Is the New York Times making money from digital media?

The New York Times Company (NYSE: NYT) is now a digital media organization.

“In 2020, we reached two key milestones, both of which we expect to be enduring: Digital revenue overtook print for the first time, and digital subscription revenue, long our fastest-growing revenue stream, is also now our largest,” NYT CEO Meredith Kopit Levien said in a press release.

For example, The New York Times digital-only subscription revenues were $167 million in the third quarter of 2020. The Times calculates that digital-only subscriptions make up 37% of its subscriber base.*

The Times added 627,000 net new digital only subscriptions in the third quarter of 2020. Executive Vice President and Chief Financial Officer Roland Caputo estimates The Times added 202,000 net new subscriptions for digital only products in the same period.

The New York Times is a Digital Media Company

Consequently, The Times added 2.3 million digital only subscriptions in 2020. The Times gained 1.7 million new digital subscribers in 2020, a 48% increase over 2019.

Impressively, The Times’ Cooking and Games apps gained over 600,000 subscribers in 2020. That was an increase of 66%. The Times’ Games and Cooking apps had around 1.6 million users at the end of 2020.

In addition, The New York Times made $36 million by selling podcast ads in 2020, Pod News reports. Levien claims The Times’ The Daily podcast attracts over four million listeners a day, “almost twice as large as the paper was at its peak”, The Press Gazette reports.

In comparison, the print edition of The New York Times had around 833,000 subscribers in 2020. Thus, I consider The New York Times a digital media company that prints a newspaper in New York City.

Does the New York Times Make Money?

The New York Times (NYT) makes small amounts of money. For instance, The Times reported a quarterly gross profit of $258.66 million and a quarterly operating income of $80.53 million on 31 December 2020.

In 2020, the quarterly gross profit grew from $248.99 million on 31 December 2019. Plus, the quarterly operating income grew from $77.96 million on 31 December 2019.

Therefore, The Times’ level of growth is small. For instance, Stockrow estimates The Times’ revenues grew by 0.2% during the fourth quarter of 2020. Consequently, the quarterly revenues grew from $508.36 million on 31 December 2019 to $509.36 million on 31 December 2020.

How Much Cash Does the Times Generate?

Value investors will examine The Times (NYT) because it could theoretically generate enormous amounts of cash from subscriptions.

In particular, The Times appeals to better educated and higher income individuals. Thus, The Times could charge higher subscription rates.

Notably, The Times estimates that in 2020; it raised the price on 900,000 digital subscriptions. Plus, The Times management thinks they can raise the price on over 500,000 subscriptions in 2021.*

Comparatively, The NYT’s quarterly operating cash flow rose from $68.30 million on 31 December 2019 to $91.25 million on 31 December 2020. Similarly, the quarterly ending cash flow rose from -$53.28 million on 31 December 2019 to $70.35 million on 31 December 2020.

Is the New York Times a Cash-Rich Company?

Importantly, The Times reported four quarters of negative financing cash flow in 2020. That means The NYT paid its debts. Impressively, The Times reported no long-term debt on 31 December 2020.

The New York Times’ cash and short-term investments rose from $432.22 million on 31 December 2019 to $595.16 million on 31 December 2020. Thus, The Times is not a cash-rich company.

However, I think The Times could become a cash-rich company if it increases its reliance on digital content. In particular, I think The Times could make enormous amounts of money by selling subscriptions to high-quality content.

The value of The New York Times is small but growing. The NYT reported total assets of $2.308 billion on 31 December 2020. Its Total Assets grew from $2.089 billion on 31 December 20219.

Consequently, The New York Times is gaining value. I think the Total Assets growth validates The Times’ digital strategy. Digital subscriptions can add value to a company.

Is the New York Times a Good Stock?

I think Mr. Market fairly priced The New York Times Company (NYSE: NYT) at $51.34 on 11 March 2021. During the COVID-19 pandemic that share price grew from $33.86 on 9 March 2020.

Hence, the NYT offers strong share price growth, but it is cheap. Moreover, The New York Times is an excellent dividend stock.

The New York Times will pay a 7¢ quarterly dividend on 22 April 2021. The quarterly dividend grew from 6¢ on 5 January 2021. Overall, The Times offered a forward annualized dividend of 28¢ and a 0.55% dividend yield on 11 March 2021.

I consider The New York Times (NYT) a potential value investment that could become a strong growth stock soon. If you want to take a risk on a cheap digital stock with growth potential, The New York Times is worth investigating.