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

All right. We'll get started. A quick note on disclaimers first. Please note that important disclosures, including my personal holdings disclosures and Morgan Stanley disclosures, all appear as a handout available in the registration area and on the Morgan Stanley public website. I'd like to welcome Meredith Kopit Levien, President and CEO of The New York Times. Meredith was named CEO back in September 2020, and prior to that was the Chief Operating Officer since June 2017. Meredith, thanks so much for joining us in person.

Thanks for having me, I was just saying -- my mic working. Yes, I was just saying that my first investor conference in person as CEO. Good to be here.

We're glad to have you. Why don't we start with that? I mean, while COVID conditions have certainly improved, it does seem like we're back in a period of extremely elevated news cycle given the state of current events and the war in Ukraine. Can you kick us off with what you're seeing on how your audience is engaged with this particular new cycle relative to prior ones? And how has The New York Times positioned itself to really procreates value to its consumers during this time?

Yes. Let me say a few things about that. I mean, first, this is the Ukraine story is just a horrible tragic story to see unfold. The time is sort of built for this kind of story in a number of different ways. And you can imagine in a really difficult geopolitical moment like the one we're in, people generally turn to trusted brands. They turn to places like the Times. So when the new cycle is like this, we tend to see that. When I say we're built for a moment like this? The Times has a number of people in Ukraine now. Among them, the woman we just named the second host of the Daily, who happens to be a Russian speaker, some of you may be listening regularly to the, Daily, but we've been broadcasting the Daily from Ukraine because of that. There's all kinds of expertise in the team there. You have people who've kind of studied the region for a long time. You have on our journalistic staff, former members of the military who serve both in a journalistic capacity and in a security capacity. And then you also have -- you're seeing this horrible war be covered in a really multimedia and kind of real-time way, in a way that you haven't previously seen on The Times. So one of the things I keep saying to people is now if you want to follow what's going on in real-time all day long, it's like you can open the app, and it almost obviates the need to turn a TV on because there's so much real-time video coverage and audio coverage and multimedia coverage. And so we're sort of built for that. I'll say though, and Roland and I were reflecting on the fact that we've been saying this, but Roland is our CFO, he's here too, that we've been saying this for some time the news cycle is always going to ebb and flow. There will be moments when there's a very big story and then there will be a moment when the tide goes out on that story. I hope it's soon on this one, right, that this one is so awful. But the time is increasingly built. We have so much breadth in our coverage. We're kind of built for the next story wherever it might go. And we also have more and more control with every passing year over the product levers to get people -- to give people reasons to come back kind of whatever is happening in the news cycle, and that's the model.

It's time is also where I think about consumer needs fatigue and whether or not there's a potential concern there. What gives you the confidence in the general market opportunity and the appetite for consumers to continue to stay following?

Yes. Again, like the news cycle is going to ebb and flow. I think the idea of news fatigue is something that's sort of lasting is probably overplayed. I don't think the world -- I mean, we're seeing -- unfortunately, we're seeing this in this horrible story in Ukraine. The world is getting more complex, it's getting more geopolitically interconnected, the implications of something like a war for the first time in many, many years in Continental Europe, you're seeing that, that is a story on a giant scale. And I think that's increasingly the character of many of the big stories that the implications are profound that they -- the stories themselves are more complex. They require more context, more ways for people to engage. And so, I'm generally not worried about news fatigue for the reasons I've said, which isn't to say certainly, you hope this story changes. You certainly hope the COVID story changed as it's finally beginning to. But the time is kind of built to cover whatever that next story is, and I hope we'll talk about this. We're also built now increasingly to answer to a number of needs in people's lives, news and beyond news.

Yes. On that point, I mean, you've been broadening out beyond just news. And in 2022 has been off to a pretty big start with the Athletic acquisition, and we can't forget about Wordle either. How should we think about your key goals around integration and from a consumer perspective as you're focusing on these bundling initiatives, what does that look like? And what do you hope to accomplish this?

