New York Times Company (The)

Good morning and welcome to the New York Times Company's second quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Harlan Toplitsky, Vice President, Investor Relations. Please go ahead. Harlan Toplitsky, Vice President, Investor Relations. Please go ahead.

Harlan Toplitsky, Vice President, Investor Relations. Please go ahead. Harlan Toplitsky, Vice President, Investor Relations. Please go ahead. Harlan Toplitsky, Vice President, Investor Relations. Please go ahead. Harlan Toplitsky, Vice President, Investor Relations. Please go ahead. Thank you and welcome to the New York Times Company's second quarter 2020 earnings conference call. On the call today, we have Marc Thompson, President and Chief Executive Officer, Meredith Kopit Levien, Executive Vice President and Chief Operating Officer, and Roland Caputo, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call and our actual results could differ materially. Some of the risks and uncertainties that could impact our business are included in our 2019 10-K as updated in subsequent quarterly reports on Form 10-Q. In addition, our presentation will include non-GAAP financial measures and we have provided reconciliations to the most comparable GAAP measures In our earnings press release, which is available on our website at investors.nytco.com. With that, I will turn the call over to Mark Thompson.

Thanks, Harlan, and good morning, everyone. Good morning and goodbye, because as everyone on the line must know by now, this is not just my 35th quarterly earnings call as chief executive of the Times, but also my last. Meredith takes the helm in just a few weeks' time. Which is great news for the company and its shareholders. She's a unique talent and will be a bold and brilliant CEO. But one of the changes it's going to bring is to the language Times executives use on these calls. Let's take the word lumpiness, a rather fine expressive word useful in so many contexts, but never more so than when applied to advertising. Now I've tried, God knows I've tried, to coach Meredith in the use of the word lumpiness. But frankly, it's hopeless. It turns out that unless you've spent decades steeped in true gnarly and above all British lumpiness, you just can't pronounce it with any conviction. Roland, needless to say, is a lost cause. So no more lumpiness. Indeed, no more Queen's English at all. From now on, it's all going to be in American. To paraphrase George III in Hamilton, good luck with that. But I do want to thank all of you, and particularly our analysts, for your engagement and courtesy to me over the past eight years. Your testing of the company's strategy and performance has helped us improve both, and as someone new to the public markets when I arrived in 2012, I've learned a lot from you. I also hope you'll forgive me, before I hand over to Meredith and Roland to tell the story of the quarter, if I say that it's a source of some pride to me that my last full quarter as CEO of The Times was not only our best ever for new digital subscriptions, but the quarter in which total digital revenue exceeded print for the first time. Now this has taken its time coming, not because we've been slower than others to execute our digital strategy, quite the contrary, but because our great print platform has remained so resilient. But it's clearly a watershed moment in the transformation of the times. In revenue now, as in everything else, we are a digital first company, and won't look back from here. The story of the New York Times over this period is partly a complex saga of new digital tactics, new skills, new structures and processes. But it's also a very simple story of a shared belief across the organization in the value and power of great journalism. The packaging and selling is important, of course, and we've made great strides in both. But the secret source is the journalism itself. It's the critical element in the virtuous circle of audience engagement, subscription, and long-term loyal retention. And it's also the point of the New York Times. That's why we've invested in it so consistently in recent years. Nothing gratifies me more about my years at the company than the fact that in such a difficult moment for journalism as a whole, our newsroom is so strong, and at a time when the public needs great journalism more than ever, They can rely on the New York Times. But let me hand over now to Meredith, who's played such a major part in all these successes and who I will believe will take this company to even greater heights to take you through the quarter. Meredith.

