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The “backfire effect” is mostly a myth, a broad look at the research suggests
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Nov. 2, 2016, 12:55 p.m.
LINK: investors.nytco.com  ➚   |   Posted by: Ricardo Bilton   |   November 2, 2016

The latest earnings report from The New York Times has some good news for digital advertising and some really bad news for print.

Let’s start with the bad. Print advertising losses are accelerating. The Times said Wednesday that its print ad revenue dropped a whopping 19 percent last quarter, driving its total advertising revenue down 8 percent. That’s a higher drop even from the previous quarter, when the Times reported a 14 percent decline in print ad revenue. Times Co. CFO Jim Follo said today he expects a similar decline in print ad revenue in the next quarter.

Sadly, the magnitude of that drop offset the encouraging results in the Times’ digital advertising segment, which increased 21 percent to $44 million last quarter. Digital now represents 36 percent of the Times’ overall ad revenue. Another bright spot: The Times added 116,000 digital subscribers last quarter, bringing its industry-leading total to 1.3 million. As CEO Mark Thompson put it in today’s investor call: “We have full confidence in our strategy and believe that our results show the rapid progress we are making in pivoting The Times from a print-dominated business model to a digital one.”

Still, with its gloomy print advertising numbers, the Times joins fellow newspaper company Gannett, which reported a 15 percent year-over-year drop in print adverting revenue during its own third quarter earnings last week. Postmedia and McClatchy also reported 21 and 17 percent drops in print advertising revenue, respectively, during their recent quarters.

These double-digit declines are grim news for newspaper companies, which have hoped that the declines in print advertising, while bad news, were gradual and predictable, giving the companies enough time to build sustainable digital business before the bottom fell out entirely (the Times’ Farhad Manjoo made a similar point on Twitter). The print advertising cliff that everyone anticipated may have arrived ahead of schedule.

The Times, like other newspaper companies, has seen the writing on the wall for print, and has explored a variety of other ways to offset those declines. Last week it acquired product recommendation sites The Wirecutter and The Sweethome, opening up revenue opportunities in the affiliate linking business. The Times has also eyed its budding events business to pick up the slack.

All of this is good news for The New York Times, but likely won’t do much to soothe the apprehensions of the many other newspaper companies facing the same headwinds.

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