Yes. I keep telling people I heard from more people when we acquired Wordle then when my son was born. So certainly I hit something there. Listen, we have now, for half a dozen years, been running a strategy of making journalism worth paying for, and that has really worked, and it has really gotten us to this kind of place of greater ambition. And we're still doing that. That's still the strategy. But we would express it now in an even more ambitious way, which is to say, we want to be the essential subscription for every curious person who wants to understand and engage deeply with the world around them. And we intend to do that 3 ways. We're going to continue to build on our lead in news and our aim there is to be the world's finest destination for big stories, for important news. We are also though beginning to build leadership in spaces that go beyond news, and particularly that occupy a lot of time and energy of curious people in their passion areas and in their daily lives and the acquisition of the Athletic was certainly about that. And the acquisition of Wordle was about that. And that the third prong of that strategy to be the essential subscription. So you lead in news, build leadership in these other spaces. The third prong of it is to put it together in a way, those 2 things that make us indispensable every single day to millions and millions more people. So that's what we're focused on.

Okay. You set new targets to recently for subscriber growth and you've recently spoken also about a bigger TAM, which includes 135 million adults who are interested across your variety of products, including, I believe you said 25 million for paid sports journalism. What gives you confidence in that number with the market research that kind of supports that? And how should we think about the catalyst path as you try to penetrate grow that market?

Yes. So let me touch on the target first. So we had said in 2019, beginning of 2019, we said 10 million subscriptions by 2025. Obviously, beginning of this year, we said we've achieved 10 million subscriptions, the acquisition of the Athletic put us over the top there. But just to say, we would have gotten there. We believe we would have gotten there without buying the Athletic much faster than we'd originally projected. So now we've set a new target of 15 million subscribers. I'd say [ systems ] versus subscribers. That number of 15 million would be larger if it were expressed in subscriptions today. But that's the new target by year-end 2027. And you referenced, we've also updated our sense of what the addressable market is. We've been saying for years now and probably 3 or 4 years, we think there are at least 100 million people in the English-speaking world who will pay for a digital news subscription and there's lots of data out there now that supports that. The Reuters Institute does the study every year that essentially validates that market is forming. And I'll say our own experience validates that, that market is formed. We announced, I think, a year ago, that we've got over 100 million people have now registered with The New York Times, and that number is still growing. So that's how we get to the news number. We've now done this additional research, very deep research that says when you add 2 news shopping advice with Wirecutter and recipes and games and sports, we think the TAM is at least 135 million people still in the English-speaking world with willingness to pay. And as I think you referenced, 25 million people just in the United States who say they already pay are willing to pay for a sports subscription. You asked -- I think you asked me about what I think kind of catalyzes penetration there. I'll just remind you; 10 million subscriptions equates to -- as of the end of last year before the Athletic, I think 7.6 million subscribers. It's a huge market. We've got a really low penetration even with the Athletic, so there's a lot of running room. And we think the bundle, the idea of harnessing kind of the whole of The New York Times is going to play, I think, the most catalytic role to getting at that market and getting it at higher penetration.

Yes. Let's talk about the bundle. I mean, as you're increasing your focused on that strategy with your growing suite of subscriptions, what's the right philosophy on the operational focus and approach to cross-pollination? And is it something that we think from a marketing perspective, you need to shift? Or is there something other than that, that you believe you need to change in your business model to be able to more optimize sort of that?

Yes. All good questions. I'll say like, and the answer is kind of yes to everything you've said. But the big idea here is you harness the whole of The New York Times offering to penetrate that TAM, and that means a few things. I think you're poking at one of these things. I think there are brand implications of that. So we're really focused now on kind of widening the understanding of what is the brand, New York Times, New York Times is something that kind of means more to more people. We're running a brand campaign right now that gets at that. It's called independent journalism for an independent life. But it's focusing on subscribers, and it shows you a collection of headlines from all the stories that are personally relevant to them, real subscribers, real stories and that gets sort of the brand meaning more to more people. So that's one. The bundle as a merchandising strategy and as a way to unlock more of that market is a big part of that. What that research, the 135 million tells us is largest number of people are still interested in news, but then you've got different numbers for the different products, we believe will unlock a lot more willingness to pay if it's news and sports, news and games, cooking and games. So there's a lot of value there. And then I would just say, there's a whole kind of programming aspect to this that we're just at the dawn of unlocking. If you go to our homepage now, even with all that's going on in the world, the top of that home page is dominated, but of course, as it should be by Ukraine. But if you scroll down on the desktop or in the app, it's presented a little differently in both places, you're going to see a carousel of recipes and you're going to see shopping advice. And at the bottom of the app, you're going to see, I think, today, there are 4 games at the bottom of the app. There might even be 5 portals not there yet. But so we've got these surfaces, the home pages, The Morning, even the Daily, we've got all of these surfaces now where we can sort of program recipe and shopping advice and sports information, and all of that is meant to unlock kind of this broader value proposition.