Thank you, Marc. While you have indeed been ineffectual at working your particular use of English into the lexicon at the time, you have thoroughly succeeded in leaving the company far better And you found it. So on behalf of all of your colleagues, let me say that we are immensely grateful to you for your inspired and steady leadership over the past eight years. You led us over the major chasm of transformation to become a global digital first subscription first company. And in doing so, you raised the ambitions not just for this place, but for the business of journalism everywhere. Having total digital revenue overtake print in your last quarter is a perfect punctuation to your incredible run. Journalist Ken Docter had it just right last week when he said that you've had one of the most transformative runs of any publishing executive in modern times. And I personally could not be more grateful for the seven years of strong partnership and getting to work with you and learn from you for much of it. Now, I'll have more to say in the coming quarters, but you can largely expect that we'll forge ahead and execute on the strategy that has guided us over the past five years. That means continuing to invest in our newsroom, our products, and our brand. It also means continuing to increase our focus and emphasis on our product itself, both the journalism and the way that people find and uniquely experience it. Thank you for joining us today. Thinking and acting ambitiously about diversity, equity, and inclusion to ensure that the Times books reflects the world we report on and is a workplace that feels inclusive and rewarding to all of our colleagues. Now let me talk about the quarter. This has been an extraordinary period in our world. Protests against police violence, racial injustice, tens of millions unemployed, political divisions that only seem to deepen as Election Day nears and a pandemic that continues to ravage the country. Through it all, Times journalists have helped readers and subscribers make sense of it. Our ongoing investment in our newsroom has enabled our national desk to dispatch reporters across the nation to chronicle events on the ground as new pandemic hot spots emerged. They've used visual and investigative journalism to tell the story of how the virus spun out of control. And our reporting has movingly underscored the staggering human toll, racial disparities, and the tragic impact, particularly on health care and essential workers. The Times has a long history of journalism that explores race in America, from Claude Sitton's pioneering work on the civil rights movement in the 1960s to last year's Pulitzer Prize-winning 1619 Project, which was downloaded an additional 4 million times in the weeks since protests began in the U.S. after the death of George Floyd. The way we've reported on these protests showcases the full arsenal of modern times journalism involving everything from visual investigation to audio, photography, and of course, the written word. It's this exceptional journalism that has continued to yield big audiences. In the second quarter, we saw an average of 130 million U.S. readers monthly, according to Comscore. While the audience gains moderated somewhat from the first quarter surge, they still represented a 32% increase over the same period last year. The gains in audience and our improved ability to engage readers and turn them into subscribers led to a second consecutive quarter of historic numbers of total net digital subscription additions. Q2 was our best quarter ever with 493,000 net additions to our core news product and 176,000 to our other digital products for a total of 669,000 net new digital subscriptions. Readers are responding to both the breadth and the depth of our offerings. The second quarter represented our largest number of subscription additions we've seen to our cooking and crossword products, as well as to core news. The end of the quarter marked the first full year of our registration-based customer journey in our core news product. The new journey has been effective in its own right in driving growth, and it's been an important foundation for ongoing engagement and conversion optimization. We also continue to experiment more aggressively and successfully with news product innovations that deepen engagement, including further expansion of our live news offerings. These initiatives are positively impacting profitability. In the quarter, digital subscription revenue grew by 30%, driven