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New York Times Snagged in Digital Divide

Stocks in this article: NYT GCI MNI WPO GOOG FB MSFT AOL YHOO

NEW YORK ( TheStreet) -- The rich are getting richer, and that extends to digital advertising.

Among the many losers are print newspapers, magazines and even television broadcasters, desperate to get more of their revenue from digital ad sales. The winners are well known: Google (GOOG), Yahoo! (YHOO), Microsoft (MSFT), Facebook (FB) and AOL (AOL) account for 65% of all digital advertising, says Ken Doctor, a media analyst at Outsell and Newsonomics who crunched that number using data from the Interactive Advertising Bureau and eMarketer.

Considering the slew of competing online entertainment and news sites, that's a huge number indeed.

First three months of 2013, digital advertising sales at the New York Times Co. (NYT) fell 4%. Total advertising at the news company dropped 11% to $191.2 million. That's an ominous sign for a company that's been among the most innovative in convincing readers to pay for content. It's especially concerning given that the Times made great progress in 2012 by posting a 1.9% revenue growth, the company's first sales uptick since 2006.

Newspaper companies are keen to replace declining advertising sales with circulation growth, i.e., online subscriber sales. Last year, the Times did just that: subscriber sales surged 10% helping to offset a 6% drop in advertising sales. For the first quarter, circulation sales rose 6.5% but not enough to offset declines in advertising.

"Even though the circulation push has been a big success, this was a major setback," Doctor said. "This widespread advertising decline is making that strategy insufficient to find growth."

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