The New York Times Company (NYT) Earnings Call Transcript & Summary

Great. Thank you so much. My name is Heath Terry. I cover the Internet sector for Goldman Sachs. Really happy to have with us today the team from The New York Times. Meredith, thanks so much for joining us.

Yes. Meredith, obviously, everyone watching knows The New York Times as a source of news. But as investors, what's the right way for them to think about what you and the team are building at The Times as a company?

That's a fun first question to start on, Heath. First, let me say thanks so much for having me. I think the first thing I want to say is that they should think of us as a fast-growing, scaling, direct-to-consumer digital subscription business with a very big addressable audience and a big opportunity to gain a lot more share of that audience. I think they can think of us as operating in a market where the conditions are moving in our favor, so in favor of quality journalism generally and in favor of The Times specifically. And I think they can think of us as the owner of highly differentiated, original IP, around which we are increasingly becoming our own best distributor. And I would just -- the last thing to say is, I think investors can think of us as a company that has a highly differentiated product with some inherent supply-and-demand advantages and that as time goes on, those become sort of mutually reinforcing of each other.

Yes. So for a new CEO that's taking over an institution that's nearly 170 years old, how are you thinking about your strategy for The Times? And how that might be different from what we've seen in recent years?

Yes. Well, I keep saying to people, the most fun thing for me becoming CEO is that I've gotten to occupy the copilot chair to Mark for the better part of the time that he ran The Times for the last 7 years. And so I would say we're -- broadly, we're still flying the plane in the same direction. We've got a very sound strategy. That strategy is working, and you can assume we're going to continue to bear down on it and to accelerate it in places where we see opportunities to do that. I'll say, at the highest level, the things that I'll emphasize, I think the work is to get millions more people to spend much more time with The Times' journalism. That means bringing lots of new people into the brand, getting them to make a direct relationship with the brand. I think for people who already have a relationship with the brand, it means finding ways for The Times to be relevant in more parts of their life. And I'll say 2 other things that are very much on my mind. I have talked inside the company about this. But as I come into the role -- both of which are enablers to the thing I just said. One is we're already a world-class journalism operation. I think the thing that sits in between where we are today and having millions more people spend much more time with The Times' journalism is that we also have to be a world-class digital product and tech operation. And so we are on the path to doing that. And then just the last thing to say, which is related, is that I'm very focused on how do we make sure that The Times isn't just a place where we can attract world-class talent, but where that talent can come and do the best work of their careers, whether they work in journalism or they work in one of our digital product functions. And I think there's still a lot to unlock there as we move through the next few years.

Sure. So a lot to dig into in all of that. But maybe just to start with one of those, you mentioned your digital business and what you're trying to build there from a technology standpoint. How would you characterize the scale and sort of where that is now and particularly maybe relative to what you see as being the addressable market for digital news?

Yes. Well, as of the last quarter that we reported, we're at something around 6.5 million subscribers, which, in some ways, feels like a big number. I can tell you, we're nowhere near satisfied with that number. We are running now what I think is the largest subscription journalism business in the digital world. But I think far more importantly, we see a really big market opportunity. We think there's -- any way we cut it, we think there is at least a 100 million people over the next 10 years who will pay for journalism. I think that probably divides into half of them in the United States, half of them out around the rest of the world. And at 6.5 million subscribers, we're at, what, 6% of that market. And I think it's not hard to imagine The Times having 2, 3, 4x that share of the market, with still plenty of room for other quality journalism outlets to succeed as well. So we see a lot of possibility in the market. I'll also say, I said this in answer to your first question. I do think there are a number of sort of forces in the market, some good, some bad, moving in our favor. Good is willingness to pay. It's just going up generally. I think entertainment and music have set a course for that. But I think across all cohorts that we look at, we're seeing more willingness to pay for news. And then unfortunately, I would say, we are also seeing supply of quality journalism going down. And while we don't like to see that generally, it certainly means that sort of differential gap between The Times and other free alternatives is growing.

Yes. Yes. Now all of that, certainly true. That market breaks down into a couple of different pieces. I mean, obviously, you have the subscription side, which you touched on, the 100 million people. What are you seeing in terms of the profile of people who are willing to pay for news online? Right now, most of those people are paying for your $1 a week plan. How do you grow that ARPU from the profile of the type of person that you have now?