by the rapid growth in subscription additions, promotional subscriptions graduating to higher prices, and the benefit we saw from our digital price increase. At the end of Q2, the Times had 5.7 million total digital-only subscriptions and 6.5 million total subscriptions, well on the path to 10 million. We're making steady progress on the levers and drivers of subscription, though the unusual market conditions are clearly amplifying their effect. We do not give forward guidance on subscription because the numbers are generally difficult to predict. That's particularly true at this moment. As we said on the last call, we don't expect the exceptional piece of audience we saw in the early months of the coronavirus story to last forever. But we also know we're about to enter the crucial last month of a presidential election. It's also worth noting that while it's been our strategy and our plan to increase the percentage of starts from organic measures versus paid marketing over time, the more pronounced increases in organic of the last two quarters were in part a reflection of these unusual market conditions. You can therefore expect that we'll return to more paid marketing in the back half of the year as we find efficient opportunities to do so. Our results in advertising, while substantially off prior years, were somewhat better than expected. We're continuing to evolve our ad organization to reflect an acceleration of underlying trends and lean even further into our strategy of drawing competitive strength and value from our brand, audience, and direct relationships. While in the second quarter, that had the consequence of reducing the overall size of our ad team and closing our standalone marketing services business, we did so entirely with our future ad business in mind. That future will be increasingly driven by differentiated digital ad products, including fewer ads but in larger formats, substantially better targeting of our audience using first-party data, in privacy-forward ways, insights for marketers about what audiences are interested in, and audio. We expect that our large print and traditional display advertising business will continue to be under pressure. While the ad business will go on being very important to the company's economics and profitability, it is unlikely to be a significant growth driver in the near term. We discontinued providing Times content to Apple News at the end of the second quarter. The decision is consistent with the core principles we've adopted in how we engage with the platforms, that quality news publications must be named and differentiated from other sources, that the end customer relationship and data should belong to publishers, and that the original creator of content must be sufficiently compensated for its work. There are other important ways we'll continue to partner with Apple through a variety of their products beyond Apple News. Last month, we acquired Serial Productions, the company that produces the groundbreaking Serial podcast. We've also entered into an ongoing creative and strategic alliance with This American Life, a radio program that transformed the genre. Among other things, we'll sell This American Life's podcast advertising Beginning next year. As we have said in previous calls, we are big believers in the power that audio can have in building deeper connections with our audience. And we're committed to bringing listeners the best audio journalism in the world. We launched The Daily in 2017 and it has quickly become the most listened to news podcast in the country. Our goal is to continue to expand our audio offerings and to chart an ambitious course for high-quality immersive audio journalism. We also accelerated our progress in bringing The Times to new audiences through film and TV this past quarter. In the last month alone, we premiered Father, Soldier, Son, our first feature documentary on Netflix directed by Times reporters Leslie Davis and Katrin Einhorn, And the weekly has been replaced by the New York Times Presents on FX and Hulu, a new monthly documentary series. We also announced a 1619 project partnership with Lionsgate, Oprah Winfrey, and Nicole Hannah-Jones, which will be adapted into a limited series for Amazon Studios. I'll close by thanking Times employees around the world for their extraordinary work in exceedingly trying times. And once again, thank you, Marc, for all that he's done for the New York Times Company. And with that, I'll turn it over to Roland.

