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NEW YORK (Reuters) - New York Times Co's risky attempt to charge fees to website readers looks to be paying off, although it still faces stiff challenges in turning around a fall-off in print advertising revenue at its core business.
The company gained more than 100,000 new subscribers since it introduced its digital subscription service on March 28, representing at least an estimated $26 million in annual revenue and trouncing early expectations for the service.
"It's an excellent figure," Evercore Partners analyst Doug Arthur said about the digital subscribers. "I (was) only looking for 200,000 subscribers in year one."
The pay model is being closely watched by general interest newspapers, which are all seeking new forms of revenue in the face of declining advertising revenue and print readership.
The search for additional dollars only underscores the problems beset by newspapers, which have not benefited from the rebound in advertising enjoyed by other media.
The New York Times, publisher of its namesake newspaper and the Boston Globe, also reported on Thursday that lower print advertising sales dragged down first-quarter revenue and profit.
Other newspapers companies such as Gannett and Media General reported disappointing first quarter results that points to a setback in any modest progress made last year.
Only a handful of newspapers that specialize mainly in financial news, namely News Corp's Wall Street Journal and Pearson Plc's Financial Times, have been successful in charging readers for online access.
Rupert Murdoch's News Corp, for instance, introduced a pay service at the Times of London and the Sunday Times in July. Collectively, the papers had 79,000 monthly digital subscribers as of the end of February, up from 50,000 on October 31, 2010.
The Daily, News Corp's digital newspaper start-up for the iPad and other tablet computers, has not said how many subscribers it added since it launched in early February.
The New York Times' online subscriber figures do not include the Lincoln automaker sponsorship that offered readers a free trial, but does include a discounted 99-cent promotional offer.
Earlier estimates for the New York Times pay model pointed to a slight drop-off in readers. Online research firm Experian Hitwise said last week that the number of people visiting NYTimes.com fell between 5 percent and 15 percent during a 12-day period following the launch compared with the 12 days prior.
New York Times executives said during a conference call that declines in traffic at the website were within expectations.
The company expects to spend $13 million in promotional costs for online subscriptions.
Total revenue fell 3.6 percent to $566.5 million. Analysts on average forecast $568.9 million, according to Thomson Reuters I/B/E/S.
Advertising revenue at the company declined 4.4 percent on a 7.5 percent drop in print ad revenue. Digital ad revenue rose 4.5 percent in the first quarter.
"Clearly, like every other newspaper company that reported, this is not terrific," said Benchmark Co analyst Edward Atorino, who noted ad revenue remains volatile at the New York Times since executives said April ad sales are trending similar to the first quarter.
At About.com, an online site that doles out advice from experts and competes with sites such as Demand Media, revenue fell 10.2 percent to $31.1 million. Ad results at the site were hurt by recent search engine changes at Google.
New York Times shares were up in early trading before sliding to be down 4.7 percent in afternoon trading.
Net income for the first quarter was $5.4 million, or 4 cents per share, compared with $12.8 million, or 8 cents per share for the same period last year.
Excluding the partial sale of its investment in job listing site Indeed.com, adjusted EPS was 2 cents per share, in line with analysts' average estimate.
Reporting by Jennifer Saba; editing by Derek Caney, Andre Grenon and Tim Dobbyn