Q2 2019 Earnings Call
Good morning, and welcome to the New York Times Company's second quarter 2019 earnings Conference call.
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I would now turn the conference over to Harlan Toplitzky, Vice President Investor Relations. Please go ahead.
Thank you and welcome to the New York Times Company's second quarter 2019 earnings conference call on the call today, we have Mark Thompson, President and Chief Executive Officer, who is joining us from our office in London.
Well in New York, we have rolling Koodo Executive Vice President and Chief Financial Officer, and Meredith Kopit, Levien Executive Vice President and Chief operating Officer.
Before we begin I would like to remind you that management will make forward looking statements. During the course of this call and our actual results could differ materially some of the risks and uncertainties that could impact our business are included in our 2018 10-K. In addition, our presentation will include non-GAAP financial measures.
Provided reconciliations to the most comparable GAAP measures in our earnings press release, which is available on our website at investors <unk> Dot and White T C O M Dot com.
With that I will turn the call over to Mark Thompson.
Thanks, and good morning, everyone.
Well, we had another encouraging quarter with good growth in both digital subscriptions and digital advertising and the successful launch of our new television series the weekly.
We sent me these positive results to a sound strategy the commitment the hard work and growing digital expertise.
Our colleagues alcohol to the dedication and talent of our amazing reporters polymer additives.
Having the best you understand the world is not so secret sauce.
And that's why we continue to increase our investment in journalism.
But let's turn to the calls and begin as usual with digital subscriptions.
Oh cool, new subscriptions grew faster than we'd expected.
This quarter, we added 131000, net new subscriptions to our core news product.
Oh. These 8000 came from a Google promotion and should be considered a one off.
But the remaining 123000 net adds still represents a significant year over year increase on the 68000, we saw in Q2 2018.
It's the strongest Q2 performance in years with a milder than expected second quarter did.
Several factors the council. This some big news stories the effect of the more aggressive introductory offer pricing we introduced last year.
I'm, great optimization, driven by much fun number that's a design test.
Although sometimes the dollar weakens it up for <unk>.
First U.S. subscriptions began on his promotion or about to reach that first anniversary.
Well, obviously going to track them closely over the coming weeks and months, but I can tell you that retention continues to trend similar to previous cohorts.
As you know we're committed to not just driving immediate subscription results.
To ensure that we deliver strong growth in the medium and long term.
We've talked in recent earnings calls about the testing we've been doing to further optimize our pay model with a particular focus on scaling direct relationships and engagement.
Well they use or is there just a little did we can communicate with them and understand that preferences and patterns of consumption more effectively than if that anonymous.
Typically leads to higher engagement and subscription conversion.
At the start of July we launched more extensive testing of registration and log in.
The test to play out differently on different platforms.
We plan to experiment with a range of parameters and business rules, how many free all verticals given use is able to leave for example, emirates ever registration over the coming months.
We don't expect this testing to have a dramatic near term effect on net subscription additions.
Oh the time, however, we believe that the growing numbers of registered unloading uses of the times will help us maintain or increase our momentum in building out our subscription base.
Turning back to Q2 2019, we also added 66000, new subscriptions to our coking coal slipped products.
The cooking products, which crossed the 250000 subscription mark in the second quarter and the crossword product with more than 500000 subs in its own right.
Two of America's largest digital subscription products from a news provider.
Together with the growth in the cool that may for 197000, new digital subscription ads on a grand total of 3.8 million digital only subscriptions for the company.
Q2 towards you I think it was also a good quarter advertising.
Digital advertising grew by 14% year over year.
With a strong performance in a direct sales, including from the daily Dog Creative services.
These days on the digital side were more than enough to offset familiar secular declines in print and total advertising revenue grew slightly.
I wrote them, we'll give you guidance on advertising for Q3 in a moment.
But it's worth noting now, but we don't expect the second half of 2019 to be a strong in digital advertising as the first call.
In recent quarters, we've been tracking against relatively weak digital advertising comparisons from a year earlier, that's played a part in the significant year over year gains we achieved in those quarters.
From Q3 onwards, we begin to comp against the strong gains from last year, and we expect that to have an impact.
One of the factors that contribute to the comp challenge is what I previously called Lumpiness.