Yes. Yes. I think those are 2 different questions. Let me try answer both of them. Just in terms of like who's the audience, who are those 100 million people, we have a pretty clear psychographic definition of what a Times subscriber looks like and who we're really going after in that 100 million people. And the simple word to describe them is curious, which for us means educated, sort of interested in cultures beyond their own, likely to be people who travel, that we have a really fun question that the audience answers in a particular way, which is, "What do you like to do in your leisure time?" And members, the curious audience, the way we define it are people who like to learn things, like to be pushed, like to understand opposing views. So that's sort of broadly the psychographic definition. What I'll say is that breaks pretty evenly across gender. You find that psychographic in all deciles of life, so people in their 20s, people in their 50s, everybody in between. So it's a big audience, and we're getting better and better at getting to them. On your ARPU question, I'll say, the broadest answer I can give you is we have a really high-value product in a still forming market. We think of ARPU as more of an output than an input. We're working to scale our base of subscribers in a moment when we think habits are really up for grabs, but we pay a lot of attention to realizing the right price for value. And we tend to bring people in most often on a promotional price. I think when we use promotional prices, it helps us get to like the outer edges of our propensity circle, particularly in big news moments. But we now have a very good track record of stepping them up in price after they get to experience what it means to be a subscriber. And we've got a very, very good story around. We're 2 years into using aggressive promotional pricing and raising people up to the full price or an interim price and then the full price. We also have a really good story around price, in general, on tenured subscribers. So we're very confident that we can bring people into the fold, get them to use the product and get them to find a lot of value in the product.

Yes. Obviously, the other big part of that market has been and is the advertising-supported size of news. I mean, for most of the last decade, that's meant a lot of sites sort of cutting and pasting the work of you and other actual news-generating organizations and putting as many banners and pop-ups and interstitials on top of it. How does The Times see building an advertising business in that kind of environment? And as part of that, what role does your investment in advertising technology and data play?

Yes. I think the broadest thing I can say is that the secret sauce of our ad business and our ability to win share in our ad business, particularly in publishing specifically, is that we are a scaling subscription business. And particularly, we're scaling relationships, direct relationships with users who now come and register, which makes a lot of proprietary data available to us that we are beginning to get really good at using in a privacy-forward way. So if you sort of think about that over a long-time horizon, as we grow our audience of deeply engaged users, we should be able to grow the ad business. I think in the near term and over the last couple of years, what you've seen us increasingly do is really lean into the idea that we are a subscription business first, and we make a lot of choices with an eye toward that, about having a great user experience, having pages that load quickly, using data only in privacy-forward ways. So in the short term, that does have some implications for the economics of advertising. But over the long haul, we think it's still a very important part of the economics. You asked me about ad tech. I'll just say there, we, in the last year, have become far less reliant, and we'd like to get it to 0, on third-party data in advertising at The Times, in selling advertising. And in its stead, we have built a really robust first-party data business that we use in privacy-forward ways. And I'm very optimistic that we'll be able to continue to grow the business, that, that first-party data is going to be very effective. It already is in helping marketers target in different ways. And I'm optimistic that, that's going to be a big part of the ad proposition at The Times going forward.

Yes. That's good to hear. Over the last 4 years, you've obviously seen a lot of subscriber and readership growth at a time when many people have understandably felt the need to tune into news much more aggressively than they have in the past or certainly hope to in the future. If we see an election result in November that means a more stable world and your reporters don't have 40 tweets a day to cover, will you see the same kind of subscriber growth?

