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

We're going to get started. I'm happy to have back at the conference this year from The New York Times Company, Meredith Kopit Levien, President and CEO. Thanks, Meredith.

Thanks for having me. It's good to be here.

Okay. So you are now well into what you've termed the next phase of your journey, part of which is focused on transitioning The Times from a single product to a bundled offer. So how would you benchmark your progress at this point toward long-term goals? And where are you focused currently?

Yes. Well, thanks for having me. It does feel a little bit like congressional testimony with this mic set up. So I'll just get that out there. Look, I think the first thing to say is we have a really clear strategy, and we feel like we're executing well on it in a pretty complicated market. I'll name some things that we've said should be markers of our progress that I do think we're making real hay on. The first one is the bundle, like I'm sure we'll get into that. But everything about the bundle is going well. Subscriber engagement is going very, very well, and that's going well against a pretty complicated audience backdrop, and we can talk more about that. We are doing a number of things on price that we feel very good about. So we're now in market with what I would say is a sort of full complement of pricing activities, all of which hang from very deliberate strategy and price, and that is really bearing fruit. And we have talked for probably a year now, maybe even a little longer about being able to demonstrate that we can actively manage our costs, and that's going well. And we've shown that in actively managing our cost growth, in particular, over the last 3 quarters. What that adds up to, which is what I think you're getting at is in terms of our medium and long-term goals and progress against them. We have said that we are aiming to begin expanding our margins on a consolidated basis this year. And that, in particular, this year, we were aiming for the start -- for that to begin with modest margin expansion. And I would say we're still aiming for that, assuming the ad market doesn't get much worse than expected. If it does, we're not going to do anything that would take us off our strategy, but our aim now is to deliver it. And I would say on -- we put out a next mile marker of 15 million subscribers by 2027, and we feel on track for that. We have asserted that we don't expect that growth to be linear, but in a year, this year where we don't regard it as having a lot of tentpole kind of known news events. We are pretty focused on building our engaged prospect funnels, which we are making good progress on and subscriber monetization, which I'm sure we'll talk about. But overall, it feels good.

Okay. That was a great high-level overview. We'll touch upon all that. So this past quarter, New York Times crossed 3 million bundle or multiproduct subscribers. I think you called out a record for bundle starts, bundle upgrades. I wanted to see if you could speak to how you've repositioned marketing and product towards the bundle strategy to get that uptake from new and existing readers.

Yes. Let me just -- just as a reminder, why does the bundle matter so much. We believe having news in combination with leading lifestyle products means we can penetrate our TAM better. And for the subscribers who do come, they engage more, they stay longer, ultimately, they pay more. So that's the thesis. And I would say because of that, we are using all the levers we have to drive people into the bundle. You named 2 of them, product and marketing. I'll talk about each and a third. On the product side, we have a working insight that if we can get -- if you come to The New York Times, any of our products for one thing, and we can get you to do just one more thing that correlates very well with staying longer, ultimately, paying more. So we've got a lot of product work going on under the hood to get you to kind of run into and engage with that one more thing. And it can be any of the things we offer. I'll just remind everybody, we have 5 products now, obviously, news, Games, shopping advice and Wirecutter, sports and the athletic recipes on NYT Cooking. One of the really obvious product interventions we've made is there's a Play tab now in the core New York Times app, that's been a real boon to getting people to engage more. And you can just imagine we're using all of our major product services like the home page like our morning newsletter, which has a huge audience to promote our products beyond news so that you run it into other things. And that's really, really working well so far. On the marketing front, I'd say there are a few things happening. One, we have all these products be on news now, and we're using those funnels, the Cooking funnel, the Games funnel, et cetera, to drive people into considering the bundles. So maybe before you'd come in for a recipe, and we would ask you to buy Cooking, now we're also suggesting and making it attractive for you to buy the bundle. So we're using the other products to generate interest in the bundle. And we're also -- we do a lot from a creative standpoint to tell you what the New York Times is all about. And increasingly, we're using our marketing creative to say, we are news and all this other stuff. And in fact, we just actually launched our first major brand marketing campaign. It's called More of Life Brought to Life. That's focused on we have a bundle. We've got all these other things you can do. As I say that, it's just worth remembering because I said there are product levers and marketing levers. The majority of our subscription starts don't come from paid marketing. They actually come from those levers and the product that I described, but we do have plenty of opportunities to kind of describe things to people. The last thing I'll say, and actually, thing as important is we're also testing our promotional price as a lever to get more people to use the bundle. So we've -- now we're a few years into using $1 a week as a promo on news, and we're testing the degree to which, for the bundle, that can be a lever to get enough conversion lift that you're growing aggregate LTV. And I'd say you put all of those things, particularly the first 2 marketing levers and product levers kind of together support our belief that over the next few years, we can get 50% or more of all of our subscribers on the bundle.

