The New York Times Cross 10 Million Digital Subscribers With Growing ARPU in Q2 2024

The New York Times released its Q2 2024 financials today and announced that it had crossed 10 million digital subscribers across the portfolio of products, including its news subscription, The Athletic, Wirecutter, Games, and Cooking.

• Total Revenue: $625.1 million, up 5.8% year-over-year
• Digital-only subscription revenue: $304.5 million, up 12.9% year-over-year
• Digital advertising revenue: $79.6 million, up 7.8% year-over-year

Operating profit increased to $79.4 million, representing a 12.7% profit margin. In Q2 2023, it generated $55.8 million with a 9.4% profit margin. Across the board, it is generating more revenue and seeing its margins improve materially along the way.

The company’s focus is on growing its digital-only subscribers—preferably with bundled offerings—and then that translating into a growing average revenue per user (ARPU). This was confirmed on the earnings call:

As we’ve said before, we’re not overly focused on sequential growth in any one subscriber bucket. The really important metric that we’re focused on is that year-over-year growth in total digital-only ARPU. The bigger picture is that those ARPU increases reflects our strategy in action as we steadily improve our journalism and product, people will engage more and place higher value on the service, and that just continues to strengthen our ability to transition subscribers to higher prices over time.

The transition to bundle offering can be seen in the below chart. For example, in Q4 2022, only 2.5 million of NYT’s subscribers had multiple products. At the same time, nearly four million were news-only. Fast forward to today and there are only 2.3 million news-only subscribers, but multi-product has increased to 4.83 million.

In an ideal world for the Times, there would be no people who are paying for only news and they’d all have a second product. The ARPU (below chart) for bundle subscribers was $11.96 in the quarter compared with $11.26 for news-only. In subscription businesses, the incremental cost to support one additional subscriber is close to zero. So, while that $0.70 in incremental ARPU might seem low, across nearly two million subscribers, it’s another $1.4 million in high margin revenue.

The question I have is whether all of the bundle action is happening at the news-level or if The New York Times is having success moving people from non-news single product to the bundle. Take, for example, Cooking. A subscription costs $6 per month. Is someone who signs up for this likely to then sign up for all access? Or is it mostly news subscribers that then decide to add in cooking?

Consider that in Q1 2024, it had 2.86 million subscribers. In Q2, it had 3.1 million. That is nearly the entire 300,000 digital additions. If these people remain single product subscribers, the digital-only ARPU will struggle to continue growing as that news-only subscriber goes to zero. The Times doesn’t report the primary usage of the bundled subscribers, but we can see how the single-product subscribers can compress ARPU.

One area worth exploring is The Athletic because it continues to become a bigger piece of the pie, but has yet to generate any operating income for the company. The Times paid $550 million in cash back in January 2022. Since it bought the business, it has had nearly $75 million in adjusted operating losses. In the below chart, we can see that it is getting closer to breakeven. NYT’s CEO suggested it’d take upwards of three years to reach that point, so if the trajectory continues, it’ll hit the mark before the end of the year.

At the time of the deal, I believed The New York Times overpaid. As of right now, it has spent $625 million for this business when you add the purchase price to the operating losses. And it could be more than that if we were to remove some of the adjustments. On the other hand, NYT has shown it can grow the subscriber numbers, which it has done considerably (see above subscriber type chart) and grown its ad business. In Q2, it generated $7.1 million in ads, up from $5.4 million this time last year.

Were there better things The Times could have done with the $550 million? I don’t know. And theoretically, the addition of The Athletic has likely helped move people from news-only to a bundle, which increases overall revenue. So, while The Athletic, itself, might have operating losses, The New York Times Company could be performing better because of its addition. Our analysis doesn’t give us clean detail there.

In summation, it was a strong quarter for The New York Times. It continues to add subscribers. Its ad business is growing. Its year-over-year digital ARPU is improving, which shows its ability to incrementally increase prices. There’s little for management to be disappointed about.