Our digital advertising business is increasingly focused on large scale multi month and in some cases multi year partnerships with some of the world's leading brands.
Demand for advertising partnerships with the New York times its strong indeed in recent months Weve completed some of the largest deal in our history as a company deals from which we will see much of the benefit in 2020.
These partnerships, so distinctive and difficult to replicate and give us real pricing power.
And that's why we're pursuing them so energetically and are willing to accept the increased variability that comes with them.
I'm in for US in Q2 was the successful launch of our television series the weekly which premiered in June on FX and soon.
The Wifi is a fabulous opportunity to expose times' journalism to new audiences in an exciting new media.
Both we and our partners are very pleased with its progress so far.
Well, we did it was the largest driver of the 30% growth in other revenue in the quarter.
But the we think it's important for another reason.
Along with the daily walk on that and I'll cooking and of course, what products. It's evidence of the extensibility of the New York times, Brian across the verticals and across different media and of our ability to delight and engage audiences fall beyond our traditional heartland.
It's this breadth of appeal.
And the enthusiasm and imagination with which on user music embracing these new expressions of times journalism.
Combined with the continued strength of our coal digital subscription offering that gives us so much confidence in our future.
Let me hand over now to run them for more details on the quarter.
Thank you Mark.
Good morning, everyone as Mark said, we remain pleased with the progress as we continue to execute against our strategy.
Adjusted diluted earnings per share 17 cents was flat compared to the prior year.
We reported adjusted operating profit of approximately $56 million in the second quarter, which is lower compared with the same period in 2018 by approximately $4 million.
Total subscription revenues increased 4% in the quarter with digital only subscription revenue growing 14%.
Two $113 million.
On the print subscription side revenues were down 2.5% due to declines in the number of home delivery subscriptions, a continued shift of subscribers moving to less frequent and therefore less expensive delivery packages as well as a decline in single copy sales.
This decrease in print subscription revenues was partially offset by a home delivery price increase that was implemented early in the year.
Total daily circulation declined 8.5% in the quarter compared with prior year, while Sunday circulation declined 7.1%.
Quarterly digital news subscription ARPU declined approximately 9% compared to the prior year and approximately 2% compared to the prior quarter as the impact from a number of newly acquired subscribers on promotion largely at one dollar per week was significantly larger than the benefit from existing subscribers, who is promotional offers ended and graduated to full price.
We expect that the more aggressive promotional offer which resulted in another strong quarter for net subscription additions and other promotional cats will continue to put downward pressure on ARPU throughout 2019.
Total advertising revenue grew 1.3% compared with the prior year with digital advertising growing 14% and print declined by 8%.
The increase in digital advertising revenue was largely driven by growth in direct sold advertising on our digital platforms, including advertising sold and our podcasts and our creative services businesses.
The print advertising result was mainly due to declines in the financial services retail and media categories, partially offset by growth in technology.
Other revenues grew 30% compared with the prior year to $45 million, principally driven by the Premier afford television series the weekly which debuted on June 2nd and from our commercial printing operations, which had not yet achieved full scale at this point last year.
GAAP operating costs and adjusted operating costs increased approximately 7% in the quarter as a result of increased content costs, reflecting both higher staffing the newsroom as well as production costs related to the weekly.
[noise] expenses associated with our growth in the commercial printing business and higher advertising also drove the increase.
Our effective tax rate for the quarter was 27% on a going forward basis, we expect our tax rate to be approximately 26% on every dollar of marginal income we record.
Due in large part to a tax benefit we received in the first quarter of 2019, we now expect the effective tax rate for full year 2019 to be between the high teens and low twentys.
Moving to the balance sheet, our cash and marketable securities balance increased during the quarter ending at $847 million.
Total debt and finance lease obligation principally related to the sale leaseback of our headquarters building, which we expect will be repaid in December 2019 were approximately $254 million.
Let me conclude with our outlook for the third quarter of 2019.
Total subscription revenues are expected to increase in the low to mid single digits compared with the third quarter of 2018 with digital only subscription revenue expected to increase in the mid teens.
Overall advertising revenues and digital advertising revenues are expected to decrease in the high single digits compared with the third quarter of 2018.
Other revenues are expected to increase approximately 25% to 30% largely due to our television series the weekly.
