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

Very. Yes. Me too. It's devastating. So increasing brand awareness and engagement has been a goal of ours since the Athletic -- since the acquisition. I've actually personally enjoyed your live game blogs on the Athletic, I followed that yesterday. Maybe you can discuss more some of the ways you're driving more time spend here. How do major events also play into that? You think is the Olympics a big boost?

All good questions. I'll just remind you, we've got really big ambitions for the Athletic. We want to do in sports what we've done in news, which is build a world-class, market-leading destination in this case, for sports fans, and we're early, but we feel like we're well on our way to that. How do we do that from a coverage standpoint? When we acquired the Athletic, it was awesome at covering teams and leagues, but really for fans of particular teams, we're still going to be awesome at that. We're very focused on that. And I'd say that's getting even more sort of polished and edited and intentional and deliberate. What we're adding in addition to that, and you're referring to this, is doing even more to own and dominate the sports news day. So kind of like the Times dominates the news, news day, the Athletic aspires to really be the place you go just to know everything important that's happening in sports. And I'd say, real investment into the live game moment is playing a role in that and more to come there. And then we also -- we've got a giant team of journalists on the Athletic, it's 500-plus people in the -- just in the sports newsroom that is very, very big, and that puts us in a very strong position to swarm the big story in sports wherever it's coming from. So incredibly focused on that from a coverage standpoint. I'll say though, you're asking me kind of about brand and making people aware of it. When we acquired the Athletic, it had 1 million subscribers, very few people beyond that even knew it existed. And so we're also doing -- still doing quite a bit of work to open up its hard paywall, reduce the friction, give people reasons to engage and come back to that live game moment and then sort of earning the sports new day as part of that. And we'll get better and better at that as we apply the sophisticated Times technology to do that. And the last thing I'll say, and this is new and different this year, we now have the -- the Athletic is the major source of daily sports news in 2 big places. So it's the major source of daily sports news on the New York Times, that's new, relatively new. And we also did this deal with Apple News+. The athletic is the major source of expansive daily sports news on Apple News+. And both of those things should go a long way to helping people know it's there.

So a logical follow-up to the engagement awareness question for the Athletic would be advertising. As background, I don't think beyond podcasting, you even had ads prior to late 2022. What's the reaction from marketers to putting inventory out there?

It's really good. It's good. We're excited about the ad business. For the Athletic, we got ads on the site, I want to say, in the fall of '22. So display ads, we did have a broadcast business. By the way, podcast will continue to be important at the Athletic, we're tweaking the portfolio kind of in the spirit of some of the things we've done with the New York Times podcast portfolio. But Athletic is really working in advertising in a handful of ways. One, it's just bringing new advertisers to the broader portfolio. So I think beer and consumer packaged goods like sports drinks and bedding and apparel, things that wouldn't have necessarily advertise with the Times. Two, we're getting more share of wallet from Times advertisers that have multiple products or brands that may not have put them all in the Times. There's now another source of targeting. It's a greenfield. So there's a lot of interest from advertisers in sports and the Athletic is new. So we can do some new and different innovative things. For example, we've expanded women's sports coverage and early on had a lot of marketer interest in sponsoring that and underpinning that. And then I'd say we're going to take all the things that makes -- that make Times advertising really efficacious and really work like first-party data, that will come online this fall at the Athletic. So we're quite optimistic about the Athletic's ad business. And as we grow brand awareness, that makes marketers more interested. And as we grow audience, it's not perfectly linear, but that makes the ad business have the opportunity to be bigger.

And following up on extending your ad product with games, right? Tens of millions of users. So obviously, a lot of engagement sitting outside the sub base. What opportunities you see with advertising there? What's also the right format or a marketer for games?

Yes. I'd say similar to the Athletic, what we've on game, so more share of wallet from the marketers we've or marketers even just saying, "I want to be over there because that's really hot." You've got a lot of audience, and we see a real opportunity to bring in new and different kinds of advertisers. If we look at the new advertisers to game so far, it's a lot of consumer brands that may not have spent or spent as much with the Times. And then I'd say, over time, today, the ad products look quite similar to the ad products on the Times, but we've done some really cool things with sponsorships because of the nature of games, and that's very compelling for marketers. But I think over time, we'll have the opportunity to experiment with new ad formats that we don't necessarily have in a big way on the Times. So I'd just say both Athletic and games present big new potential areas of growth for advertising that we're excited about.

