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

Okay, everyone. Thanks for joining us. I'm John Hodulik, the telecom media analyst from UBS. And I'm very pleased to introduce Meredith Kopit Levien, the President and CEO of The New York Times. Meredith, thank you for being here.

[ Thanks ] for pronunciation. Good job.

Thank you. Thank you very much. I was working on it. So we're closing out 2024 here. Maybe you can set the table here by talking about the -- your priorities for The New York Times as we look out into 2025.

And thank you again for having me. Let me start by saying we are now 3 years into our essential subscription strategy, and it feels like it's really working. So as we think about 2025 and even beyond, we are incredibly focused on building on the sort of key elements of the strategy that even more consistently position us to control our own destiny. At its core, the strategy is about making products that are so good, so valuable in people's daily lives that they seek them out and ask for them by name and make room for them in their lives, and ultimately make a direct relationship with us. And so -- and those direct relationships, of course, just help us grow the business in so many ways. And so for 2025, we are intently focused on continuing to do that, build those products to be worthy of all that. First and most importantly, in news, but also now in sports and recipes and shopping advice and games. And I'll just say, as I sort of look out at what's happening in the broader world. So intense polarization that we've all felt for some time now and then an erosion of trust in media and an information ecosystem that feels kind of overrun with low-quality content and rapidly changing tech that has the potential to make that worse. Everything I just described at The New York Times feels even more well positioned to be value creating to the consumer, to shareholders, to everybody. So I have a lot of confidence that we've got a really strong, clear path to growth, a good runway to that growth and that we've built a machine that's really working to help us keep building a larger and more profitable company.

Makes sense. So speed of the pathway, you've got 11 million digital subscribers right now.

Yes.

You're targeting 15 million by year-end '27. It was about 1 million subs a year. Can you talk about sort of the major drivers and sort of levers that you can pull to execute on that 1 million new subs a year?

Yes. I think we see kind of growth and running room in every direction we look, and I'll sort of give you product by product. In news, the sort of audience for high-quality independent journalism across a whole broad range of topics. We believe is organically growing. And if you think about audience interest growing, the sort of uniqueness of the machine, The Times has built to do it. It's getting more and not less unique. There are fewer and fewer places that are kind of able to do it at the quality and breadth and scale that The Times is doing it. The tech for making that journalism more and more accessible to more people is only getting better. I'm sure we'll talk about AI, but we are experimenting with it in automated voice, so you can listen to a lot of times in translation. Our ability to engage people around news through sort of more modalities, more formats is only getting better. 2024, I think, will go down as a really important and big year for us in terms of more video on The New York Times. You can see that in how much more -- we have just reporters talking to a camera about their reporting or about a big story. And sometimes that video is enough to tell you what happened in the story or it's a teaser makes you want to go read what they've actually written, but I think there's lots of running room in format, innovation. So I have a lot of confidence about the running room in news, and I'll just -- you ask me where else. Sports is a giant space. We are early. We really like what we're doing so far on the Athletic, and we think it's going to be more and more value creating for The Times. And Games so habit-forming for so many people, and we've got a very good track record now of feature development in Games that just sort of make it more and more, have it forming more and more appealing to people. And also, we've got a good track record of new games. So I'd say growth kind of in every direction we look.

Got you. The 15 million subscriber target represents just about 10% of the 150 million or so registered users you have. Can you talk about the value of having this large of a registered user base? And how should we think about converting those customers to paying subscribers sort of over and above the 15 million target?

Yes. It's a great question. Let me say 2 things about those registrations that I think don't get set enough. One is we've been at this for like almost a decade, building registrations, building direct relationships, recognizing the importance of it. And it's like just beginning to like really bear fruit. So this is a strategy kind of long in the works that we're really benefiting from now in a complicated ecosystem. It really does having all those registrations allows us to be less reliant on the big platforms to drive the model. That's the first thing to say. Second thing to say is we've been really deliberate about the portfolio. We've built an all 5 parts of the portfolio, news broadly defined, sports games, recipe, shopping advice. All can help us continue to grow registrations. So we have a lot of confidence about that. As to what they do for us on the sub side, we've long said we're -- its registered users convert better than anonymous users. And we can call them to action because we have that registration, we can get them to engage in the journalism more actively, and that's habit-forming small example yesterday when it appeared that there was a suspecting custody, the tragic shooting of the killing of the United CEO. So we could e-mail people and say, here's the news come to us to see the news on that, so we can engage them. We can cross promote. We can take the signal that we know you love news, but you -- we may get you to use recipes. And we can compel them to subscribe through that e-mail through that registration. So really valuable on the sub side. I'll just -- I'll make 2 other points, really valuable on the ad side. We've got this drove of first-party data now that we're getting -- we're still building, it's getting kind of bigger and better and more powerful, and the registrations help us do that. And even in affiliates, so in the Wirecutter business, we have been working hard there, too, to make that business somewhat less reliant on search or social to bring people in. And now like we can e-mail you and say, look at these deals for this reason because this thing is happening in the world, and that's really powerful.