Thank you, Meredith, and good morning. I'd also like to take a moment to acknowledge Marc's upcoming departure and to thank him for his partnership over the past eight years. While I will surely miss working with Marc, I am equally excited by the prospect of continuing to work closely with Meredith in her new role. As I said last quarter, although we expect short-term results to be negatively affected by a decline in advertising, our subscription business, which represented nearly three-fourths of our revenue in the second quarter, provides a source of strength and resilience through a recurring revenue stream that we expect to grow further as we continue to excel at our core mission. Adjusted diluted earnings per share was 18 cents in the quarter, one cent higher than the prior year. We reported adjusted operating profit of approximately $52 million in the second quarter, which is approximately $3 million lower than the same period in 2019. Total subscription revenues increased approximately 8.5% in the quarter, with digital-only subscription revenue growing nearly 30% to $146 million. This represents a further acceleration in the sequential rate of quarterly growth, largely as a result of the large number of new subscriptions we have added in the past year, strength in retention of the dollar per week promotional subscriptions who have passed the year-long promotional period and have graduated to higher prices, and the impact from our first ever digital subscription price increase, which began late in the first quarter. Quarterly digital news subscription ARPU declined approximately 11% compared to the prior year and approximately 3% compared to the prior quarter, consistent with the rates of decline we reported for the first quarter of 2020. For both sequential and year-over-year ARPU trends, the historically large number of newly acquired subscriptions, mostly on the dollar per week promotion domestically and at deeper promotional rates in many areas outside of the U.S., More than offset the benefit from subscriptions graduating from the introductory promotion to either step up or full price as well as the benefit from price increases on our more tenured full price subscriptions. ARPU related solely to domestic new subscriptions declined 8.5% in the quarter versus prior year and 1.4% versus the prior quarter. We continue to expect strong Subtitles by the Amara.org community Largely due to a decline in single copy and international bulk sales, as many sales outlets were closed throughout much of the quarter. Revenue from domestic home delivery print subscriptions was flat in the quarter, as a home delivery price increase implemented early in the year offset year-over-year subscription declines. Total daily circulation declined nearly 20% in the quarter compared with prior year, while Sunday circulation declined 9.7%. The closure of hotels, universities, and other outlets as a result of stay-at-home orders across the country contributed approximately seven percentage points to the daily decline and three percentage points to Sunday, while the loss of Starbucks as a distribution outlet in August of 2019 contributed approximately two percentage points to the decline. Total advertising revenues declined approximately 44% in the quarter, as both digital and print were severely impacted by lower marketer demand during the pandemic. Digital advertising declined approximately 32% in the quarter compared with the prior year, somewhat better than the guidance we gave on our first quarter earnings call, largely as a result of higher levels of spending from the technology category. Print advertising declined approximately 55% across most categories with entertainment and luxury hit artists. Other revenues declined approximately 5% compared with the prior year to $43 million, primarily as a result of the conclusion of the first season of the weekly television series, as well as lower revenues from live events and commercial printing. These declines were partially offset by licensing revenue related to Facebook News and an increase in affiliate referral revenue from Wirecutter. Adjusted operating costs. decreased 8% in the quarter, significantly lower than the guidance we had originally issued as we attempted to partially offset lower expected advertising and other revenues as a result of the pandemic. Cost of revenue decreased approximately 6% as lower print production and distribution costs and advertiser servicing costs more than offset higher digital content delivery and journalism costs. Sales and marketing costs decreased approximately 36%, largely driven by lower media spend, which we reduced during the initial months of the coronavirus pandemic. The extremely strong news environment and the continued improvement of our digital products proved to be a strong combination and demonstrates that we have become less reliant on acquisition spend as a means to drive subscription growth. However, we do not view Q2 marketing spend as representative of future spend given the special circumstances under which we were operating in the second quarter. Continuing with the second quarter results, product development costs increased by approximately 22%, largely due to growth in the number of employees engaged in digital subscription strategic initiatives. We recorded a $6 million severance expense in the quarter, largely as a result of workforce reductions primarily affecting our advertising department. Our effective tax rate for the second quarter was 19.6%. On a going forward basis, we continue to expect our tax rate to be approximately 25% on every dollar of marginal income we record with some variability around the quarterly effective rate. Moving to the balance sheet, our cash and marketable securities balance ended the quarter at $757 million, an increase of $70 million compared with the first quarter. The company remains debt-free with a $250 million revolving line of credit available. As I said last quarter, the consistently conservative approach we have taken in managing our balance sheet in tandem with the continued strong results produced by our subscription-first business has provided us the financial flexibility and confidence to continue pursuing our growth strategy Even as we manage through the economic fallout of the COVID-19 crisis. As Meredith noted, we announced the acquisition of Serial Productions, which closed last week, and included an approximately $25 million cash payment at closing. Let me conclude with our outlook for the third quarter of 2020, which is based on our current knowledge and assumptions and could be impacted by the evolving effects of the pandemic. Total subscription revenues are expected to increase approximately 10% compared with the third quarter of 2019, with digital-only subscription revenue expected to increase approximately 30%. Overall advertising revenues are expected to decrease between 35% and 40% compared with the third quarter of 2019, and digital advertising revenues are expected to decrease approximately 20%. As a reminder, September typically plays an outsized role in third quarter advertising revenue, which when combined with uncertainty arising from the COVID-19 pandemic, makes this year's third quarter especially difficult to predict. Other revenues are expected to decrease approximately 10% as licensing revenue from Facebook News is expected to be more than offset by lower revenues from our television series, and as a result of the pandemic's impact on both commercial printing and our live events business. Both operating costs and adjusted operating costs are expected to be flat or to decrease in the low single digits compared with the third quarter of 2019 as we pull back on non-essential spending while continuing to invest in the drivers of digital subscription growth. And with that, we'd be happy to open it up for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. First question comes from Alexia Quadrani of JP Morgan. Please go ahead.

