I’m picking on the New York Times because they are the 11th largest “audience aggregator” on the Web, but many newspapers and other traditional media companies are similarly using strength in their digital operations to conceal weakness in their legacy businesses. Here’s an example of the consequences of such “obfuscation” from MediaPost’s coverage of the NYT’s Q2 07 earnings release:
NYTCO enjoyed 23.4% growth in online revenues in the second quarter–to almost $81 million
NYTCO’s newspaper ad revenues fell 5.7%, as earnings fell from 37 cents a share to 34–an 8% decline, compared to the second quarter of 2006.
You could easily conclude that it’s PRINT ad revenue that fell 5.7%, when in fact the 5.7% drop in ad revenue INCLUDES the 23% increase in online ad revenue. Let’s look at the earnings press release from NYTCO (bold is mine):
Total revenues decreased 3.7 percent to $788.9 million from $819.6 million. Advertising revenues decreased 5.7 percent; circulation revenues decreased 0.5 percent; and other revenues rose 2.2 percent.
Total News Media Group revenues decreased 4.5 percent to $764.2 million from $800.2 million. Advertising revenues decreased 6.9 percent due to weakness in print advertising across the News Media Group, partially offset by higher online advertising revenues.
Total About Group revenues increased 27.0 percent to $24.7 million from $19.4 million due to increased display and cost-per-click advertising as well as revenues associated with the acquisition of ConsumerSearch.com in May 2007.
Here we learn that the 5.7 decrease in advertising revenue is actually for the whole company, which likely includes some significant portion of the 27% increase in About.com revenue. If you pull out the News Media Group, which is really the “newspaper” ad revenue, the decrease is actually 6.9 percent.
But here’s the BIG question that goes unanswered in all this data — how much did PRINT advertising decline? All of the advertising revenue numbers are reported with online ad revenue included, and while online ad revenue gets broken out, we never see PRINT ad revenue broken out.
I can’t blame MediaPost for the lack of clarity in its coverage, since the data that the NYTCO releases is so difficult to parse.
For a previous NYTCO earnings release, I rolled up my sleeves to figure out exactly how much print advertising had declined, but that’s not an exercise that most investors or industry observers will take the trouble to do.
Honestly, I can’t really blame NYTCO or other newspapers for hiding the details on their bad news. If I were in their position, I’d be very tempted to do the same. But the MediaPost coverage really highlights how easily withheld information can lead to confusion, misunderstanding, or outright disinformation.
All newspapers are working overtime to find ways to overcome the decline in print ad revenue, which is outpacing the growth in online ad revenue, but those that are public companies have a fiduciary responsibility not to hide the ball. (Of course, most public companies hide the ball on bad news, but that doesn’t change the principle.)