Financial Reports: How to Read, Understand, and Use Them

Question One 

Concept	Ratio used	2017	2016	2015
profitability	Operating profit to revenue	6.7%	6.5%	8.6%
Efficiency	Return on Average Total Assets	0.2%	1.3%	2.5%
Liquidity	Current assets to current liabilities	1.80	2.00	1.53
Leverage	Total debt and capital lease obligations to total capitalization	21.8%	22.6%	34.3%

Question Two 

According to Mark Thompson’s statement to the shareholders in the 2017 financial report, The New York Times has been improving in the past financial years. He, therefore, promised that the trend would prevail in the subsequent fiscal years. Well, so far, according to the 2018 first half report of the New York Times, some trends support Thompson’s projections; whereas, others contract them. Below are some of the trends in the first half of the 2018 fiscal year that support Thompson’s predictions. Firstly, the subscription revenues of The New York Times increased from $407.1 million (2017 second quarter) to $414.6 million in 2018 second quarter ( Investors.nytco.com) . This is proof that the company has improved since the revenues are key in assessing the financial performance of a company. This simply means that The New York Times recorded more subscribers in the second quarter of this year than last year, which is an indication of improved competitiveness. Besides that, The New York Times’ revenues from the digital-only subscriptions (including news, cooking, and Crossword products) rose to $98.7 million. This was a 19.6 percent growth from what was recorded in the second quarter of 2017 financial year. 

In regard to the number of subscribers, the paid-only subscriptions were about 2,892,000 by the end of the second quarter 2018 financial year. This was a 24 percent rise from of that of the second quarter of the 2017 financial year. Also, that was a 109,000 increase in the total number of paid-only subscriptions from the first quarter of the 2018 fiscal year. Another supportive trend has to do with the operational costs. The New York Times’ total operating costs were $373.3 million by the end of the second quarter of 2018. That was about a 1.4 percent reduction from the $378.6 million expenses that were recorded in the second quarter of the 2017 fiscal year. 

However, the following results contradict Thompson’s assurance to the shareholders. Firstly, The New York Times’ digital advertising revenues dropped to $51.0 million at the end of the second quarter of the 2018 fiscal year, from $55.2 million in the same time in the 2017 financial year. That was a 7.5 percent reduction. The print advertising revenues too dropped by 11.5 percent compared to the same time in the 2017 financial year. The fall in the digital and print advertising revenues was associated with the reduction in the audience and creative service revenues. This contracts Thompson’s statement that promised a growth in the company’s revenue in the subsequent fiscal periods ( Investors.nytco.com, 2018) . 

Additionally, The New York Times’ adjusted operating costs rose significantly from 2017 to 2018 financial years. In particular, they rose from $342.4 million in the second quarter of the 2017 fiscal year to $355.2 million in the second quarter of the 2018 financial years. In finance, a rise in adjusted operational costs simply implies that the company is incurring extra burden to finance its operations (worsening performance). This, therefore, disapproves Mr. Thompson’s promise that the company would continue to perform better in the coming years. In summary, some of The New York Times’ objectives were fulfilled by the end of the first half of the 2017 fiscal year as projected by CEO Thompson, but others were not 

Question Three 

The five most critical forces according to Porter are: Competitive rivalry, Bargaining power of suppliers, bargaining power of customers, Threats of new entrants, and threats of Substitute products or services ( Dobbs, 2014) . However, the two forces that are most relevant to The New York Times’ situation are Competitive rivalry and threats of Substitute products or services. 

Competitive Rivalry 

This force focuses on the current level of market competition, including the number of other key players in the industry and what makes them more competitive ( Dobbs, 2014) . The New York Times is the world’s most subscribed digital news provider. This makes it the most competitive in the industry. Besides that, it has the highest capital base to implement expensive marketing strategies that could increase its competitiveness. However, The New York Times faces stiff competition from other news providers. among the major competitors of The New York Times in the US market include CNN.com, Huffington Post, FoXnews.com, Time.com, People.com, Yahoo News, Google News, NBC News, The Washington Post, The ABC News, USA Today and Los Angeles Times, just to name a few. Internationally, The New York Times faces competition from the likes of BBC News, Aljazeera, Mail Online, Reuters and the Sun, among others. 

To curb the stiff market competition, below are some of the strategies that The New York Times should employ. Firstly, it should set its advertisement costs at levels not higher than its competitors. That will attract many advertisers to advertise their products and services The New York Times’ platforms ( De Prato et al. 2014) . Note that despite the fact that The New York Times has the largest number of subscribers (audience size is key in the advertisement), advertisers are very sensitive to the advertisement costs. As a result, charging affordable prices will drive many clients to The New York Times thus increasing its competitiveness. The second strategy that The New York Times can use to increase its competitiveness is diversifying its services even more. Although the company currently offers a wide range of services and products, it has not exhausted all the opportunities in the market. It should, therefore, invest a lot in research and come up with many new, unique products and services that will attract more clients. 