Thank you very much, and Marc, we will miss you and your accent, so best of luck ahead.

Thanks, Alexia.

Thank you. Just a couple of questions, pretty straightforward. Can you provide a bit more color on the digital subgrowth in the quarter? I guess any sense of how it trended, you know, as we sort of progressed? You know, I know you usually don't comment month to month, but I'm curious, given all the volatility and all the news, if it would heighten in certain months versus others. And I guess just on that same point, I guess any call you can give us in terms of engagement in the quarter, you know, are people still just very engaged with COVID news or is it really broadened out?

Sure. I mean, Meredith, I'll let Meredith answer all of this. Just to say, you know, we don't disclose very much in this area. One completely obvious point is that major news stories, and it has been a very busy period for news, obviously draw in audiences, both at the unique user level and also in terms of engagement. But Meredith, can you help Alexia at all on this?

Yeah, I mean, what Marc has said is obviously right, so we won't comment on quarter to quarter, but it is probably worth saying we do see some audiences C.F.A. More we are focused on registration and conversion and engagement of registered users, that has sort of a moving out effect.

And then any thoughts when you may resume the tenured price increases? I know you put a pause on it during the crisis here.

I'm getting a signal that my sound could be better, so I picked up my phone. My colleagues will let me know if... If that's not working, I'm getting a thumbs up from Harlan. So we paused. We did a big chunk of the price increase, and then we paused when COVID hit just because we felt like given what was going on, it was the right thing to do, and we will resume that price increase this fall to a smaller but still substantial cohort of people.

And then just lastly, a quick question on your investments in sort of the TV side as well as in the audio sort of the podcasting. Any really comments you can give in terms of what the returns are like in maybe the TV video versus the audio? I mean, does it make sense to put more of an incremental dollar in one versus the other?

I would say, you know, we've got, as I said in my remarks, we've got really big ambitions for audio journalism and for what the Times can do in audio, particularly now that we've got, you know, a sort of triple threat of the daily and serial productions and a new partnership with This American Life. Those aren't the only things we've just moved Kara Swisher's main interview podcast here as well. So I think you can expect to see us continue to invest in audio for a number of reasons. And I would say in contrast on TV and film, we're really pleased with what we're doing there. But I would say it's less an economic driver and more about how we get Thank you very much.

The next question comes from Kenan Venkateshwar of Barclays. Please go ahead.

Thank you. Marc, obviously, congratulations on a fantastic tenure. And I guess it begs the question now, you know, the company is doing phenomenally well. And as you highlighted, it's, you know, the trends over the last four quarters have accelerated significantly. So I guess it begs the question of why now from a timing perspective?

Yeah, no, it's a fair question, Karen. I mean, I told the board when I arrived in 2012 that I thought that, you know, You know, it all went well. Between five and eight years was about right as a run from my point of view. I like to have a big fresh strategic puzzle to work on and to work through it. And I think one of the really important things for this company, it's a long transition, it's got many years to go, is fantastic momentum. And I think the idea that from time to time you bring C.F.A. He's going to bring fresh impetus, fresh ideas. I mean, I've had eight years to play out all my ideas, and I think I'm satisfied with the way things have gone. But I'm a believer that you maintain momentum by, you know, in most of the key jobs, changes from time to time. And by the same token, personally, it means that, you know, potentially I don't know what it's going to be yet, but I can also apply myself to it. Thank you, Martin. All the best.

Meredith, from your perspective, in terms of strategic priorities, obviously there are a lot of areas that are still growth opportunities. You highlighted podcasting and video as potential areas for expansion. But when you think about this, I guess there are two strategic questions that you'll probably be working through in the near term. One is the distribution strategy. You have the choice of using services like Spotify or Hulu or the legacy TV networks for distribution. Or given the brand of New York Times, you yourself can be an aggregator. And aggregators in general have seen a lot more value creation over the last few years when it comes to digital business models. So it would be great to get your thoughts on how you think your newer businesses from a distribution strategy perspective could evolve. And in terms of the content cost itself, I mean, podcast, you've made some investments, but on the video side, you've relied more on partnerships in order to defray the production costs. Is there a self-owned model for content going forward where you could essentially use some more investment dollars? Thanks.