You've also spoken about some newer initiatives around Audm and kids How to product. How should we think about the outer reaches of what makes sense as a distinct subscription versus a part of your core product like Wellness or Parenting, do you think this distinction matters less over time? Are you interested in other genres where you think that this playbook of creating these distinct brands that are separate makes sense longer term?

Yes. It's a good question. So I would say both of the things you're poking at are important. One is, we've got a pretty full plate now. I don't rule out that there will be other genres or spaces where we say we want to add to the bundle. But right now, we've got some big products, The Athletic, Games, Cooking, each have more than 1 million subscriptions. As of today, we intend -- there are big spaces that occupy a lot of time from curious people, and that's the focus. Just as an example, we put a beta out for a Parenting product, I want to say, 2 or 3 years ago, and we ultimately said, there's a real audience here, there's real engagement. But in fact, while we were doing this beta, our ambitions got a lot bigger on cooking games, and we said the space for a new product has to be pretty big for us to say it's going to be an independent product that can stand as part of the bundle. And so we moved Parenting into the core and said, it's a newsletter and it's a desk, and it's thriving it's that. You referenced the investment we've made in a beta for audio, and that was grounded in an acquisition we made a couple of years ago of read-aloud audio app called Audm. We also have a beta coming for kids How to App. I'll say very candidly, it remains to be seen will those things ultimately become products in their own right that we market as part of a bundle or will they become just part of the engagement strategy of the broader New York Times. To your sharp question, in some cases, there I'm not sure the distinction matters. What we're looking for is how do you engage this much larger group of people to get to 15 million subscribers and then ultimately beyond that.

Okay. As you focus on that increased bundling, how does that impact your pricing and promotional strategies, both on a stand-alone product basis as well as using discounts to enhance the All Access bundle? What's you're thinking around how the evolution of pricing will impact your broader consumer adoption?

Yes. I'll talk about that. Let me first say, I think one of the attractive things about our business is that we believe, given where we are in the penetration journey, big TAM, low penetration. And given where we are, I just described to you a bunch of places where we're investing in value, we believe we can grow volume and grow revenue, kind of volume and ARPU at the same time. And I think that's unusual, and that's a big part of the bet. And you're going to hear us talk more and more about subscriber ARPU and its importance even while we're trying to grow volume. To your question about how to think about promotional pricing strategies for the bundle. We've been using promotional pricing as long as I've been at The Times 8.5 years, I think we've always been pricing promotionally. We've had different price points in, I want to say, 2018, we started using a pretty aggressive discount of $1 a week for news. And that has really worked, and we now have like 3 or 4 years of building a model where we can use a promotional price to bring someone in, very active getting them to subscribe, helps them engage. And then we have a lot of machine learning and other know-how now about how do you get them to engage, and then ultimately, how do you determine do you step them up to an interim price or do you bring them all the way up to a full price. We wouldn't continue to use promotional pricing if that wasn't working really, really well. And you can assume we're going to do the same -- the kind of the characteristic of what we do on the bundle will be like what we've done in news. And by the way, started doing it on Cooking as a stand-alone product, and we're quite excited about that. So it's going to look like that. Ultimately, the bet is a bundle as a higher-value product with higher lifetime value.

