Citigroup raises New York Times to buy on pay wall plan

Mon Mar 21, 2011 6:46am EDT

* Says digital rev to be higher than advertising rev

* Says needs lower subscibers to offset low rev

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MARCH 21 (Reuters) - Citigroup raised New York Times Co (NYT.N) to "buy" from "hold" saying that the company's plans to charge for online access to its flagship newspaper will help make up for falling advertising sales.

The Times said on Thursday that it will start charging for full access to its articles on mobile phones, tablet computers and the nytimes.com website. Digital subscriptions will be available in the United States and abroad starting March 28, after testing the plan in Canada. [ID:nN17267818]

"Revenue generated by an annual digital subscription will likely dwarf the advertising revenues generated by even heavy users," said Citigroup analyst Leo Kulp.

The Times' pay wall could add about 15 percent to the company's EBITDA (earnings before interest, taxes, depreciation and amortization), and as much as 35 percent, Kulp wrote. In a worst-case scenario, he wrote, it could knock less than 1 percent off EBITDA.

Many news publishers are closely watching the Times' plans. U.S. newspaper companies have been suffering, and some papers have shut down, as people stop paying for their print newspapers and get their news online for free.

While a few papers charge for access to some or all of their news, it is far from clear whether beginning to charge money for something that has largely been free for more than a decade will bring in enough money to ensure a newspaper's survival.

The New York Times Co rose 3 percent on Friday to close at $9.18 on the New York Stock Exchange.

(Reporting by Vaishnavi Bala in Bangalore. Editing by Robert MacMillan)

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