I'm probably going to have to have you clarify the last bit of the question, but let me try the first two. I would say in general, as I said in my remarks, you can expect us to continue at least broadly with the strategic themes we've been at for five years now. One of those big themes is we really believe in the power of The New York Times being a destination and being something that people come to directly and is asked for by name. And at the same time, we are very conscious of the fact that we operate in a broader ecosystem. And in many cases, habits are formed based on some of the biggest players in that ecosystem. And I think a lot of that in Let's say audio or in film and TV kind of remains to be seen what distribution will look like. But you can expect we'll take the learnings that we've had so far, which is it's been a really powerful aspect of our business that we've been focused on our own destination. And I'll say in the audio space, it's not clear yet, you know, what a destination is in many cases. C.F.A. We've learned a lot about what it means to be and build a destination. I think we're going to continue to be very focused on doing that, on being something that people come to directly and ask for by name. But we also operate with a healthy sense of reality that there are some very big players in the ecosystem who are very important to driving our funnel. Facebook, others in the case of our news business, Apple, Spotify, and others in the case of audio. And you've seen, based on what we've done in television, that there are places where we assume that the best way to build an audience for Times journalism, Times content, is with other distribution outlets. And that's why we had our first major foray into regular I would say you've seen us now. apply a mix of organic development so using our capital to build things and I think we've done that quite successfully in the game space and in the lifestyle space with our cooking product and you've also seen us use our capital in organic ways and I'll point we haven't talked a lot about the autumn acquisition but I'll point to that as an important experiment in two ways. Autumn is a destination in and of itself. So just going back to the point I made earlier about the importance of destination and subscription, but it is also an aggregator of other audio. So it's spoken word audio from now the times, but when we acquired it, it was spoken word audio C.F.A. C.F.A. C.F.A. C.F.A.

New cycle is obviously important to generate more subs, as we've seen over the last couple of quarters, but I'm sure there is different consumer behavior when it comes to churn across different cohorts. So if you could just help us think through how this has evolved over the last maybe three or four years as subscription growth has accelerated in terms of growth contribution from the top of the funnel versus the bottom of the funnel, that would be very helpful. Thanks.

I'll take a crack at it and tell me if I'm actually getting it at your question, and Roland may want to come in here as well. I would say, I mean, I said a version of this in my remarks, but, you know, audience continues to be a really important aspect of, you know, how we think about our funnel, and as audience grows, that's The audience story of the last two quarters has been a very important part of the story, and I think we said in the last call that as we see sort of a step function change in audience, I think we see the opportunity grow and change. But behind that, our new customer journey that we launched a year ago, which is registration-based, This opens up, I think, a sort of new stabilizing function. We bring people in, they register. We're more effective at getting them to come back and reengage and to stimulate further use, and that's a really important part of the puzzle. So I think the broad answer to your question is our own organic means of engaging people become more important in a reggie model. So can we get you to come back and engage through a newsletter? Can we message you in a more commercial way and get you to come back and engage? Or can we get you to download the app? If you do that, you're more likely to subscribe. So I would say our own organic channels in a reggie model become that much more important. But Roland, you may want to add. to the answer.

Kanan, did you have a retention question inside that question? I can address that if you'd like.

Yeah. The question was, you know, if you look at the churn across different cohorts, as you raise price, as people have rolled off of promos, I'm sure that behavior has changed. So if you could just help us think.

So, you know, we're now 22 months into the first offerings of the dollar a week, so nearly two years. That retention curve for the folks on a dollar a week, you could almost sit it right on top of the retention curve at 22 months for the prior offers. And at each point of that curve, it's almost identical. The slope, the little dips in it, et cetera, are almost identical. When we peel that back a little bit further, the folks who we've stepped up to an intermediate price, they retain a little bit better than the folks we step up to full price. And then if we look at more recent cohorts, if we look at the COVID cohort, so, you know, Back in Q1, you have a massive number of people subscribing and you're curious to how they'll retain. And while it's still early, you could sit that curve on top also. So we are seeing a retention that makes us quite happy no matter how we split these cohorts. And as we've been growing and growing and growing the base, our overall churn numbers have been within one or two tenths of a percent either way. The retention story is very good for new cohorts. It's very good for folks who came in on a discount and are getting stepped up. And it's also very good for the tenured folks who got a price increase, you know, a base price increase last quarter.

That's great. Thank you so much.

The next question comes from Vasily Karyasov of Cannonball Research. Please go ahead.

Vasily Karyasov Thank you. Good morning. I was wondering if you would like to comment on the 10 million subscriber goal that you put forward several – some time ago and given how strong the sub-base is growing. Maybe the timeline for it or the order of magnitude, anything would be – would be Very interested to hear what you have to say.