Oh, <unk> operating costs and adjusted operating costs are expected to increase in the high single digits compared with the third quarter of 2018, as we continue to invest in the drivers of digital subscription growth.
And with that we'd be happy to open it up for questions.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
[noise] [noise]. The first question comes from John Bell <unk> with Evercore. Please go ahead.
Mr. Brown your line is open on our end.
Thanks, everyone I, just want to talk a little bit more about digital advertising business, which I'm sure is going to be a focus of attention here given the new guidance.
So I'm just looking for any additional color on some of the underlying trends you know is there any part of the business has meaningfully weakened recently is this more of a broader market issue just kind of a lumpy business with tougher growth comparisons because I know if I look back over a five year period, you've grown digital AD revenues up double digits. On average is there any reason to think the trajectory of this business has changed now relative to where you saw it three months ago. Thanks a lot.
Good morning, John This is Meredith a couple of things to say there.
First I think you know broadly in answer to your question and I would say demand for what the time is selling in the AG business remain very strong and I think we've got a unique proposition, which is grounded in no brand safety and Jason see to IP that matters is important and an ability to insert launch creative ideas in the world. It's Dale and I don't think we don't feel demand changing for that in any way and I don't expect that it will I think what you're really looking at here in [laughter] lot I'm, particularly in the back half a years I think we were up in the low thirtys person in the fourth quarter last year in advertising and as Mark alluded to in his remark yeah, we feel quite confident in our strategy of selling.
A combination of media and partnership and services in each of those things drives the other as the business again.
More and becomes more about partnerships, there's just more variability in the system because the timing of these things.
Differs from from year to year, but we remain very confident in the strategy we remain optimistic that.
And that would be over the last number of years, it's very much there and we remain confident and optimistic about our ability to to different route.
Right. So over the longer term do you still view this as a nice growth driver for the company.
Yes, and I <unk>, you know as Weve said in previous calls and I think it remains that and also that you know that the better we do on subscriptions and engage the better that is for the [laughter] over the long haul.
Right makes sense. Thank you very much.
The next question comes from Alexia Quadrani with JP Morgan. Please go ahead.
Hi, Thank you so much I just have a few questions on that here I think you spoke about exploring possible price increase your digital subscription service I guess any update or any more thoughts on that.
But I have a couple more.
Sure Hi, Alexia I, Yes, we did we didn't talk about that in the second quarter, we launched a pretty substantial price increase test on a population of users who had been with US I think for a couple of years or more and we are very pleased with the results of that test it exceeded our own expectation side I would say well we take from that is that we do have pricing power and that there is a lever to be news.
I'm sure that as we see fit and you know it remains to be seen when when we may use that lever and as I've said in previous calls I think we've got real opportunity on price on both ends of the demand curve and you're beginning to see US now some good exercise that as I. Just described in the past at the high end and also as we continue to make use of introductory offers.
Hi, Matt.
I'm not sure I know I think you had a promotional offer somewhat similar in Europe that you sort of.
She was here August 2018 can you I think it's been now at least several months since our initial offer with anniversary can you give us an update on how churn is trending bite from those subscribers, maybe as a potential you know I read into how it may or may see it here in a month or a few months from here.
Absolutely and I would say just broadly to reiterate what Mark said at the top the called are sort of the picture for attention for a whole base. The dollar weak subscribers looks quite similar to the previous cohorts. So yeah. There's there's nothing in what we've seen so far I think for 10 months and domestically in 13 14 15 months in internationally. There's nothing we've seen so far that troubled to us we are two or three months into renewing since you came in on that promotion internationally and I would say the same thing.
We used with what we've seen so far and then I'll I'll say something I've I've said in previous calls, which is we had you'd have very substantial kind of refer to people in the past you sort of all over a three four or five month period arrived at a step on that meant we had that on at the end of 2017, and beginning 2018, a very large cohort of people who came in just after the election of 2016, and we lived through that and yeah, well ahead of our expectation and what gain what that gave us is sort of the operational so to know how to move through this not that I'm very confident that you know it doesn't all come at once I think we launched a dollar weak domestic leave you at the end of August last year, and then it flows through obviously profit Oh ensuing here and we are sort of.