Got you. You have fourth quarter guidance for digital revenue growth in the range of 14% to 17%. I think that compares to the 14.2% you did in the third quarter. So effectively guiding to some nice acceleration. What's driving that? And -- yes, I mean -- and then how sustainable is growth at this level?

Yes. I mean, listen, I think it's just the model working kind of as designed. There are 2 things that go into ARPU growth, and we've obviously targeted modest ARPU growth year-on-year. One is volume. The other is price. And I think all year long, we've now had a track record of being able to grow both of those things, and it requires both. The second thing worth saying what makes us confident that we'll be able to continue to grow ARPU in the way we've targeted going forward is that the products are just getting more and more valuable, and they're getting more and more valuable kind of with each passing quarter and year in a market where that's more unique. There are fewer things like it. So we're really excited about that and optimistic about what we've been able to do there and what the path looks like going forward.

And maybe what's the role the recent presidential elections have played in terms of that growth? And maybe how would you compare this election to previous elections and its impact on your business?

Yes. Listen, I think every election, I've been at The Times '11 and change years. So I've seen a few of these now. I'd say every election is unique and presents a different set of dynamics. What we are focused on kind of going into an election and through it, 4 things, the breadth of the coverage, the depth of the coverage, our ability to really engage people increasingly in different ways with that coverage and then how accessible we can make it, how many people can get to -- to come to us. And I would say in all of those dimensions, we feel really proud of the work that we did. And if you were to compare for those dimensions, what we did this past elect -- presidential election cycle relative to 4 years ago or even 8 years ago, you would just see we get better and better and there's so much innovation in the model. And by the way, that doesn't just apply to an election, I think that applies to any major storyline that The Time is covering. And I'll give you a few examples. The data journalism has gotten -- we've been known from being really good at that. Gotten better and better. This time around, we had an even more sophisticated polling operation with that data journalism. I will just say, if you paid attention to the needle in the past, and you paid attention to the needle here. This was the most seamless experience of the needle. So I think that shows that sophistication. I mentioned, it's been a big year for us in video and reporter-led video. So much of that happened around the election, really great for engagement. I think we're going to talk about the redesign of the core New York Times app, but there's an election tab right next to the Today Feed in that app. So we gave people a place to go, which is awesome. And in audio, we had more product than we've had and really compelling products that a lot of people listen to with the Ezra Klein Show, The Run-Up, which was our show about voters. And even The Daily, The Daily did something really different this time. We did these election roundtables. And by the way, they were on video, and those videos were like watching kind of the best of cable television in The Run-Up to the election. I'll also just say we feel really proud of the coverage since the election. I mean there's a whole machine that's prepared to cover a new administration and covering that really, really well. So take everything I just said, that's relevant to the election. It is relevant to how we cover any major ongoing moving storyline; the innovation gets better and better as we go.

So does this mean -- based on your comments and what we're seeing in terms of the guidance, does this mean you're not seeing sort of a slowdown in either sort of new subscribers or traffic post-election. We had Steve Tomsic from Fox here talking about how the cable news ratings were very -- remain very strong, but maybe not so much for his peers, but it sounds like the underlying strength and engagement has continued even after the elections.

You mentioned cable news. I will tell you, one of our objectives, and this was the case 4 years ago, I talked about this a lot actually after the last election is certainly the case now. Can we actually get you to be on your New York Times app, like as your main screen experience. And I think we -- I just gave you all the reasons, we sort of get better and better at doing that. As to your more precise question, what are we seeing? We obviously don't guide to net adds. We don't guide on user metrics. What I will say is the model at The Times now in the multiproduct portfolio are really designed to harness demand wherever it's coming from, whether that's a big news story like a presidential election or sports events or high cooking and shopping season last week was Cookie Week. So the model is really meant to wherever the demand is coming from to enable us to capture it.

Got you. So maybe less cyclicality just driven by the portfolio?

The model has meant -- the model is meant for us to be able to grow whatever is going on in the world.

Makes sense. And earlier as a driver you talked about new modalities, audio and video.

Yes.

Can audio be a driver of new subscriber growth for you in terms of getting that 15 million target?

