I’m glad to see that New York Times Digital‘s operating profit during the previous three months was (US) $8.4 million — an annualized yield of $34.6 million in profit.
Why am I only now happy when NYTD has been reporting ‘profitability’ for two years? Because its figure have always been boosted by some $25 million in revenues that have had nothing to do with the Internet and that predate NYTD. So, if NYTD is now reporting more than $25 million in profits, then it finally has become truly profitable from its Internet operations.
When NYTD was formed in the mid-1990s, the New York Times Company gifted it with all the revenues that the NYT received from supplying news to the NEXIS news data base. This NEXIS contract — which isn’t based upon usage but upon fixed annual payments to the time — was generating $20 million annual revenue. So, from its first day of operations, NYTD was able to claim that it was generating more than $20 million in revenues, even though NYTD had then no actual revenues of from the Internet or its own implementation. The NEXIS contract contained a annual escalator clause, and the payments from NEXIS to NYTD have increased to approximately $25 million annually. Thus, if NYTD now has annualized revenues of $102.8 million and annualized profits of $34.6 million, you can subtract the NEXIS revenues and see that NYTD has some $77 million in revenues and nearly $10 million in profits from Internet operations..
Many analysts will point to NYTD profitability, cite it as an example, and believe that all newspapers can now be profitable on the Internet. However, the reality is that America’s premiere newspaper has only now truly achieved online profitability after spending eight years and nearly $100 million in startup costs getting there. NYTD has originally forecast profitability in 1998.
The true test of profitability for an industry isn’t that its premiere player has finally emerged from red ink but when the majority its players do — the majority of other 1,430 daily newspapers Websites in the U.S.