Very prepared to operationalize around if there are particular cohorts and people are users we need to step up in price. So you know I'm I'm confident that no. Three this non then as we have the prior one.
Thank you and just one quick follow up on the digital I know you guys have talked about digital advertising a fair amount already on this call, but I just want to clarify it sounds like demand is very very strong just a bit lumpier and obviously the comps are a challenge.
I guess my question is how how much visibility do you have or how far out do you see that demand our digital advertising and does have the strong demand at the daily which I believe is lumped in there does that becomes bigger and bigger does not maybe I'd take away a little bit of volatility.
I think you know, it's a big AD business. So something has to be very very big to take away volatility in a meaningful way and I'll say the daily is certainly and much larger than we expected and Ascendon AD product, but you know it it's still and we just think about the scale of our AD business. So generally over time I think it will do that and we added a second and into the daily at the end of June I'm, sorry, I expect that to overtime also have a positive impact and I'll just say in general and your your.
You're you're getting it says there is real demand for audio advertising in association with quality unique content that has big audiences and so we're optimistic that over time, our other podcasts. In addition to the daily will become a meaningful ad products.
And Alexia if I can just just add from from London.
I've been in the room for some of the some some of these these these deals and.
The large scale policies were doing I think of for example, our partnership with Verizon around Fiveg.
It's something which which extends over a long period of time and some R&D. It is.
And is shaping up to be really quantify the partnership so I think as we scale. These the the these these big partnerships over time that will to some extent offset be the the the lumpiness that we've seen in recent calls I think it's fair to say that this is probably going to be always is somewhat more variable business than the than the old as were fairly pure kind of.
You'd have to simply display based business.
But.
We do know that some of these partnerships a lasting so long, but we have some visibility.
Into the future, but those deals at least that I think just to reemphasize, what meritas said the demand for what we're doing.
I've just come from some sales meeting here in London.
Remains very high indeed, we feel very excited about the cost savings of annual times and and the the new people who want to work with us.
That's right and I would also just add the fact that we had a uniquely wide asset based.
Sort of media possibilities to put into a partnership <unk> digital advertising the paper audio creative services lighter than you know that.
There there are few if any you can match that the scale and the New York Times and I don't think demand for can you have business for a long time I don't think the demand for that goes away.
Thanks, Thanks very much.
The next question comes from Leslie I Kinda Southworth Cannonball Research. Please go ahead.
Thank you good morning, Roland I wanted to ask you a couple of questions on the cost growth in Q3, and what it implies for Q4, hopefully before outer years too. So can you give us an idea a what the growth rates would be for production costs and as Jan They may be and then what percentage of the cost growth is a variable versus fixed and the if it's variable what it's driven by is it related to the.
One dollar a weak subscriber promotion rolling off I'm, just help us dimensionalize, how this will be what the trade show Yeah, Let me start a little bit maybe the best places to start by breaking down what happened in the past quarter.
So that there is some clarity there.
So.
Of the total operating costs right. The increase was 7.2% and that that broke out.
To be Oh, 11% growth in production costs and what was the driver there was was.
Investment in content, so news and editorial so the newsroom.
And also we've had the cost for production costs associated with creating the television show can we please for the first time.
And then we had a commercial printing at full scale cycling on commercial printing at less than full scale.
And SGN, Hey was just kind of Oh that was for about a 4% increase and that that increase was kind of spread amongst a bunch of areas I'll highlight that marketing was modest and significant driver of best DNA. So we don't typically get into the details of future quarters, but we talk about what our investment thesis is.
And so we could expect a similar.
A breakout of Costco <unk>, well continue to invest in our content and we'll have a full quarter of production of the weekly.
Well finish the cycle on on the scaling up of the of the commercial business and we are focused on as we go forward.
Into future quarters to drive our LTV to sack ratio up so were expecting so to continue to invest in our in our product capabilities and with with the desire to drive up our percent of organic versus paid starts and drive our LTV to sack ratio, which is going to benefit profitability of the company and weren't saying, which we saw in the second quarter. So that the product itself in the second quarter was yeah was it was a better engine as making people form habit pain say than in previous quarters versus paid marketing.
