News Corp, NYT Eyeing More Digital Subscription Revenue

According to ComScore and the Newspaper Association of America, 62% of all adult Internet users in the U.S. accessed newspaper sites last quarter. Worldwide, 105.3 million unique visitors went to U.S. newspaper Web sites in the fourth quarter of last year. The visits accounted for an average 4.1 billion page views per month and 3.4 billion minutes spent online by viewers, compared with Nielsen’s estimate of 3.2 billion page views and 2.4 billion minutes in the same period in 2009. As the focus on digital content sharpens, newspaper giants are doubling their efforts to address this market.

News Corp’s Financials
News Corp’s (NASDAQ: NWS) Q2 revenues grew from $8.68 billion a year ago to $8.76 billion and exceeded the market’s expectations of $8.70 billion. EPS of $0.29 was higher than previous year’s $0.25 and the Street’s expectations of $0.28.

Cable network revenues grew 12% over the year to $1.97 billion driven by strong growth in advertising revenues. Domestic advertising revenues grew 12% over the year and international cable advertising revenues grew 27% over the year as viewership and advertisement for the Fox International network improved in Latin America and Asia. Television segment revenues grew 10% over the year to $1.37 billion, and the publishing division’s revenues were flat at $2.35 billion. Direct broadcast satellite revenues fell 6% over the year to $0.94 billion and Filmed entertainment revenues dropped 5% to $1.81 billion.

News Corp and Digital Focus
The company continued to implement newer distribution streams for their content and recently launched The Daily, their tablet news product. The Daily is currently available on the iPad and costs $0.99 for a week’s or $39.99 for a year’s subscription. The application, which has more than 100 pages of content, has received good reviews for its exclusive video and photograph galleries, interactive charts, customized sports news, audio articles, and ability to let users do crosswords or Sudoku and share articles with Facebook, Twitter, and e-mail.

While News Corp is planning on launching The Daily on other tablets, at present they are focusing on the iPad. Apple sold 14 million iPads last year and estimates it will sell another 45 million this year. News Corp is counting on these iPad sales as a big opportunity and is spending close to half a million dollars a week producing The Daily. The Daily hopes to recover these expenses primarily through subscriptions and will gradually migrate to ad revenues. It already has good ad backing and received a two-week free trial sponsorship by Verizon. Industry observers expect that the full-page ads on the app will be interactive, customizable, and offer branding and direct response opportunities for advertisers.

News Corp and MySpace
While News Corp is doing well in managing online news content, they have been struggling with their social networking site, MySpace. After laying off 500 employees, nearly half of MySpace’s workforce, earlier this year, News Corp finally put the loss-making site up for sale. News Corp expects to fetch a price of $50 million–$200 million for the site. They have yet to make the final decision and are considering strategic options which include a sale, new investors, or a management buy out.

The site has already received interest, with Yahoo! rumored to be a potential buyer. The mobile social networking player, MocoSpace, is in discussion with News Corp for the site. MySpace boasts of high mobile engagement with users spending over 40 minutes a week on the service. Over all, MySpace has more than 100 million users, more than half of whom are based in the U.S., and MocoSpace hopes to complement those with its 16 million mobile users.

News Corp Acquired Wireless Generation
News Corp is also diversifying their operations into the education sector. Earlier last quarter, they announced the acquisition of a 90% stake in Wireless Generation for $360 million. Wireless Generation is a leading partner in New York City’s education department’s School of One program, which aims to provide students with personalized, effective, and dynamic classroom instruction. Wireless Generation has manufactured the Web-based tracking software that helps teachers track and plan individual lesson plans according to the student’s performance. The K-12 U.S. education sector is estimated to be worth $500 billion, and through the acquisition, News Corp is hoping to gain a foothold in the market.

News Corp’s stock is trading at $18.26 with a market capitalization of $47.9 billion. It touched a 52-week high of $18.80 in April of last year.

New York Times’s Financials
New York Times (NASDAQ:NYT) saw Q4 revenues fall 3% over the year to $662 million to miss the market’s expected $666 million. EPS of $0.46 was marginally higher than previous year’s $0.44 and managed to exceed the market’s expectations of $0.35.

During the quarter, News Media Group revenues fell 3% over the year to $626.5 million due to a fall in both circulation and advertisement revenues. Circulation revenues fell 3.6% and advertisement revenues fell 3.1% over the year. Print advertising recorded a decline of 7.2% that could not be fully offset by 11% growth in digital advertisement. Digital now accounts for 26% of the company’s advertising revenue. Revenues from About.com fell 3% over the year to $35.2 million.

The company ended the year with revenues of $2.39 billion compared with $2.44 billion a year ago. EPS of $0.71 was significantly higher than the previous year’s $0.14.

New York Times’s Digital Focus
The New York Times Company is also set to monetize their digital content and will launch a paywall later this quarter. The company is hoping to convert some of their estimated 45 million unique monthly visitors to their website to paying customers. The online subscription for The New York Times is expected to cost less than $20 a month, but limited free access to some content will also be available.

Their iPad application, which is currently free, is also soon expected to become a paid service. The application has already been downloaded more than 1.5 million times. The company has also tied up with e-reader platforms, and content from their publications is available on all major e-readers. The New York Times charges across all these platforms and has managed to successfully monetize this platform.

New York Times Invested in News Aggregator
They also invested $4 million in Ongo, a news aggregator service that lets users read and share news from multiple publishers on a single interface. The service, launched earlier last month, has been funded by The New York Times Company, Gannett, and The Washington Post Company. For $6.99 a month, users can access content from these media companies’ news sites and customize their reading experience.

The stock is trading at $10.31 with a market capitalization of $1.5 billion. It touched a 52-week low of $7.06 in August of last year.