So I'll go with that first. I think Meredith again should address it. Well, I mean, I announced that goal, I think, in the earning call for Q4 2018, so in February 2019, with a milestone of $10 million by 2025. At the time, quite a few people, other executives on the call, let alone the wider world, thought it was a slightly crazy number. You know, 18 months later, the company is clearly close to two-thirds the way they are already with more than five years still to run. So it looks now, I think, like assuming the strategy continues to deliver strong gains, it looks probably like an underestimate. I do want to say about the $10 million, it was always a milestone. It was not a kind of like a terminal milestone. C.F.A. So the answer is I think what felt as recently as 18 months ago like a really stretching milestone for the company now feels, I don't want to say it's in our grasp because obviously there are several million more subscribers to get, but feels eminently achievable and achievable well within the timetable I set. But Meredith, you should, because literally as I pass the baton to you on this call pretty much, you should talk about this as well.

Yeah, I don't have a whole lot to add. I think you got most of it, Marc. I'll just say, you know, we see the market for subscription journalism to be large. You know, we think it's at least 100 million people, half in the U.S., half globally, and we think the opportunity is big for us and others to participate in that market.

All right, thank you.

The next question comes from John Bolton of Evercore. Please go ahead.

Thank you. First, Marc, I'm going to miss you. Good luck and congrats to Meredith. So I have a couple on pricing. So first, Roland, given all the comments you just made about retention across all these different subscriber price cohorts, Have you changed the strategy in terms of the number of dollar-per-week customers you're stepping up to full price versus intermediate at the one-year anniversary? On a related note, I think you said in the prepared remarks on 8.5% in the quarter. Should we expect that to continue to improve sequentially on a year-over-year basis moving forward? And then what does that imply for international ARPU in the quarter and just any update on international pricing strategy? Thanks. Sorry for all the questions.

Okay. I'll see if I can retain all of them. So in terms of the strategy on the step-up pricing, meaning presumably the percent that we're asking to move to a step-up price or intermediate price and those we are stepping up to a full price, We're still targeting approximately 50-50 on that. Where we're making progress on AI is the percentage that the model is picking. But at this point, we don't have evidence that we should come off the 50-50. So that's still in place. Right, I did reveal for the first time the domestic ARPU change versus the international. Obviously, intentionally to expose the fact that we are discounting pretty heavily internationally. We think that's the right pricing strategy in a lot of countries. It's not one price in all countries. So countries with lower GDP or where a basket of similar goods is priced low, we want a price to sell in those markets. On the domestic side, so yes, the ARPU is down 8.5%. But, John, the key here is, you know, depending on how many new subs we bring on, and we're going to continue to use the dollar a week promotion. It's been very successful both in bringing on new subscribers and we've been able to step their prices up. We've proved that also in the last few cycles. So, you know, as long as we're bringing on these very large amounts of new subscribers, I don't expect ARPU to stabilize quite yet.

Got it. All right, thanks, and talk soon. All righty.

The next question comes from Craig Huber of Huber Research Partners. Please go ahead.

Yes, good morning. Thanks. Marc, I wanted to say you did a heck of a job in the last eight years. We're going to miss you, and congratulations, Meredith, on the new position.

Thanks, Greg. Thank you.

Thank you. My questions – Mark, where was the number of journalists at, the number you have when you first started the company eight years ago? Where is it right now? And maybe if Meredith could just speak about maybe on a go-forward basis, I assume you guys want to continue to invest in that area, the content side.

Sure. Yeah, of course, Greg. So I haven't got the exact number in front of me, but – I want to say that we're at about 1750 at the moment across newsroom and opinion so 1750 and that's probably 250 or slightly more than 250 more than the one I walked into the time so we've been able and we had in the first couple of years we had some buyouts and layoffs and we've had some since which have been about C.F.A. C.F.A.