Right. Right. I wanted to go back on the refining of the customer journey, which you just talked about, how should we think about the incremental work that you're doing there? Because I think you mentioned in 3Q that you benefited from some tighter restrictions around the paywall. But then in 4Q, some of that eased. So can you share with us any lessons that you have taken away from some of that and [indiscernible] experimenting? And how do I refine it?

So one of my big lessons, I kind of came up through the ad and the subscription business. One of my big lessons on the subscription business is like early on, we would think like we're going to run out of room to optimize the journey. We're going to run out of room to protect the funnel. It hasn't happened yet and particularly as we widen the value proposition, widen the product set. I think there's always room to do more optimization. What I think you're referring to is early last year, we said we were arriving at a phase where we were getting ready, and I think in the second quarter and into the third quarter to unleash a number of new optimizations to model in kind of 2 buckets. Bucket 1 was using machine learning in a more sophisticated way to say when do you ask people to pay? When do you intervene? How much engagement do they need before you try and convert them? And then also some new product interventions around how you delineate between that which is available to everyone and that which is only available to subscribers. And both of the things I just described involved interventions that sort of tightened or restricted access a little bit more. We put a bunch of those optimizations out. They all really, really worked. And what we described, if you remember, we had a very strong third quarter, particularly in news, and we described that what we would do from there, as we would normally do was kind of calibrate the gearing so that we weren't just getting a lot, a lot of conversion, but we were also continuing to build the top and the middle of the funnel. As we did that, and we tried to describe, you never do it quite perfectly that, that's how we were thinking about the fourth quarter, and in fact, it played out exactly as we suggested. It would. And you're going to see us, particularly now with multiple products the bundle, multiple funnels, you're going to see us doing those kind of calibrations and gearing on a regular basis.

A similar question for the Athletic. Putting aside the content side of the equation for a moment. What part of the Athletic's customer journey and subscriber management practices can The New York Times apply its own learnings to feel greater growth than sort of on a stand-alone basis?

All of it. One of the great things about the Athletic different space, obviously, but the fundamentals of the subscription business, and ultimately, the ad business, we believe, is there, just looks so much like our current business. And we've got -- I think we've been doing this like twice as long as they've been doing it in subscriptions, many, many years longer in advertising. And so what are the character of those interventions look like? The Athletic has a pretty tight payroll. Today one of the things that's done a lot to drive the growth in the Times. We've grown -- I think we've grown subscription sixfold in the last half -- like as long as the Athletic has been alive in the last half dozen years. One of the ways we've done that is we've really widened the distribution of Times journalism. We've opened up the funnel and widened the audience. We intend to do that with the Athletic that is a know-how thing, it's also a technology thing. So we're very prepared to do that. We also have been doing a lot of work on having a deliberate customer journey and sort of a deliberate management of people through a funnel on the New York Times, the most -- the thing you would recognize that we've done there, most prominently in 2019, we launched a registration model for the time the Athletic doesn't have that in a big way today. So you can assume we're going to do something similar on the Athletic and there are all kinds of optimizations that come with that registration model, including using e-mail newsletters and commercial e-mails a much bigger lever. There's a ton we've learned on The Times about how to reengage people. So a user who may have come once but not come back. How do you reengage them? We're very prepared to do that. And then of course, there's the whole arsenal of things around selling the Athletic to current Times subscribers using the Athletic as a retention tool for the Times selling The Times to current Athletic subscribers. We've talked about the fact that the overlap today is quite modest between the 2 properties. So upselling, cross-selling bundling. There's just a lot we cannot unlock there, and we've been experimenting with that with news cooking crosswords now for some time. And then finally, it shouldn't go without saying big ad opportunity. And I think the character of that business should look similar to ours.

You mentioned leveraging, e-mail marketing to kind of do that cross-selling. And also, it sounded like real estate landing space kind of origin. Is there any other clear opportunities where you can communicate effectively to ones to subscribers and promote it to another?