The Threat of Substitute Products or Services 

This is another relevant force (of Porter’s five forces) to The New York Times’ situation. The online news industry is currently facing substitution threats from other avenues of disseminating information. One of those avenues is social media. Very many people nowadays depend on social media platforms such as Facebook groups to get the latest news. If this trend prevails in the future, the number of people subscribing for premium services will decline. As a result, The New York Times performance will worsen. The other alternative way of disseminating news is the blog sites ( De Prato et al. 2014) . In fact, this is almost taking over from the online news platforms. That is because bloggers present the news in a more interesting way, which includes adding their own opinions. 

To corp up with the above-listed threats, below are some of the strategies at The New York Times disposal. Firstly, it can adopt the blogging approach, and start making its news interesting. That will attract a lot of blog lovers to their site hence maintaining its relevance ( De Prato et al. 2014) . The New York Times should also start posting its news on almost every large social media platforms (such as Facebook groups) to widen its coverage and reduce the chances of losing its potential audience to Facebook groups. 

Question Four 

The media industry is affected by a lot of environmental factors such as political, economic, social among others. However, The New York Times should focus a lot on the social and political ones. 

Social Factors 

The social factors are the concerns of the society that influence the operations of the media industry. The influences can be either positive or negative. But media outlets can use different strategies to convert the negative influences into opportunities ( Anderson, 2013) . The first social factor that affects the media industry is the need to observe social morals. That is, the media should not publish information that is perceived by the majority of the audience as promoting undesirable morals. Therefore, The New York Times should always scrutinize and analyze its contents before publishing them. That is, it should exclusively publish the contents that can promote the morals and ignore the ones that are perceived to worsen the situation. 

The other social factor that affects the media industry is the language issue. The media industry is expected to reach out to as many people as possible, irrespective of their language differences. This means that the players in the media industry should not publish their news in one language alone. But if it does, it must be certain that the information can be easily translated to other major languages ( Anderson, 2013) .. Fortunately, The New York Times has observed this rationale since it has about 1450 journalists speaking 57 different languages, meaning it has a wider coverage. The other social factor that affects the media industry is the need to respect the cultural and religious beliefs of the audience. Media broadcasters are supposed not be too critical to the audience’s cultural and religious beliefs, therefore, The New York Times should always observe this standard before publishing any content. For example, when advertising women clothes primarily in the Islamic states, The New York Times should not use pictures of women in revealing/sexually-provocative attires because that is against Islamic morals. 

Political Factors 

Political factors are mostly related to the governance of a country. Normally, governments are very opposite the tendency of media to criticize them. The audience/public, on the contrary, are highly attracted to the articles that expose the dark sides of the ruling administrations ( Graber et al., 2017) . This usually puts the media outlets in a dilemma (to please both sides). But to be on the safe side, The New York Times should only criticize the government whenever it has evidence on the matter at hand, and not rely on allegations. Also, The New York Times should not involve itself in illegal actions such as publishing articles that help extremists to overthrow the government or undermine the functions of the government. 

Question Five 

The true mission for The New York Times 2018 should be: “To feed the world with truthful information, at affordable costs, and at their convenience.” 

Question six 

The first common problem affecting the cable TVs and The New York Times, according to the 2015 study, is that there has been a significant reduction in the viewership/subscriptions among the millennials without children. Besides that, there has been a significant reduction in the viewership/subscriptions among the millennial living in rural areas, or with low incomes (Steel and Mash, 2015). However, the difference is that most of the highly learned millennials have subscribed to internet news services like the ones offered by The New York Times. Only a few subscribe to cable TVs. 

References  

Anderson, A. (2013). Media, culture and the environment . Routledge. 

De Prato, G., & Simon, J. P. (2014). Digital media worlds: the new economy of media . Springer. 

Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review , 24 (1), 32-45. 

Graber, D. A., & Dunaway, J. (2017). Mass media and American politics . Cq Press. 

Investors.nytco.com. (2018). The Financial Reports of The New York Times. Retrieved from https://investors.nytco.com/investors/financials/annual-reports/default.aspx 

Steel , E. and  Marsh , B . (2015). Millennials and Cutting the Cord . Retrieved from https://www.nytimes.com/interactive/2015/10/03/business/media/changing-media-consumption-millenials-cord-cutters.html