Yeah, I'll say a few things. The first one to say is that I think the single most important driver of what the company has been able to do in its business strategy and particularly its subscription strategy in the last, you know, eight, nine years has been the continued investment in the newsroom and the journalism and the expansion of formats and in putting – More reporters, more journalists, more editors in more places. So you can assume that we are going to continue to invest heartily in the newsroom and in our journalism very broadly. I'll say two more things about that. I think I talk a lot about the product itself as the primary engine of the business, and by that I mean The ability of the journalism to be sufficiently different from free alternatives and of equality that people will pay for it. And I also mean the ability to help people find and experience more of it. And I would say on the second, we still have a lot of distance to travel to be really effective at surfacing All that we already make to people so that they get in a digital environment, and particularly in a mobile environment, so they get to the stuff that's going to be most relevant for them. So I think there's always going to be an important corpus of Times journalism that everyone who comes to the Times should see, but there's still a lot of room for us to get better at surfacing particular stories, particular kinds of journalism to match people's interests. And that brings me to my third point, which is you can assume we'll continue to invest heartily in the journalism, particularly continue to expand in new formats as we've talked extensively about on this call in audio and to some degree in film and TV. But it's worth saying, and I think we've said a version of this in prior calls, that that investment doesn't have to scale with subscriptions. And that's in part because of the second thing I said. I think there's still a lot of room for us to get better at surfacing the stuff we already make, the great journalism we already make to the very, very large audience we have. And a lot of the work of driving more subscriptions lies in our ability to do that really effectively.

I appreciate that, Meredith. I want to also ask you about the daily. Maybe if you could just update us on the number of listeners each week, if you would, whatever metric you want to give me now versus, say, a year ago. And then a longer-term strategic question, I guess, on the daily podcast. I'm just curious, how much thought have you given, maybe, as you think out of the next roughly 18 months, about starting the charge for the daily podcast? And I ask that whether you charge for it on an annual basis or But also perhaps maybe included in the news-only digital product, and it gives you another reason to raise prices down the road on that product, but also help drive the digital subscriber sign-ups for the news-only product to be included in there down the road here and stuff. I mean, is there a transition you think you could make down the road here to start charging for this product? It's obviously being very well received out in the marketplace. Thanks.

Yeah. Well, let me just start on the audience for the daily. My The thing I can't help but say is the audience is now vastly larger than the audience for the paper daily or Sunday even at its peak. And most of the listeners to the daily were people who probably never read the newspaper. So it's really done this incredible job of widening the audience for the Times and bringing new people to the brand. I think now we're somewhere above 3.5 million average daily listenership for the daily, which is almost twice where we were a year ago. One of the things that's been particularly remarkable in this period is the resilience of the daily, even during quarantine, during stay-at-home orders. I'm not sure that's been the case for listenership to audio. In general, particularly because people lose drive time, so we've been very, very pleased to see that. And then just turning to the other part of your question, I think the daily has been very, very powerful in a number of ways for the company. I have to say it's a really strong and particularly resilient ad business. As is audio generally at the Times, and so we continue to be optimistic about that. But as we've said in prior calls, you know, we believe and we've found evidence that The Daily plays a real role in bringing people into our subscription funnel. One of the great things about it is, you know, it's essentially a single story every day, so often we leave people wanting more. on that particular story or other stories. And so then they come to the Times to get more. And we know that people who listen to The Daily feel real affinity for our brand. If you listen, you'll hear that we often use one of the ads in The Daily as a direct subscription ad. And I would put that in sort of You know, top and middle funnel work where we're talking about the brand and how we go about the work, but also essentially asking people to subscribe if they like The Daily. And those ads are really, really powerful. And then, as I said in answer to another question, The Daily itself is a really important distribution mechanism for other audio journalism, meaning, you know, we use it as an envelope to send other new New podcasts into the world. And that's been quite effective. We've been able to launch a number of other important shows as a result of having The Daily. And we can do that directly in feed. Or we can do it by using The Daily as promotional space. And I think all of that is useful to us. And I'll say very broadly, we have a subscription-first strategy and a strategy of direct relationships And that has served us very, very well even against the backdrop of many, many free alternatives to the Times. And so I would say we don't rule out that at some point in the future it could be directly a part of our subscription business. But what I will say is, you know, if you look at the, I think we're nine years into the pay model now, if you look at our history, we have always had and even today have A very wide free layer for our content, which is hugely important. I said a version of this in my answer to Vasily's question, but hugely important to driving the business and to our ability to make direct relationships. And it's hard to imagine a scenario where the daily in some capacity doesn't play that role for a while.

Great. Thank you. And best of luck to you, Mark, going forward. Thanks so much.

This concludes our question and answer session. I would like to turn the conference back over to Harlan Zaflitsky for any closing remarks.

Thank you for joining us this morning. We look forward to talking to you again next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.