The New York Times posted a surprising $90.9 million gain in the fourth quarter of 2009 as income tripled year-over-year based on cost cutting and improvements in the advertising market. To put things in perspective, the company lost about $100 million in the third quarter of 2008, so this is good news for the company. But the revenue model is in violent flux. Last year the Times' announced that for the first time in history, it was collecting more from readers than advertisers -- "in an industry where advertising revenue traditionally outweighed revenue from circulation by at least three to one."

Let's look at the hard numbers from Q4:

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What's Up:

1. Income: The Times' $90 million fourth quarter brought yearly income to $19.9 million.

2. Cost Cutting: The company cut $475 million in all of 2009, or 15.5% of its operating costs.

3. Digital Advertising: Q4 saw a 11 percent increase in digital ads (which include newspaper sites liek NYTimes.com and digital properties like About.com). Online ads now comprise 23 percent of the total ad pie for NYT.

4. Circulation Revenue: Circulation revenue inched up 2.4%, after the Times increased newspaper prices for the Boston Globe and NYT last year, according to the Globe.
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What's Down:

1. Overall Revenue: Fourth quarter revenue fell $681 million, or 11.5%. That's an improvement over Q3, when revenue dropped 17%.

2. Assets: To help repay $769 million debt, the Times sold its NYC classical station in October and still has plans to shed its interest in the Boston Red Sox and New England Sports Network regional cable channel, according to the WSJ. Last year the company slashed its debt by $290 million.

3. Print Advertising: Paper ads dropped another 20% year-over-year in Q4. That is an improvement, since they had been falling 30% for most of 2009.
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What It Means

Here's what the numbers tell me. The NYT newspaper will have to continue to cut costs to stay in the red. This will mean fewer reporters, shared bureaus, and a lighter global footprint. But the newspaper will not have to completely re-scramble its DNA to survive as a newspaper/blog hub hybrid. It's short term strategy will be to shed assets as overall revenue continues to fall. Its long term strategy should be to augment its circulation pipeline.

In eleven months, the Times is scheduled to unveil a metered pay model that will charge readers for navigating their site (it won't count horizontal clicks from blog posts and emails against the meter). Based on some back-of-the-envelope math, The Big Money's Frederic Filloux estimated that if the Times could convince 10 percent of its online readers to pay about $3 dollars a month for the site, it could see a 20 percent bump in online ad revenue. It's good to see that digital ads are recovering, but as that portion of the pie grows, the Times' CPMs will still not be able to sustain the company's fundamental mission to report original, global news. The Times is smart to innovate with a meter, and it's also smart to delay that innovation a year so it can cut dead weight assets in the interim.

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