New York Times Co reported a decline in quarterly revenue on weak advertising sales but said it would try to grow out of the slump by expanding its suite of digital products.
The 11.2 percent drop in advertising revenue in the first quarter underscores the pressure that the New York Times faces to increase its subscription revenue, especially for its digital products, and find new veins of income.
The company plans to roll out a line of lower-priced products - including an expansion into e-commerce and games - to attract more readers around the world.
"We want to deepen our relationship with our existing loyal customers, but we also want to use a wider family of New York Times products to reach new customers both here and around the world," Chief Executive Officer Mark Thompson said in a statement.
Paid subscriptions to digital products at the company's namesake paper and The Boston Globe totaled 708,000 in the first quarter, a 45 percent increase from a year earlier.
Still, the growth in subscriptions slowed compared to the prior quarter. Paid digital subscriptions were up 6 percent in the first quarter from the fourth quarter, after growing 13 percent in the fourth quarter from the third.
"The rate of increase was less than in the last quarter of 2012, though that is at least in part attributable to the volume of news, including the presidential election in that quarter," Thompson said on a call with analysts.
Compounding the challenge is a surprise slip in digital advertising revenue - once a bright spot for the industry. At the New York Times, digital ad revenue dropped 4 percent in the quarter.
"I don't expect the new products to grow as fast as the paywall but at least it will add another revenue line which did not exist earlier," said Kannan Venkateshwar, an analyst with Barclays. The "paywall" refers to the Times' existing online subscription platform for its website.
Part of the new strategy, which will be introduced later this year, includes lower price access to the New York Times' "most important and interesting stories."
The Times introduced its digital pay model more than two years ago in an experiment closely watched by newspapers across the U.S. The move to charge for some digital content was one way to become less dependent on advertising revenue, which is dwindling fast for the industry.
DIVIDEND STILL SUSPENDED
At the Times, the company has narrowed its focus, selling off assets - The Boston Globe and its sister properties in New England are currently on the block - in order to sharpen the flagship. Earlier this year, it renamed the International Herald Tribune the International New York Times.
As a much smaller company, executives signaled the Times needs to keep its almost $900 million cash coffer to guard against its debt levels and make future investments for growth.
That means no dividend, putting to rest at least for now a much discussed topic among investors and analysts. The family-controlled company run by the Ochs/Sulzbergers suspended its dividend in 2009 at the height of a revenue crisis for the newspaper industry.
"Given the continuing challenges faced in the advertising environment and our desire to retain maximum flexibility, we feel that maintaining a conservative balance sheet remains appropriate," Times Chief Financial Officer James Follo said on a call with analysts.
Total revenue for the company fell 2 percent to $465.9 million, below analysts' expectations of $470.5 million, according to Thomson Reuters I/B/E/S.
Excluding severance, earnings per share for the quarter was 4 cents, in line with analysts' forecast.
Shares of New York Times whipsawed on Thursday, gaining as much as 5 percent before falling on the news that the company does not plan to restore its dividend.
Shares were almost flat in noon trading at $8.97.
(Reporting by Jennifer Saba in New York; Editing by Gerald E. McCormick, Lisa Von Ahn, Sofina Mirza-Reid and Phil Berlowitz)