Price inflation in the US could moderate. But continued increases in consumer prices may be the media and entertainment industry’s only hope of sustainability. On Wednesday, The New York Times Company reported that first-quarter operating profit fell by a tenth, year-over-year.
Paid memberships have driven the newsgroup’s immense growth over the past decade. As this growth stabilizes, NYT earnings appear vulnerable to cyclical weakness in print and digital ad revenue. That’s down nearly 10 percent in the first three months of the year. His new sports writing portal, The Athletic, acquired last year for $500 million, is still losing money.
Streaming video groups including Disney, Paramount and Warner Brothers Discovery have lost hundreds of millions of dollars building technology and buying content to fill hundreds of hours of digital time. Paramount reported a whopping $500 million loss in its direct-to-consumer segment, which slashed its stock price by nearly 30% last week. After steep cost cuts in 2022, Warner Brothers Discovery made a small direct-to-consumer profit for the first quarter.
News or video stream subscriptions generally cost around $20 a month. Such price points would have to attract enough paying viewers to achieve sustained profits with some modest contributions from advertising. Purely advertising media like BuzzFeed and Vice have failed.
Such attractive prices offer a seemingly good deal for consumers, compared to large libraries of written and recorded content. Additionally, addressable customer bases are often smaller than originally anticipated.
Netflix and Disney have already had to raise prices. They are also holding back production plans, following a writers’ strike.
The NYT’s acquisition of The Athletic, announced in early 2022, could prove to be a high point of average optimism about growth prospects and the markets to target. The Gray Lady, as the paper is called, was wrong in believing that its affluent readers wanted more in-depth coverage of the Yankees and Knicks.
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