The New York Times Company (NYSE:NYT) recently announced its Q1 2011 earnings and provided an initial glimpse into the results of its newly introduced paywall.  The paywall was recently implemented to encourage “heavy users” to subscribe. New York Times competes with News Corp’s (NASDAQ:NWS) The Wall Street Journal (WSJ) as well as internet-based outlets like Yahoo (NASDAQ:YHOO), Google (NASDAQ:GOOG) and AOL (NYSE:AOL).
Our price estimate for NYT stock, at $9.19 is about 5-10% above market price.
Early Signs from the Paywall
According to management, the paywall generated 100,000 paid subscriptions within three weeks of its launch.  Notably, the terms of the paywall offer the first 4 weeks of service for only 99 cents, after which subscribers will shift to the standard (higher) rates.  The point here is that the service is still within its promotional period and might see a few cancellations as subscribers breach their 4-week discounted window. Overall, we estimate that NYT will attract around 500,000 paid subscribers in 2011.
As expected, the paywall has brought a decline in online traffic for NYT. According to Experian Hitwise, a market research firm, the total number of visits on NYT.com declined 5% to 15% in the first 12 days after the paywall launched, and total page views declined 11% to 30%.  We anticipate that monthly page views per user will decline 30% in 2011 vs. 2010 levels.
What Does Management Expect?
Management sees that the decline in traffic at NYTimes.com as being within expectations. The company expects no loss of advertisement inventory on its site, as any inventory that goes unsold in the premium market could be used for remnant programs or promotional house ads.  The hope here is that any potential revenue loss from the traffic decline will be more than offset by subscription revenue gains.
- NYT Q1 2011 earnings conference call transcript, April 21st 2011
- NYT Paywall subscription plans
- Experian Hitwise: Impact of Paywall on NYTimes.com, April 11th 2011
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