Great. Maybe stepping back and covering the ad market more generally at earnings. I think you said there was a pickup in demand so far in Q2. How much of that is driven by the broader market versus actions you're taking? And then your guide, I think is for high single-digit digital growth. That's not like the wide range we've seen in some prior quarters to that. Is it -- does that mean you've less volatility that you're basically seeing at the moment?

I'd -- let me start on the second part of your question. I'd say we've more visibility for Q2 as of the time that we reporting -- reported earnings. And that sort of additional visibility reflected in the second quarter a pickup -- some pickup in demand and also some confidence about our ad products. I think the broader thing to say is we've continued to feel some amount of marketer news avoidance. We talked about that in the last quarter, but we do have a lot of confidence that we've a lot of varied compelling supply coming online in games and sports and also in news. And I'll say that news itself is quite a broad thing at the Times. One of the things I highlighted at earnings was our continued investment within what we consider news, but in science-backed health and wellness coverage, which is very appealing to consumers and also to marketers as a space. So I'd say we're broadly optimistic about our ad business. Even if visibility for the second part of the year remains limited for the medium and long term, we're broadly optimistic.

Okay. Other revenue, that's catch all for a number of items that's consistently outperformed at least our model for several quarters. A big part of that seems to be Wirecutter. Maybe can you walk through some of the growth drivers there, better SEO, Apple more categories? I mean, it strikes me there's still some large product areas, cars, credit cards, right? I think that everything you get into?

Yes, yes. Let me talk for just a second about other revenue. What we've said about other revenues, specifically, we expect growth in Wirecutter and licensing this year. So I just want to anchor in that. And Wirecutter has just been a great and consistent source of revenue growth, and we expect it to continue to be for a handful of reasons. One, I don't know -- I don't never say never on cars and sort of bigger ticket items, but we do feel like in an ROI positive way, we can continue to invest into coverage or the kinds of products we already cover, but in more spaces in a way that, that will drive growth, and we're doing that. I think I mentioned that in my prepared remarks on the earnings call. And also, we're doing a lot of other things, we're doing on the broader Times that we think will drive growth at Wirecutter. We're using our direct relationships to use e-mail to expose people in sort of big shopping moments to things they'd be interested in. We're doing format expansion in a way that engages people differently. And as I just said about the Athletic, we now have Wirecutter featured pretty prominently on the Times core surface and it will also be part of Apple News. So just broadening awareness for it, we think, is going to play a role in its growth.

A complain I'll in the past that I couldn't find a Wirecutter on the app.

Now, you can.

Okay. So it's in there. All right. I stand corrected.

And on the web home page. So let me make one more comment about that, particularly in moments, where it's high shopping time and people are thinking about shopping.

Got it. Also within others, your licensing business. When we look across the news landscape, we've seen, including recently a number of competitors, you could call it like news adjacent reach agreements with AI platforms. So how to about the opportunity of licensing your content there?

Yes. Well, let me make the most important point first, which is we produce an enormous amount of high-value intellectual property. We've done that for 172 years, much of which is copyright protected, and we continue to produce fresh, new IP at real scale every single day, and we think that will continue to be of great value to everyone and the primary source of our value creation. And in terms of what we're seeing out in the world, I think we're seeing that the -- to some degree, the LLMs have willingness to recognize value of that content and pay publishers for content, and we think that's generally a positive signal. I'll say, we're prepared, given the enormity of value we've to enforce our rights around our own IP in whatever way that takes, and we also have a real track record of doing deals with big tech companies when we feel like those deals are consistent with our business strategy and honor our IP rights and have fair value exchange in them.

Maybe staying on the AI topic. Presumably, there's a number of use cases across your platforms. You touched on a couple earlier like audio conversion, but maybe mass translation as well ad targeting. What do you -- what excites you from a product perspective?

