily in the newsroom and in our journalism, very broadly.

I'll say two more things about that. I think, I talk a lot about the product itself as the primary engine of the business. And by that I mean, the ability of the journalism to be sufficiently different from free alternatives and of a quality that people will pay for it. And I also -- the ability to help people find an experience more of it and I would say on the second, we still have a lot of distance to travel, to be really effective at surfacing all that we already make to people, so that they get in a digital environment and particularly in the mobile environment, so they get to the stuff that's going to be most relevant for them. So I think, there is always going to be an important corpus of Times journalism that everyone who comes to The Times should see, but there is still a lot of room for us to get better at surfacing particular stories, particular kinds of journalism to match people's interest.

And that brings me to my third point, which is, you can assume we'll continue to invest heartily in the journalism, particularly continue to expand in new formats as we've talked extensively about on this call, in audio and to some degree in film and TV. But it's worth saying and I think we've said a version of this in prior calls that, that investment doesn't have to scale with subscriptions and that's in part because of the second thing I said. I think, there is still lot of room for us to get better at surfacing the stuff we already make and the great journalism we already make to the very, very large audience we have and a lot of the work of driving more subscriptions lies in our ability to do that really effectively.

Craig Huber -- Huber Research Partners, LLC -- Analyst

Appreciate that, Meredith. I want to also ask you about The Daily, maybe if you could just update us on the number of listeners each week, if you would, whatever metric you want to give me now versus say a year ago. And then a longer-term strategic question I guess on The Daily podcast, how -- I'm just curious how much thought have you given maybe as you think over the next roughly 18 months about starting the charge for The Daily podcast and I asked that whether you charge for it on an annual basis, but also perhaps may be included in the news only digital product and it gives no reason to raise prices down the road on that product, but also help drive the digital subscriber sign-ins for the news-only product to be included in there down the road here? So I mean, is there a transition you think you can make down the road here shortly, because this product has obviously been very well received out in the marketplace? Thanks.

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

Yes. Well, let me just start on the audience for The Daily. My -- I think, I can't help but say as the audience is now vastly larger than the audience for the paper, Daily or Sunday at -- even at its peak and most of the listeners to The Daily were people who probably never read the newspaper, so it's really done this incredible job of widening the audience for The Times and bringing new people to the brand. I think, now we're somewhere above 3.5 million average daily listenership for The Daily, which is almost twice where we were a year ago. One of the things that's been particularly remarkable in this period is the resilience of The Daily even during quarantine, during sort of stay-at-home orders. I'm not sure that's been the case for listenership to audio in general, particularly because people lose drive time. So we've been very, very pleased to see that. And then just turning to the other part of your question.

I think, The Daily has been very, very powerful in a number of ways to the company. I have to say, it's a really strong and particularly resilient ad business as is audio generally at The Times. And so we continue to be optimistic about that, but as we've said in prior calls, we believe and we have some evidence that The Daily plays a real role in bringing people into our subscription funnel. One of the great things about it is, it's essentially a single story every day. So often really people wanted more on that particular story or other stories and so then they come to The Times to get more and we know that people who listen to The Daily feel real affinity for our brand. If you listen, you'll hear that we often used one of the ads in The Daily as a direct subscription ad and I would put that in sort of top/middle funnel work, where we're talking about the brand and how we go about the work but also essentially asking people to subscribe if they like The Daily and those ads are really, really powerful.

And then as I said in answer to another question, The Daily itself is a really important distribution mechanism for other audio journalism, meaning we use it as an envelope to send other new podcasts into the world and that's been quite effective. We've been able to launch number of other important shows as a result of having The Daily and we can do that directly [Technical Issues] or we can do it by using The Daily as promotional space. And I think all of that is useful to us and I'll say very broadly, we have a subscription-first strategy and the strategy of direct relationship with users and that has served us very, very well even against the backdrop of many, many free alternatives to The Times. And so I would say we don't rule out that at some point in the future, it could be directly a part of our subscription business, but what I will say is, if you look at the -- we are nine years into the pay model now, if you look at our history, we have always had and even today have, a very wide free layer for our content, which is hugely important. I said a version of this in my answer to Vasily's question, but hugely important to driving the business and to our ability to make direct relationships. And it's hard to imagine a scenario where The Daily in some capacity doesn't play that role for a while.

Craig Huber -- Huber Research Partners, LLC -- Analyst

Great. Thank you, and best of luck to you, Mark, going forward.

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

Thanks so much.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Harlan Toplitzky for any closing remarks.

Harlan Toplitzky -- Vice President, Investor Relations

Thank you for joining us this morning. We look forward to talking to you again next quarter.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Harlan Toplitzky -- Vice President, Investor Relations

Mark Thompson -- President And Chief Executive Officer

Meredith Kopit Levien -- Executive Vice President, Chief Operating Officer

Roland A. Caputo -- Executive Vice President, Chief Financial Officer

Alexia Quadrani -- J.P. Morgan & Co. -- Analyst

Kannan Venkateshwar -- Barclays Capital, Inc. -- Analyst

Vasily Karasyov -- Cannonball Research -- Analyst

John Belton -- Evercore ISI -- Analyst

Craig Huber -- Huber Research Partners, LLC -- Analyst

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