So if I wanted to if I looked at the last year quarter to quarter progression of ER as Gen. They for example that would not be a good indicator for how things will go this year.
I don't I don't know.
I'm not sure how valuable that would be.
All right. Thank you very much.
The next question comes from Doug Arthur with Huber Research Partners. Please go ahead.
Yes. Thanks.
Well just to clarify I mean.
See marketing spend in the second quarter was not as high as expected.
And.
So do you anticipate in your third quarter Guy that you'll get back to kind of that 45 plus million area you had been running.
Well our goal.
And whether this explicitly happens in the next quarter over several quarters is.
To get the product to do more of the work that that marketing has been doing in that in the recent quarters. So we would hope to be able to accomplish that over the next few quarters.
So okay. So marketing spend may not get back into the high high mid to high Fortys bottom line.
May not.
Okay, and then Meredith to your point on the tough comps I mean on digital advertising you get you you're going up against a 32% growth comp in the fourth quarter.
That's 32 against that adjusted taking the extra week out of 17.
So it is it is it.
Reasonable based on your sort of a second half guidance that we could be down double digit and digital AD in the fourth quarter.
I think well, it's already getting the guidance.
Yeah, sorry.
Yeah, I I don't think we can for guiding past the third quarter.
Okay, and then just finally, just to clarify or I don't know if you can clarify, but as you anniversary. These one week.
Price promotions I mean, what are you intending to take them to full price or is it is it a to be determined or any any any kind of.
Ah guidance on that.
What our history suggests is that we'll be able to move a lot of them right and we as I said I'm in response to a related question. We're also operationally prepared to make step up offers as necessary and not in how we've managed through these madmen previously so I think that probably answers it.
Okay got it thank you.
The next question comes from Kinda on Big attached with Barclays. Please go ahead.
Thank you.
A few I guess first on the ARPU side I guess, Ron you mentioned that you might see the pressure in the second half of the year as well and you will have.
Easier comps.
I guess from an ARPU perspective, your promotions started in Q3 of last year.
So when you think about ARPU pressure in the second half of this year if people do step up.
We would expect the cadence to change in the opposite direction. So just wanted to understand a you know what the thinking is dead on the auto side of it.
Secondly on the subscriber growth side.
<unk> full quarters. Your second derivative has accelerated so year over year, the number of subs, you're adding has accelerated.
But as you go into Q3 and Q4, you do have these tougher comps coming in.
So is it fair to say that you know given your retention rates in Europe and you know some of these other promotion do you have done in the past the trendline seen over the last four quarters, you know that may not be fair to extrapolate going forward. Thanks.
Okay on the ARPU question so.
Just to kind of level set here and where we are happy with the way the dollar week promotion.
Has been working both on on the starts and retention side as we've discussed so.
As as that large a continuing large number of subs come on at a dollar weak right that's going to overwhelm the number stepping up that said in terms of the trajectory of that.
Over the next several quarters, we could expect the downward pressure on ARPU just start to moderate.
Because we're gonna have large numbers of folks stepping up either directly to full price in one shot or stepping up to something between their current promotion and full price. So we'll see we'll see the pressure.
Well see downward pressure continue because we aim to continue to bring on large numbers of subs.
But that the that quarter to quarter sequential.
Numbers should should moderate so the drops should get less.
Yeah, and I think I'll take the second question and I'll, just say broadly that I think you know quarter over quarter, our understanding of the drivers of the business what makes someone form AVOD and pay and stay is getting better and mark alluded to this in his remarks I think we are also getting sequentially better and intervening to move those drivers in there. There are three places yeah kind of three ways to think about that one is customer journey and yes, we are and as Mark said I'm in a position now to run many more tests on sort of everything about friction and value exchange in batteries, and where do you intervene outlet meter count how you message, but offer do you show people I think we're also getting better sort of quarter over quarter.
And optimizing every part of the conversion funnel from that time.
Managing the mechanic of retention better so things like Greece, and involuntary churn and how we message through those moments in the intervening what we still have a lot of room to get a lot better at is engaging people from the moment, they subscribe and getting them to form a habit and sort of behave virtuous lead by signing up for newsletters and downloading the app and and registering logging in and all of that has real room for us. So I guess my broad answer to you is I still think Theres, a fair amount of room in the model.
