Over the last two months, The New York Times has made a lot of headlines with their moves at The Athletic. The newspaper bought that digital subscription sports site for $550 million in February 2022 (after a long “will they or won’t they” flirtation), and there have been plenty of discussions about their attempts to integrate it into their other operations since.
But that front particularly heated up in June following major layoffs of nearly 20 people at The Athletic and an announced shift to more regional and league-based coverage. And then July saw the Times announce they were disbanding their own sports desk, shifting those reporters elsewhere, and replacing that desk’s coverage with coverage from The Athletic. That move has prompted a union grievance (as the Times sports desk is unionized, and The Athletic is not), and has produced comments that publisher A.G. Sulzberger “murdered the sports desk.”
Amidst the qualitative discussion of what’s going on with the paper and The Athletic, though, it’s worth looking at the quantitative financials. And the Times had some interesting notes there in their financials release Tuesday, covering the second quarter of 2023. That release noted that the paper saw overall operating profit rise to $55.8 million from $51.7 million in the same quarter last year, and adjusted operating profit rise to $92.2 million from $76.2 million. And it cites increased digital subscription numbers, including The Athletic and bundles that include it, and decreased losses at The Athletic (adjusted operating losses there decreased to $7.8 million from $12.6 million in the quarter last year, carrying on a trend from their first-quarter results). Here are some notable quotes from that release:
Meredith Kopit Levien, president and chief executive officer, The New York Times Company, said, “Our second-quarter results confirm our view that our essential subscription strategy is working as designed, with momentum in several key areas. We added 180,000 net new digital subscribers, with more than half of our digital starts taking the bundle for the second quarter in a row. More than a third of our nearly 10 million subscribers are now bundle or multiproduct subscribers.”
“Digital subscription revenue grew thanks to gains in both subscriber volume and ARPU, with the latter up year-on-year for the first time since our acquisition of The Athletic. Subscriber engagement remains high, helping to power our multi-revenue stream model, including digital advertising, which exceeded expectations with a 6.5 percent revenue increase. And we’ve continued to exercise cost discipline while simultaneously enhancing the value of our offering.”
“We believe continued strong execution of our bundle strategy positions us to be more resilient to external market dynamics while driving sustainable value creation. We are proud of the progress we are making to build a larger and more profitable company, which in turn allows us to continue to do the most ambitious, high quality journalism across an ever broadening range of topics and formats.”
While adjusted operating losses of $7.8 million for the The Athletic segment are still certainly massive, it’s notable how they’ve improved from the same quarter in 2022. And it’s interesting how much of this overall earnings momentum for the Times is coming from various digital offerings outside the core paper, including Wirecutter and their Games offering. They’re trying hard to sell their “News and Games” bundle in particular, which includes NYTimes.com, Wirecutter, Games, Cooking, The Athletic, and more. Kopit Levien mentioned that both in that release and in comments on an earnings call, where she noted that more than half of new digital subscribers are bundle subscribers. Here are those earnings call comments, via Angela Fu at Poynter:
“We view the quarter’s subscriber results as a testament to our broad and valuable product portfolio, which continues to attract a large engaged audience despite the ongoing reality of less traffic from the platform and a news cycle less dominated by singular stories that capture unprecedented attention,” Kopit Levien said.
The Times is in the midst of a price increase roll-out for News and Games subscribers. The company hopes to eventually get at least half of its total subscribers on the bundle. Currently, more than a third of its nearly 10 million subscribers have bought more than one product.
Kopit Levien highlighted several new product features, including a data journalism tool that tracks extreme weather in the U.S and two new puzzle games. She noted that Games has helped funnel subscribers towards the bundle, and the company expects The Athletic to play a similar role.
“We made a number of technical and journalistic enhancements to (The Athletic’s) product in the quarter to drive engagement,” Kopit Levien said. “Those enhancements helped propel its audience to substantial growth for the second quarter in a row, and we continue to make good progress for our goal of Athletic profitability.”
Much has been made of how The Athletic has continued to lose money under Times ownership. And that deserves to be noted. But the numbers and comments here help illustrate the paper’s strategy with The Athletic, and why the past and current losses aren’t the only thing to consider.
A lot of this is somewhat analogous to various networks’ over-the-top streaming offerings, which have long posted giant losses but have not been abandoned because of their perceived strategic importance going forward. The idea is to get subscribers in at a loss to start to build scale, then hike the price and hope to keep enough of them, and then to have new consumers come in to the company through these offerings. (In particular, Disney’s ESPN+ strategy and eventual full linear direct-to-consumer plans have a lot of similarities, including bundle emphasis, price hikes, and even splitting of costs and revenues between divisions.)
None of that prohibits criticism of The Athletic, of The Times‘ management of it, and particularly of their decision to replace their (very differently-focused) sports desk (which has broken several important stories recently, and has often done that) with non-unionized coverage from The Athletic. There are many points that can be made on all of those fronts, especially when it comes to the editorial and content sides.
But the financials, and the comments from Kopit Levien, are certainly interesting. And they help show why the Times bought The Athletic, what they’re doing with it, and what they hope its future will be. Whether they’ll ever hit that “goal of Athletic profitability” is a question at this point, as is whether buying The Athletic will work out for them in the long run. But it’s clear that the paper is placing high internal importance on The Athletic, and looking to expand that further in the days ahead.