Yes. That's a good question. The short answer is yes. Let me give you a longer answer about that. The first thing to say is The Times is in many ways, as a business, countercyclical to certainty in the world, and it is very hard to imagine that we're moving into more certain times even beyond the giant politics story or the global pandemic story. There is just so much other change and movement in the world, in technology, on climate, on any -- inequality, on any number of other topics. So I think we can assume that we're going to be in a robust news cycle for a long time to come, and that the public consciousness around news and people's need for the kind of journalism The Times does is not going to abate. Let me say a few more specific things, though. We've been at subscription journalism, first in print, now in digital, for some time now. And what I can tell you is that at no point does any one story drive the model for too long. And actually, if you go back to 2015, so a year before Trump was elected, that was the year that we were just starting to get our arms around kind of the real levers of being a direct-to-consumer subscription business. And if you go there and then you look at the results in -- just after the election of 2016, at some point, the tide started to recede on that story. But what you saw was it was -- our results settled in at a place that was a step function higher than where we've been before the election. So what's happening there is just quarter-over-quarter, for the last 5 years, we've just gotten better and better at sort of pulling the underlying levers in the model. We're better at the tech. We're better at the data. We're better at how the digital product actually gets you to form a habit, and I think that's going to show plenty of resilience to fluctuations in the news cycle. I'll just say 2 more things. We -- the one thing we do know about the model, and we've known this for 5 years, is the behavior that's most likely to correlate with people paying for a subscription to The Times and staying a subscriber to The Times is that they experience us across a range of topics, that they sort of come for our breadth. And so we have plenty of product levers to use to sort of stimulate that breadth. And I would just say as a last thing that even now, it's a small minority of people in the overall readership and particularly amongst registered and subscribed users who just come to us for one story, so who are just there for the politics story or just there for the COVID story. Most people are experiencing us across a range of topics.

Yes. Now is there a way to kind of quantify that range of topics, the -- whether it's the percentage of time spent on political news versus other or readership for one versus the other?

Yes. I'll say 2 things. One, the -- it's a small minority of people who -- in the registered user base and the subscriber base who are there for one story, a small minority. The second thing to say is we've seen a huge surge in the last 6 months on people, I'll give you one actual number, who are experiencing us on a 3, 4, 5 or more stories at a time. And so again, that tells you something about the model. If we can get you to experience the breadth of The New York Times, you're much more likely to form a habit, come back, pay and stay.

Yes. No, it makes sense. I don't see how anybody can at least read the social views as long as everything...

Yes. And let me just say, sourdough bread, like the number -- everybody was making sourdough bread. The Times had a whole lot to offer on that topic. Playing games, The Times had a whole lot to offer on that topic. During the sort of peak of the pandemic, there's just plenty there. We launched a whole at-home section that was a huge hit with readers. And there's -- you could scratch the surface on any topic, and The Times has quite a bit of depth on a very broad range of things and that the work, the digital product work is to unlock that depth for people.

Yes. That's absolutely -- I mean, along those same lines, I mean, a modern newsroom obviously comes with a lot of new challenges, managing editorial, your reporters' ability to connect directly with the world through channels like Twitter, around your own channels, perceptions of bias and nuance that I'm sure pop up almost daily. How do you deal with those and stay ahead of those new challenges?

Yes. Well, let me -- I mean, you're saying this in your question, but let me just first say that the world is increasingly polarized. And so much of what is said of or about The Times is a reflection of a more polarized world. I think the answer and the whole answer to what to do about it is to hold firmly to our commitment to true independence in our journalism and do everything we possibly can to make sure that the wider world understands what that independence means. And what it means is that we cover the world with real curiosity and without fear or favor on any topic. And it's interesting. The -- one of the things we've learned as we've expanded out across a range of formats is we have more opportunity when we tell a story, when we report the truth as we see it, to sort of explain how that story unfolded. And the more we actually expose people to how the journalism came to be, how a particular story was brought to the world, the more people see it as the truth, the more people understand the independence of the journalism. So for example, if we -- the Weinstein story comes out. The next day, you have the reporters on the Weinstein story, Jodi Kantor and Megan Twohey, on The Daily explaining how that story came to be, people are much more likely to appreciate sort of the independence of the journalism when they understand how the story came to be. So we take lots of opportunities in the work itself, so on The Daily, in our TV show, in the digital product, to sort of put stories out there with as much as we can about how they came to be. And we also do that in our marketing. Our TV commercials are about how -- what is the work of journalism? How does it come to be? And I think the more we do that, the more the public will really inhabit and understand all that independent journalism means.

Yes. No, that certainly makes sense and an understandable challenge. For many people these days, their path to news is Facebook. It's Google. It's Apple News or Twitter or some other online platform. How does The New York Times leverage those sources of traffic? And is there a way to do that where the economics of journalism makes sense?