For acceleration and I would see it as us just getting sort of steadily better.
Over time as opposed to a discontinuous moment.
Okay can I ask one follow up question matter to them in terms of the marketing and advertising budgets.
I think about the framework.
Broadening we've seen digital businesses say Spotify and so on I mean, when you look at their marketing budgets as a proportion of the revenues.
It tends to be more than that.
12% to 15% range, depending on who you are who you are looking at I think New York things around that motor company about 8%, if I'm not wrong and.
So when you think about the framework for.
What your marketing budget looks like overtime.
Is that a framework, we should be thinking about which is normalizing it as a proportion of revenues, how you're thinking about that evolution over time. Thanks.
I would say two things about it and then rolling should add anything I've met.
You know our stated strategy is.
Investing in the product itself to be a better end gena what drives growth in the business and by that we mean, both the journalism and the kind of combination of user experience and customer journey and we've talked about that at some links.
Over time and you know.
I mean, three over a long haul you imagine that makes your marketing more efficient. So you can spend more to drive more growth or ultimately you may spend differently or less the thing weve been able to do so far which has worked very well for us is to really shift the marketing mix. So in the time that I've been here I think Weve, you know probably come close to tripling, what we spend on marketing and gone from spending 100% those dollars on performance marketing and direct response.
Two.
You know nearly half and in some cases more than half on saying is that the sentiment or get people to sort of think or connect differently to the time.
Emotionally and I think that what I've. Just described I would say is a longer term beds and one that I think pays off over a longer period of time.
I mean, I would just add or over the long term, we would like to see the LTV to sack ratio.
Move up consistently not in any drastic fashion.
So if you kind of translate to how that plays out represented as a marketing expense to revenue percentage you would not expect us to drive that percentage up in the future.
Correct.
Yes, and if I can just add that we've taken really quite a broad view about how we get the message out about two times a night bye bye, although it's fundamentally a journalistic project I would say that the daily.
Which is which is intrinsically.
Cash positive it generates revenue in its own run his duties as good a very good as it would gross margin attached to it.
He is a fabulous way at all.
Telling the story in the times, we do indeed inside the daily often mention.
The opportunity to subscribes to New York times, So the what we're doing.
In pulp cost and what we're doing in television.
Also intended and indeed, the the the return to brand marketing to the times is in turn is intended to.
That's a very very top of the funnel to get new audiences engage in journalism understanding the brand and getting ready for if you like.
The the tactics, we can you further down the fundamental ultimately the conversion tactics.
I mean, I think the all strategy, which is investing very heavily in content first and foremost above all in journalism and improving the.
The way in which our photos engages.
Brings people back again, and again and then give them we.
Is new to us at the end of it if we can efficiently with economic efficiently. We can spend continue to spend money actually at the conversion stage I would say as long as it makes economic sense, we should spend as much as we can.
And generally.
I think the high numbers out of marketing, we associate with very big with periods, where there is a lot of demand for the products.
Alright.
Thank you.
Your next question comes from Craig Huber with Huber Research partners. Please go ahead.
Yes, hi, there are a few questions one.
Cost growth outlook for the third quarter were up high single digits. If I heard you right. I think you were seeing the marketing costs in the third quarter should not be up.
Signet overly significant number year over year, even sequentially. If that is the case can you maybe just help us understand better what is driving the cost growth of high single digits third quarter. Thank you.
So.
First first thing and having a full a full quarter of the weekly right. So we had a partial quarter of the weekly.
In Q2, so thats, a large driver and the other really is investing in.
The two other components of our growth strategy for digital subs and Thats content and.
And product and technology.
Okay and then also.
Just wanted to just better understand it seems like you guys are getting more and more efficient I guess or is it just timing in terms of the marketing spend or.
And second and third quarter in other words, you're not studying up dramatically year over year is it does it come at you were hinting that are saying that some sort of a slower growth of digital subs were not going to spend overly aggressive here mark in here, but.
In a period of cycle, we get the more the political season here. That's when you expect the marketing spend this pickup significance, so I'm going to hand, it to merits in a moment, but I'd just one point I want to make is we govern our direct spend based on our internal rate of return.
So.
