MICHAEL LIEDTKEThe New York Times Co. cushioned the blow from another big drop in advertising in its latest quarter by shedding more payroll and collecting more money from newspaper subscribers. The strategy paid off with a third-quarter loss that was smaller than analysts anticipated Thursday. Times Co. shares surged $1.97, more than 22 percent, to close at $10.72. But cutting costs and raising newspaper prices probably isn't a formula for long-term success. Like other publishers, the Times Co. is trying to hold on until advertisers increase their spending again. It didn't happen in the third quarter for the owner of The New York Times, The Boston Globe, The International Herald-Tribune and 15 other daily newspapers. The Times Co.'s advertising revenue plunged 27 percent from last year's July-September period. The erosion wasn't as bad as the 30 percent drop in ad revenue during the second quarter. But the annual comparisons are getting easier as the year progresses, given that the recession worsened with the financial crisis in late 2008. Janet Robinson, the Times Co.'s chief executive, said the advertising environment has "improved modestly" this month, with online marketing showing the most momentum. Those remarks echoed recent comments from the CEOs of two other major newspaper publishers, Gannett Co. and McClatchy Co.
With so much ad revenue drying up, the Times Co. has cut about 20 percent of its work force in the past year and reduced wages and other employee benefits. The Times Co. now expects to lower its expenses by about $475 million this year, about $25 million more than it was projecting three months ago. Although they didn't provide specifics, Times Co. executives said the company expects to save more next year. Among other cost-cutting plans, The New York Times is eliminating about 100 newsroom jobs ¿ roughly 8 percent of the staff. To fill some of the holes, The New York Times may rely on more outside contributions as it expands coverage in other metropolitan markets. The newspaper this month added a twice-weekly section for San Francisco and is planning to do something similar in Chicago next month. While it has been whittling its expenses, the Times Co. has been asking people to pay more for its newspapers. In June, for instance, the Times raised the newsstand price of its daily national edition by 50 cents to $2. The higher price has driven away some readers, but most are sticking around. In an industry rarity, The New York Times took in more revenue from readers than advertisers in the third quarter. Traditionally, newspapers have gotten about 80 percent of their revenue from advertising and 20 percent from circulation.
The trend doesn't bode well for the Times Co.'s earnings potential, because circulation revenue isn't as profitable as advertising revenue. That's because more money from each dollar of circulation revenue goes toward recovering the costs of distributing the newspaper than each dollar of advertising revenue. "Circulation really isn't a profit center for newspapers," said Benchmark Co. analyst Edward Atorino. Dragged down by various accounting charges for job cuts and other expense reductions, the Times Co. lost $35.6 million, or 25 cents per share, in the last quarter. Revenue was $570.6 million, down 17 percent. In the same period a year ago the Times lost $106.3 million, or 74 cents a share, as other accounting charges triggered by the Times Co.'s woes hurt the results. If not for such charges, the company said it would have earned 16 cents per share in the most recent quarter, compared with 5 cents a year ago. Analysts surveyed by Thomson Reuters had projected a loss of a penny per share in this year's third quarter, excluding charges. ___
AP Business Writer Andrew Vanacore in New York contributed to this story.