Okay. So that increased engagement that you spoke about before?

Too close. Thank you.

Okay. Sorry about that. Is the engagement primarily a sub who is mainly on news now taking another product? Or is that sub who was on news just by being in your ecosystem or engaging with news more as well, right? Is it more verticals or -- yes.

Yes. It works both ways. I mean my favorite thing to tell people it's just as likely for somebody to drop into our funnel to play Wordle and then go to news as it is the other way around. So it's sort of all feeds on one another. And I'll just mention that we've been really deliberate about choosing the spaces we're in beyond news for 2 things. One, these are giant spaces where there's a lot of interest. And obviously, that The Times has permission to play, sports is a great example of that. But there are also spaces where you're going to have repeat engagement because you're interested there. You don't only cook once. You don't -- if you follow a sports team or a league actively, you're not just going to do that once in a week. You're going to come back very often. Games, many people play every single day. So the whole idea here is these are all forces that can drive up engagement. And the differential that we see is people who subscribe to the bundle consistently engage 10 to 20 percentage points more on kind of a weekly basis than if you just buy news.

Got it. Okay. So The Times begin to ramp the bundle strategy. I think around this time last year that followed the athletic acquisition, so I'm assuming that means some of those initial bundle cohorts are now either lapping or coming up to the end of their promotional period. So any early view on retention versus like a news promo sub? How fast do you think you can kind of graduate them to that full price?

Yes. My short answer is it's really early, but so far, we like what we see. So just so everyone understands we've got a long history of bringing people in news in at promotional prices, getting them to engage in a year at the year mark stepping them up to an interim or a full price based on that engagement, increasingly more to full price over time. And then ultimately, getting them to pay full freight. That's what we're doing now on the bundle. And while it's early, so far, retention looks stronger than news only and ARPU is better. So -- that's kind of the strategy in action playing out as we expected it to. Still early, but good so far.

And going back to the stat or target you just gave or maybe where the bundle could go as a percentage of overtime right? If we think about your subscriber base, there's a minority but still material portion that's international. Is the bundle offering -- does that resonate as much abroad? Does that require you to tweak that non-news product somewhat to make it more palatable for those audiences?

I would say yes and yes. And let me give a little color there. In general, the uptake on the bundle outside of the U.S. is about the same as it is -- close to what it is in the U.S. I want to say that's been a pleasant surprise for us. We had assumed that of the products beyond news, some would resonate more than others, and that might make bundle uptake lower outside the U.S. In fact, it's been basically as strong. Just to give everyone the data, the latest stat unbundle uptake, generally, we've put out is as of the end of last year, 30% of starts. We're coming in on the bundle by the end of the year, and we said that went up in Q1, you can assume we're seeing that internationally and domestically. And the second part of your question is what do you have to tweak. I think you're asking what do you tweak to sort of see that continues to grow. We think the athletic and Games will be particularly resonant outside the United States. And on the athletic, you can imagine as we get better and better sort of geo targeting, there's even more running room there. Games has been the big surprise. People love Wordle everywhere.

Everywhere. Okay. I want to touch upon the topic of traffic. So for most of The Times digital journey, I think social media could be relied upon as a distribution funnel for your product. That option is not gone, but maybe because of TikTok or the way others responded to TikTok, it's maybe a diminished source of referral. And you've been out in front of this, you've highlighted this, but maybe focusing in a bit. Are you seeing this impact on a particular kind of segment of your reader, potential sub? And then what are you can -- what can you do to sort of widen that funnel back?

Yes. It's a good question. I would say the distinction to draw is sort of subscribers and the casual audience. Subscriber engagement, as I said at the top of this conversation has been remarkably strong. And I would say that's because of the quality of the products, it's also because we are doing a lot of product intervention to sort of drive that, but that is remarkably strong even kind of in a tough traffic environment, where we've seen real pressure from the platforms, I'd say it's all of them. You mentioned Facebook. You said diminished. They're like close to out of news with the closure of News tab. We've seen that really hurt us on the casual audience front. And I would say there's a second thing going on, which is just the news cycle has changed, right? And it doesn't mean it's not still plenty going on in news, there is and it's important for me to say, we are long on news. News cycle is going to ebb and flow. But sort of over the long arc of what's to come, we think there's only going to be more demand for our news product. But what we've seen this -- in this particular moment, say, for the last few quarters is we've gone from these like singular dominant news stories, the politic story, then the COVID story to a much more varied news cycle. So that's what's happening. What we're doing about it, it's just worth saying this is what our strategy is about. We feel like the combination of news plus these leading lifestyle products sold very actively in a bundle or on their own, gives us some resilience to a news cycle that's ebbing and flowing. And there are now plenty of reasons, let's say, in a day or a week or a year to engage with The New York Times that go well beyond news. And there's sort of a cadence to when people have high interest in Cooking when they have a high need for shopping advice, the sports calendar is sort of robust all year long with lots of different peak moments that look different than news and so forth. And that's the idea here. And we're quite focused this year on building out strengthening the audiences for our non-news products, which in many cases, kind of build their audiences in different ways.