When there is demand and we can spend wisely and spend dollars, we're going to get a sufficient return on we will spend them. So that that can vary quarter to quarter and does vary quarter to quarter, but from a from a bigger picture perspective pass to Marianne yet and I will just kind of reiterate some of the things I've already said I mean, we've got a stated strategy of making the product itself, which is the combination of journalism user experience and customer journey.
Better engine assist us that have growth the things that make people engage in pain.
Currently stay as subscribers advocate to others and I think you saw some of that in the second quarter. I think we look we see a real opportunity in the market I think we have real running room to.
To.
Do better on what I, just described and to get more out of the model based on what I. Just described I don't think that obviates the need.
For marketing I think we've just described sort of that it can allow us in some cases to shift the mix and put more of our marketing dollars to work for more long term efforts to move sentiment and to.
Make our way into People's lives were not already in.
But it's.
The more starts and retention that we can drive organically through our own product better and just going back.
To your question I think the previous month, one of the unique things about the time.
And news as a digital subscription business that I think is different for music and entertainment is we have 150 million people are engaging with our product at any moment and only.
For 4.7 million, who are paying us so that there is a giant audience of people who are already coming to us in some way organically in a lot of what we're describing is making the most of that audience.
Good also mark if I could ask you.
Could you be more specific on where you are investing that for content and journalism, both in the us and outside the US where are those dollars going towards.
Sure and I want to say that these decisions are not taken.
We absolutely make investments available to the news or the decision is taken by the news from itself and by by the public strategy Sulzberger.
But I would say.
Current focuses has been on building for the all capabilities and invest for the journalism.
Investing more in tech coverage.
Globally in particular.
Trying to make sure that we cover.
The way in which.
Tech is is.
In Asia is becoming a geopolitically and economically incredibly significant force.
Those will be those will be examples, we're obviously going to be investing into the.
It's the visit sites as we head towards the 2020 election period.
We're looking hard at ways in which we can we're also investing more in climate coverage.
And doing I think pulling more common stores and nothing pretty much any other news organization on the planet at the moment.
We're also looking for ways, we've talked about this previously in earnings calls all building out our poll costing capability and for further opportunities in television and film.
And my last question Mark.
Given the ongoing demise of the smaller.
Midsize newspapers' out there and give us.
Nelson of conducting the new media emerging talking about $300 million of cost cutting I'm sure. Some of that good chunk of some kind with expensive journalism.
At the end of the day it Doesnt. This all sort of make the New York times much more.
Major source of news in the us.
Is that the horses a work to your benefit is the last man standing almost any industrial I mean.
Yeah, No I understand the point there I mean, we want to I want to say first and foremost we we love competition.
We think the plurality in journalism's are important and we we.
All dismayed by the tribulations of but the broader.
News news business in America, and indeed throughout the developed World, We think Thats a bad thing.
What is true is that we've got a model where we are we've been investing in journalism we have.
More journalists in our news room than we've ever had and we'll have.
Still more to high this year by the end of this year, we'll have something like 1700 50 people involved in Germany with the New York times by far the biggest.
In our history and as I've said before we take the same view about content.
The Reed Hastings, and Netflix do which is if you won't be able to pay for great content you need to invest in the content. So it's that for them to to to to bond and delight.
If we can help other news organizations.
With our expertise and we partnership we will do that and we're looking at ways in which we could potentially do that.
But we do have a thesis that America and the world is crying out high quality journalism.
Delivered effectively in engaging and attractive digital products and monetize significantly through through subscription. That's all thesis we have with the term to go on investing in it.
Market. My last quick question Thats 17, 50 number of total people involved in journalism today, what was that number when you started the company five plus years ago. Thank you very much.
I haven't got an exact number for you, but hundreds fewer with very substantially larger than we were.
And we as I said at the start of my remarks, we attribute the success of the.
At times in building out its digital subscription business very significantly to the investment and the focus that we put on John as we think many news organizations have some outsized willing to go things too through cost cutting and reducing that news rooms, we think exactly the opposite.
To get a great journalism.
Business to work you have to invest in great journalism.
Great. Thank you.
This concludes our question and answer session I would like to turn the conference back over to Harlan Toplitzky for any closing remarks.
Thank you for joining us. This morning, we look forward to talking to you again next quarter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.