Last year was a milestone for The New York Times Company. For the first time ever, the company gained more revenue from its circulation than from advertising. In 2012, The Times announced, circulation revenue reached $954 million while advertising revenue was $898 million.
Paid digital subscribers to The Times and the International Herald Tribune (which the company also owns) grew by 13 percent and rose to 640,000 as of the fourth quarter of 2012. The company also saw a profit of $133 million last year compared to a loss of $39.7 million in 2011, with much of the profit, however, coming from the sale of About.com and a portion of Indeed.com.
But it's not all sunny for the media company. Paywalls and other circulation revenues are helping soften the blow of steep advertising declines, which dropped 8.3 percent in the fourth quarter of 2012 compared to 2011. As Bloomberg reports, this news represents a shift in the conventional wisdom in the media business:
It’s a milestone that upends the traditional 80-20 ratio between ads and circulation that publishers once considered a healthy mix and that is now no longer tenable given the industrywide decline in newsprint advertising.
“They clearly are leaning on their readers to support the business now,” Edward Atorino, a media analyst with Benchmark Capital Co. in New York, said in an interview after the report. He rates the company’s shares as hold.
The paywall seems to be working in that it's growing and helping to weather difficult times in advertising, but how long can that last? As media analyst Ken Doctor tells AFP: "It's clear how much can be gained through smart introduction of metered paywalls, it's unclear how much circulation revenue growth can be had in the third year plus."
This post was originally published on Smartplanet.com