Yes. I'm really excited about audio. I don't think we talk about it enough. On your precise question of can audio be a more direct driver of subscriptions. By the way, I would say, everything we've done in audio has certainly played a role in the growth of The Time and in the growth of subscription, an indirect role at least, but it absolutely played a role. We launched just a couple of months ago, something new, and I would regard it as kind of a big experiment with Apple and Spotify. We're now -- there is some friction in front of our podcasts on Apple and Spotify depending which one and how you listen to it, where we are now asking you to pay. And it's pretty -- still pretty open, but there are places where now you do get asked to subscribe. And it's very early. We really like what we see so far. And we regard it as an exciting experiment. I would say stepping back from that and maybe even more importantly, we have been investing very deliberately in audio for 4 or 5 years, maybe even longer. Now, and we've got a bunch of things to show for it that are an important engagement drivers for The Times and engagement is like the high-octane gas in the whole in every tank in every revenue line, we play in. One, we've got this audio app where you've seen us really experiment with all the different ways to do, audio journalism and having that app as part of what enabled us to be able to do these the subscription experiment with Apple and Spotify. You can now -- I hope you all have the core New York Times app. There is now listen tab in the core New York Times app, and you see the emphasis we're placing on kind of listening as a modality for engagement. By the way, you can listen not in that -- not in the listen tab, but just going through the app, you can now listen to much of the New York Times through automated voice. AI is powering that. And I mentioned a couple of the shows that were new to this election cycle. We've got a lot of new shows. So we're still very, very focused on having the best podcasts. And like having podcasts that huge numbers of people listen to. So like the Daily continues to be a huge, really important podcast, Ezra Klein Show is huge. We launched a Wirecutter podcast. I was actually suspicious who's going to listen to a podcast about like laundry and kind of household things. It's awesome. And so on like our Modern Love series, got reinvented and is better. So we are optimistic about audio as a whole new kind of important modality for how people engage with New York Times. By the way, we make money on audio and podcast and advertising. So it's already a good business, that way. And we think any way you slice it; it's going to play a bigger and bigger role in the story at the Time.

Yes. I mean I think your engagement is a sort of multiyear highs. How big of a role has audio played at this point in terms of getting -- driving that? And then how far along in the process are we? I mean, is there a lot of room to run from...

Yes.

For audio and maybe video as well?

I think there's real running room and engagement. And certainly, audio and video are going to play a role. It's a handful of things. I think, play an important role in engagement. One is continued format innovation, which we've just talked about. And listen, we're early in what we're doing with audio. We're very early in what we're doing with video. I think the continued investment we've made into each dimension of the portfolio, news journalism and on down, nothing drives engagement more than having distinctive journalism, games, recipes, shopping advice. I think that kind of gets better and better. And I'll just give one small example. From news broadly defined, we've put -- I've talked about this a few times. We've put a lot of investment this year, a lot in context, it's not a lot, but put some investment into science, more science-backed health and wellness coverage, which our readers, listeners and watchers and users can't get enough of. So sort of more investment into the journalism, into distinctive things in the product really drive engagement. Cross-product use drives engagement. And then I'll just say -- and we've been very focused on that. Something we don't talk about much, but I think really matters here. We have a team of digital product leaders at the executive level and kind of on down at The Times, Chief Product Officer, Chief Growth Officer, Chief Data Officer, CTO and so forth and then on down we've been working together for a long time, and I think we are just getting better and better at sort of getting a lot of tests on how to engage people into the market and sort of adapting and learning and dispensing with what doesn't work and sort of scaling what does work very quickly. So for all those reasons, I think engagement is still going to be incredibly important to the growth story.

Got you. And you referenced the New York Times app redesign earlier in the presentation. How did that go? And...

Yes.

How is it driving engagement and maybe overall monetization?