And on that topic, I think with the athletic you're doing more daily sports coverage, more live sports coverage. How do you win mind share there versus someone who might just go to ESPN for that type of coverage?

Yes. Let me say a couple of things about that. In the first quarter, we said our audience for the athletic was up 50%. That feels great. That's part of a very deliberate strategy to say let's open up their paywall, let's really build a prospect audience. And even the athletic being up 50% in a quarter. If you look at that relative to other sports sites, it's still a tiny audience. So what I'm really saying is there is plenty of running room to keep growing the athletic audience relative to ESPN, I would say sports is a really big market. The athletic has very low awareness. It's 7 years old. Now we bought it when it was 6. It had about 1 million subscribers when we bought it and a hard paywall. So I would venture to say very few people beyond its million subscribers really know it existed. And we have the whole kind of promotional power of The New York Times to help people know it exists. I'll say one more thing because you asked me about what are we doing in the actual journalism on the athletic to change that. A few things. We acquired the athletic because it was very, very good at helping the passionate sports fan follow the team that they loved, very, very good at that. We are still doing that. what we're adding to that, and this is what's really helping us drive more audience is 3 things. We're getting better sort of in the live moment around sports and The Times is quite good in live moments, and we're bringing a lot of that expertise to the athletics. So for example, athletic -- it's always very good at covering the NFL draft, the run-up to it, what happens after we are now also quite good in that moment of the draft. So the live moment in a game around a big event, we're getting better at. That's one. Two, I'd say the athletic is just getting even more sort of on the news. So everybody is talking about the idea that Aaron Rodgers may be traded to the Jets in addition to the fact that we're going to write the story after he is traded, which we would have done before anyway, now we can sort of swarm that story as it's unfolding in a much bigger way. And then just the third thing to say is the athletic has been very sort of team focused and now we are adding to that more comprehensive like national layers. So if you follow the team, you also probably care about the big news happening in that league around it.

Understood. So you recently announced that you will execute a price increase for tendered subs. I think first, this is for news and Games, then Cooking later in the year. And obviously, it's interesting because, arguably, we're heading towards a slower, economic period you can debate that. But can you give some background on the decision here, the confidence that you can execute this with fairly limited churn?

Yes. So I like -- I'd step back and say, we are always looking to sort of balance growing volume of subscribers and share of subscribers in a moment where habits are really up for grabs and driving price. So we're always looking to do those 2 things in the right balance. And ultimately, we believe we can grow both of them, right? The work here is to grow aggregate lifetime value. What we're doing in this moment is for a group of tenured subscribers to news and a group of tenured subscribers to Games. We're increasing their price and what gives us confidence to do it is, one, we've got a long track record here. We did a fairly sizable increase to the news price for tenured subscribers in 2020 and spilling a little bit into 2021, that went very well. So we know how to do it, one. Two, I would say the products themselves have gotten -- if you use them, you'll know this, increasingly valuable. The journalism continues to get more varied in its format. In news, we add journalists, we cover more things, more deeply, more richly. And Games, we keep adding more Games. So the products themselves are more valuable. And then I would just say we are able to execute really well here. We have been building a real data science capability to say sort of how do you ask people to go up in price? What is the best way to do that. And of course, we tested it. So we tested this very actively I think, at the end of last year and rolled it out at the beginning of this year. And so far, we like what we see. So we're doing it the way we do -- much of what we do at The New York Times, which is very thoughtfully and deliberately. And we really like the result we see so far.

Okay. On the earnings call, I think Roland highlighted it was going to be 1 -- around 1.5 million subs that we get a price increase notification this year. And I think we can estimate around 1.2 million of those are news, some getting just news, some getting news plus another product. Should we think of that figure as sort of your fully tenured news base and the balance are on promo or -- you're shaking your head so I think...

No.

The answer is no.

No. I would say that is group of people who we put into that bucket for a price increase for a number of reasons. They have a certain amount of tenure. It's not all tenured subscribers. Certain amount of it. They have enough distance from being on a promotional price. So that plays a role in this. And 2 more things, domestic. We're only doing this at the moment domestically. And this is a significant one. They didn't come to us through a third party. So they came to us to subscribe directly. So you can assume -- you can take from that the sort of tenured base is a substantially larger group of people.