Yes. I mean there are so many. We have so many programming surfaces in news. Those are the biggest ones with the widest audience and then also in the stand-alone products. So sort of endless opportunity. What I'll say is we're pretty early in doing it. So there's a lot of optimization room there. The one that just happened this week, it's not an Athletic example, but this week -- this past week, a couple of weeks ago, we migrated Wordle onto the domain of The Times as much to Twitter, whatever. And then last week, on that Wordle page, we actually got up pretty quickly there's a menu now, so like a little -- the hamburger menu, you see the other games. So you can place Belly Bean, I think in labor tax and tiles obviously play crosswords. But then below it, you can go to the Athletic, you can go to Wirecutter, you can go to Cooking, you can get news and so forth. And so I think like that's the beginning of the promise of all of this stuff.

Got it. In my score, I transfer just fine.

Yes, I guess not...

And I got my first -- 2 guests try. So it was pretty...

It's like the standard answer was just refresh the page, refresh.

For the Athletic going back to that. I mean, you have charted a path to reach accretion over the next 4 years, even while investing behind more content and more data analytics. Where do you see the most opportunities to gain additional operating leverage to get you to that target over that period?

Yes. I mean the biggest thing to say is that the Athletic inside the family of The New York Times is just a much more valuable proposition, not least because of the enormous audience and programming opportunity. We open up for that. And when I try and make people see that in the easiest way, I see I'd say literally just go to the homepage and look at what we do for cooking and imagine a version of that for the Athletic and there's just tons of running room under the surface there, too, to use The Times to widen the distribution. So that's a big part of it. But if I were to say more technically, it is how you get to leverage. We acquired the Athletic because ultimately, we want to accelerate our strategy, and we want to build a larger and more profitable New York Times company, and we will get there through all the things I've just described to you on subscription, individual Athletic subscriptions, more people buying The Times because we own the Athletic, more people buying the Athletic because it's part of The New York Times and a bundle. We're going to get there through advertising. And I would say today, the Athletic's ad business is tiny, tiny. It's podcast and a little bit of video that they basically don't have display advertising. We've got a huge thing to unlock there in terms of value and potential for revenue in the first-party data products that we've built at the time for advertisers and the canvases. And even that is -- we'll open up categories of advertising, we'll open up more inventory of advertising, but then we just -- we've already got this great channel to a bunch of marketers. So we're really excited about that. And then I'll say one other thing, which I don't think we've been asked about a lot. The Athletic is a whole media company. And so I would just assume all the ways that the times of a media company with proprietary original IP in a space a lot of people care about all the ways that we can make money even beyond subscriptions and advertising likely apply to the Athletic. And the last little thing I'll say is, we did not buy the Athletic because we got cost synergies were the main thing, but that doesn't mean we won't find them and find more efficiencies as we go.

Okay. I want to just squeeze one last one and we open it up for a question in the audience, if there is one. So you can raise your hand. But maybe one for me just on margins, touching on margins. When you talk about investing behind the opportunity ahead, how should we consider the investment priorities and what's needed to retain a market leadership in the news relative to all of the exciting opportunities that your kind of building out with these other services like Cooking and Games and Athletics?

Yes. Let me make a precursor comment, which is we are endeavoring to build a larger and more profitable company, and we will -- we believe the path from 10 million subscriptions to 15 million subscribers moves us more in that direction. We have gotten to where we've gotten. I think different from many of our competitors first and most because the first dollar in the place always goes to the differential value and quality of the journalism of the news report. And we're going to continue to invest in that, I think, in a differential way versus anything else. But I think we're in a -- because it's the biggest driver has been the biggest driver of the business, and we think it will continue to be directly or indirectly the biggest driver of the business. That said, we are in a position now because of all the investments that have been made over a long-time horizon. There's a lot of value across our product set to be unlocked and that's what we're focusing on. And you'll see that's additive to our Games portfolio or just some of the features in the Cooking app about how to use a recipe, but the message for this room is we'll keep investing, and we're in a position now to do it across the product set, but there is a lot of value already there. And our work in this period, a lot of it is about unlocking that value for users.

Great. Thank you so much. I think we're out of time unless there's one last question to squeeze in. Meredith, thank you so much for your time.

Pleasure to be here in person.

Appreciate it.

Thank you.