Yes. We are really happy with it. There's sort of what you see in the user data and then there's what you hear about everywhere you go. And I would just say, I hear about the New York Times app and how much people really, really like it everywhere I go. We'll have more to say over time about the user data, but we are broadly very happy with how it's going. And I think the sort of underlying thesis is the most important part, which is that we need it and we ultimately were building toward a sort of digital experience manifestation of the essential subscription strategy that there would be this one place where you could go and you could experience all of the world's best news journalism, plus the other things that we do and you don't have to, you can go to individual apps for each of those things, but there's one place that serves as a gateway to all of it. And so the things I would pay attention to in the app redesign that we feel really excited about and all represent places where you'll see us have more and more innovation. If you navigate across the top now, there's a panel for each of our products. So just to the left of the main news feed, which we call Today, you can go to the Athletic. If you navigate just to the right, right now, there's an election tab and you can imagine we've got this dynamic space we can use for any major sort of long-lasting story line, and then you can access all the other products that way. You asked a lot before about modalities. You can now -- there's a listen tab in the app, you can imagine what that does in terms of ultimately, maybe you'll be able to watch things in the app. And then the other thing I'll say about the redesign that is super promising and we're really excited about is more personalization. Obviously, in the background, the product overall is getting over time, more personalized, but there's also a You the fourth tab, the bottom of the app is a You tab. And if you go there now and you start to use it every day, I think you'll be pleasantly surprised by how much more of the content we can surface to You that you would enjoy. And I'll just end on the sort of surfacing more stuff. To note, the whole point of the redesign beyond like manifesting what The Times is meant to be at great scale. The whole point is to have more surface area, so people can experience more of the product. And that's really working kind of a news broadly defined and across the portfolio.

So you've talked about steady year-over-year ARPU growth going forward. So what are the drivers of this? And what gives you confidence in that growth and then the pricing power?

Yes. Yes. 3 things that we always talk about, we are now, like, I think, more than a year into having to bundle out at a promotional price and bringing people through a transition to interim and higher prices, that's just gone really well. It's gone really well. The product is awesome. It's getting more and more valuable. I mean, the bundle itself, the data science and our ability to execute gets better and better. So we just have a lot of confidence.

So you're saying, the promo roll-off, is it going well?

We have a lot of confidence that, that's all going kind of according to plan and well, and I think we get better and better at doing it. We have exercised our pricing power on single products too. That has 2 benefits. And by the way, I'm going to keep saying this, the individual products are each getting more valuable. You've seen us do it a few times in news. You've seen us do it in cooking. And the point there that sort of pays in 2 ways, either the consumer as they realize more value takes higher price or the bundle looks like and becomes a more rational choice. So it's beneficial in 2 ways. And then I would say we're getting better and better at showcasing more of the value in each product to the users, so the products just get more valuable and a more valuable product is fundamentally more engaging, more retentive, more likely to get someone to pay more over time. And the small example I'll give you there. I've talked a lot about news innovation. In Games, we launched a new Games app this year where you can see and play all of the games. The Games product is just like in absolute terms, so much more valuable today than it was a year ago this time.

Got you. What's driving to pick up in your digital ad growth rate in Q4? We talked a little bit about the guidance that you guys had laid out there. Is it more demand? Or is it more supply driven?

Yes. I think we talked in the last call about the fact that in the third quarter, we had seen some pickup in demand even as you still have some marketers avoiding certain hard news topics. So we talked about that, I would say. So that's what we saw in demand. On the supply side, I think we've been talking all year about the fact that we've got sort of the steady stream of new supply coming online. And let me just characterize that new supply broadly, we've got a digital ad product set for The Times, starting with news that really works. We've got premium canvases; those canvases really work. We don't have too many of them. So they're highly performant, and we've got a ton of first-party data that gets better and better, so marketers feel like they can really target with them. And we are extending those high-performing ad canvases now to Games, to sports to the Athletic to cooking, to Wirecutter. Games and sports obviously present the bigger opportunities there relative to cooking and Wirecutter, but it's all kind of working. And I would say there's a good runway of more to come, still really early.

Yes. Speaking of that, let's talk a little bit about the Athletic.

Yes.

Where are we in terms of monetizing that platform? And can you talk a little bit about the strategy and has a little bit of expectations thus far?

Yes. We're really happy to be in sports. It's been a lot of fun. And I think you've seen in the economic progress we made that the Athletic is already in a position to be value creating in a lot of ways for The Times. And I think we are really well positioned for it to continue to be value creating and more and more over time. So we're super excited about it. I'll say just a few things like a few dimensions where we're really focused and where we think that value creation story really rests. One is the Athletic is a team of roughly 550, really talented sports journalists with deep expertise in their beats covering teams that a lot of people pay attention to, and broadly the leagues that those teams operate in. And there's like no engine like that. So that, the uniqueness of that and all the things we can do from that were, I would say, even more confident and optimistic about that today than we were almost 3 years ago when we acquired it. We've got a great editor. He's doing an awesome job. And we feel really good about how we're positioned there. I'd say, it's been a great story with ads. We took -- I've talked about this publicly. We had our -- the person who ran the leader who ran ads at The Times for a long-time kind of go and build the ad in more broad kind of commercial and partnerships business at the Athletic and that's just gone well. And by the way, the big thing we need to do on the Athletic is we are growing audience. We've told a story of audience growth. We are growing audience, but we've got a lot more room to really grow audience. We are intending to take a real leadership position in sports journalism. So audience growth is incredibly important, the ad and partnerships. And obviously, subscriber opportunities grow with that and get bigger with that. We still have really low awareness for the Athletics. So we are pleased with how we've executed in a lot of dimensions. But have a lot to do that I'm excited about to really put the Athletic on the map for sports fans who don't know it's there. And then I would just say it's early in our ability to deliver on the brand promise of the Athletic, but I have a lot of confidence that we're really well positioned to do it.