Yes. I mean the first thing that excites me -- let me just say very broadly, we think AI used in lawful ways could produce a real increase in access to our journalism and the ways we can engage people with our journalism. So we're incredibly excited about it. We also believe that what we do at real scale, human-made news journalism and human made and tasted recipes and product testing, sort of shopping advice and puzzles and sports journalism, I think that's only going to get more valuable in the world. We're headed into the 4 places where we feel particularly excited about experiments that are like in the world now I'll mention, but it's early. This is just the beginning. We've got a lot of kind of time and energy and our best and brightest people focusing on this. One is language translation. So we've got an experiment we've had out for a little bit of time now. It's relatively modest in scale, but you can see the implications of it. If it goes well, what we're trying to augment, Spanish language translation of the Times, augment the work of humans, we really like what we see so far. It's early. The tech is early, it's all early, but like what we see so far there, and you can imagine that across languages. I'll say a little more about the audio experiment that I mentioned. And by the way, we've multiple audio experiments going on kind of at any time on the Times in our core app and in our audio app. But what we've done with generative AI is you can now -- a portion of our audience can now listen to Great Swamps of the Times, most of our content, except the live journalism and except Opinion, I think magazine may be excerpted. You can just listen to it. And I'd just say I keep telling people, I'm a runner, and so I can just like hit the play button on an article I can consume vastly more times journalism than I used to be able to do. So that's a second experiment we're quite optimistic about. We've got an ad experiment that is in test right now. We'll go to market in the third quarter called Brand Match, where we're able to take the whole corpus of New York Times digital content and match what marketers are trying to accomplish. So match their targeting priorities to that. That sits in addition to and almost like above what we can do with first-party data at the user level. So we see big potential there, and that's something that will come online this year. And if it works, it will get better and better over time. And then I'd say in the journalism itself, using generative AI to do things like pore through vast realms of public documents or to track things. There was that story, I think, like a year ago on the Chinese Spy balloon. We actually used AI to track that in a very profound way. So I'd say it can help augment what humans are doing in the course of journalism and that's all just at the beginning.

And just 2 follow-ups. You said augment Spanish translations. So you're doing a little bit of that now. This would just be more articles. And then audio conversion, is it generic voice? Is it the....

It's an automated voice. So there is another audio experiment, where you can listen to report or reads, both in the core app and of course, you can listen to our podcast, or in the audio app, but the thing I'm referring to is listening to the text, New York Times articles as written today in an automated voice.

Okay. We've got about 2 minutes left. Let me just cover expenses. You recently guided to 4% to 5% adjusted cost growth for the second quarter. Spoke more broadly into a disciplined investment from here. Where you focus from a resource perspective? Is there opportunity to kind of reallocate from here?

Yes, I'd say we've got a very good track record now of sort of asserting our cost discipline and pretty relentlessly reallocating resources on a regular basis to areas of highest impact. And what we've been very focused on is cost discipline so that we can continue to invest in the areas that drive the most value creation, which our journalism across all the domains we now play and the digital product experiences and underlying tech that help people find and experience that. And I think we're doing quite a good job of that and we're -- we remain on track this year for an AOP margin growth and to continue to deliver healthy free cash flow, and we also remain on track for the midterm targets we put out. And we're doing that while investing in these things that we believe will really drive medium and long-term further value creation.

Okay. Maybe a final one. So New York Times now prominent news, sports games, shopping, lifestyle. Any other verticals you see an opportunity in?

Yes. Listen, we never say never, but the bar is really high. We really love the portfolio we've, and I'd say we still have great running room in that portfolio within particularly news and games and sports. I've talked about where we're still investing in news. The world is certainly not going to get less interesting and formats are going to keep making that more accessible and interesting. People in games and sports, early days. And we think we've got real growth levers there to further realize. So I don't -- and cooking and Wirecutter too. So I don't rule out that there's another space. But certainly, the strategy is currently contemplated. We really like what we've and see a lot of running room within it, and the bar is very, very high for anything else.

All right. Great. We'll end there. Thanks so much.

Right on time.

Yes.

Nice to be here.