Great.

It's just fun to work in sports.

Agreed. So I think DealBook is a great example of the power of The New York Times platform to create new franchises.

Yes.

So a couple of questions. First, how was the event last week, and I have to say that given I attended last year, I would be surprised if you had quite the fireworks you did with Elon's commentary to Bob, but how was the event?

I'll tell you what I said to Andrew, it was like slightly -- it was less shocking this year. Actually, we had Elon last year, the year before, I think we had Sam Bankman-Fried just after his company had collapsed. And then -- and like clearly talking not with his lawyer's advice. And then the year before that, we had Adam Neumann, and I think it was like Adam Neumann, first big appearance. So this year was slightly less shocking. The thing that was extraordinary, and this really goes to like the value creation of DealBook. The thing that was incredible was every single person who spoke, Bill Clinton, Jeff Bezos, Sam Altman, I could go on and on. Each one they came, and they want to talk to Andrew, they want to be part of this for The New York Times. They want to be heard on this platform. Andrew is an extraordinary reporter. So I would regard him as just representing the real quality and depth of what means to be interviewed by The New York Times. And then -- and this is different from past year. We have a podcast on each of them. So you can now go -- we streamed a lot of it, so you could watch it. And you can now go listen if you go to our audio app now, there's a whole carousel of all those interviews. And by the way, Alex Cooper was awesome. I actually re-listened to Alex Cooper. Alex Cooper, I saw her there. And I re-listened. So it's just -- I think it's a manifestation of the importance of Times journalism, the importance of the platform is the fact that Jeff Bezos wants to be there and talk about everything that's happened around him on that stage. I think it does that. And I think if you take that, and you apply it to all of the things we cover. That's the level of quality of the reporting of The New York Times. That's the level of subject who is willing to talk to us. And that's the level of sort of public interest we're able to get. So it was just great all around.

So 3 minutes left. I've got a couple of topics here; I want to hit. First, the cost side.

Yes.

Obviously, producing the kind of journalism that The New York Times is known for is very expensive. I mean, you mentioned 540 sports journals, it's a huge number. I didn't realize it's that big. How should we think of the cost structure at New York Times going forward and the potential for margin expansion?

Yes. Let me say a few things. First, just to go to your last point, we are highly focused on building a larger and more profitable company with expanding margins, and we're healthy free cash flow. So that we are highly, highly focused on that. The most value-creating thing I've seen us do in the last decade is invest in really high-quality independent news journalism that is valuable to people at great scale and now appending that to games and sports and shopping advice and recipes, it's just the model is really working, and we think it's going to keep working more and more. And I think we now have a really good track record of showing that we invest into our medium- and long-term growth, but we do it in a really disciplined way. I think we've shown that. And I think that just gives us more confidence to keep investing where we think it's truly value creating and where we can say on the other side of it, we're doing this. Not just in service to the public, but to building a larger and more profitable company.

And I don't want to go too deep down the rabbit hole, but can AI be a driver of that growth, maybe on the revenue side and the cost side?

Listen, we are -- let me say a few things about AI because I'm watching the clock. We're incredibly excited about the potential for the tech to make our journalism far more accessible to people. We're already doing that with automated voice and our translation experiment. And I would just say more and more and more to come. One. Two, I actually think AI can help our journalists. So you already have -- there's a number of places it's being put to use, but a really obvious one is coming through reams and reams of public documents to be able to get to a story more efficiently. AI can certainly help do that, and there are a number of other things in journalism, it can help do. We are sitting on and owners of a mountain of really high-quality intellectual property, and we're being really thoughtful and deliberate about how we are ensuring that the rights to that intellectual property are valued and honored in an appropriate way. And we've got a really good track record of doing 2 things: one, finding partners where the value exchange is appropriate and working with them; and two, we've got a really good track record, maybe this is a good ending point of harnessing the most important innovations in technology to make The New York Times more valuable to society and more value producing for investors.

That's great. Meredith, thanks for your time today.

I can't believe you got through all your questions.

Fairly. Thank you.