New York Times Co (NYT) 2005 Q2 法說會逐字稿

Good day, and welcome to The New York Times Company Quarter 2, 2005 earnings conference call.

Today's call is being recorded.

A question-and-answer session will follow today's presentation. (OPERATOR INSTRUCTIONS) For opening remarks and introductions, I would like to turn the conference over to Miss Catherine Mathis.

Please go ahead.

Thank you very much, good morning, everyone.

Welcome to our earnings conference call.

We have several members of our senior management team here today to discuss our results with you, including Janet Robinson, our President and CEO;

Leonard Forman, our Executive Vice President and Chief Financial Officer;

Scott Heekin-Canedy, President and General Manager of The New York Times;

Martin Nisenholtz, our Chief Digital Officer;

Jim Lessersohn, our Vice President of Finance and Corporate Development;

Stu Stoller, our Vice President, Process Engineering and Corporate Controller; and Tony Benten, our Treasurer.

Our discussion today will include forward-looking statements and our actual results may differ from those predicted.

Factors that may cause them to differ are outlined in our 2004 10-K.

This presentation will also include a non-GAAP financial measure, and we provided a reconciliation to the most recently comparable GAAP measure in the press release, which is available on our website, www.nytco.com.

This conference call is being webcast and an archive will be available on our website as will a transcript, and an audio replay will also be available and the directions for that are in our press release.

So with, that I will turn the call over to Janet Robinson for some comments on the quarter.

Thank you, Catherine, and good morning, everyone.

Our earnings for the quarter came in at the high end of our guidance.

Second quarter diluted earnings per share were $0.42 on a GAAP basis, compared with $0.50 in the same quarter last year.

Included in this quarter's EPS were $0.04 of cost associated with our staff reduction program and $0.03 per share of incremental costs associated with the expensing of stock-based compensation that we did not have in 2004.

On a revenues side, our performance reflected the continued unevenness of the advertising market.

Overall, for the news media group, retail advertising, including preprints, saw the largest gains in revenue growth up 5%.

National was flat in the quarter.

Classified advertising rose 2% with gains in the real estate and help-wanted category, offsetting softness in the automotive advertising.

At our largest business units, "The New York Times" media group, ad revenues rose 2% in the quarter.

Strong areas included national automotive, which has had new or increased business from Mercedes-Benz, Infinity, General Motors and Audi.

Residential real estate where display advertising has been particularly strong, fashion jewelry store advertising, which has seen increased business from high-end jewelry advertisers, such as Tiffany, Cartier, and Tourneau; financial advertising and book advertising.

Weak categories were telecommunications, which continues to cycle the AT&T/Cingular merger, travel, where airlines, cruise lines, and hotels continue to spend at reduced levels, corporate, which had two large campaigns last year that did not repeat in 2005, and pharmaceuticals.

Entertainment advertising declined 2.5% in the quarter, mainly because of fewer film releases in April.

As part of our continuing investments in our products, in April, we launched the new Thursday Style Section, featuring increased coverage of men's and women's fashions, fitness, shopping, beauty and style.

This section has been very well-received by both readers and advertisers.

Later this year, we will add two news issues of T Styles, our special supplement on our very successful Sunday magazine.

One will focus on beauty and the other on the year-end holidays.

T Styles has proven to be a very popular edition, particularly with luxury good advertisers.

Color advertising remains strong, totaling 29% of advertising revenues in the quarter, up from 28% in the same period last year.

We plan to increase our color-printing capacity by 40%, by the first of November, in time for the busy holiday season.

As Boston continues to lag the rest of the country in economic growth, the New England Media Group had a challenging quarter.

The revenues declined less than 1%.

Retail advertising improved, led by jewelry, watch, and electronic advertisers.

Department store advertising showed modest gains, but travel, entertainment and telecommunications, all large categories, declined.

Last week, the Globe launched Sidekicks, an innovative new section designed to provide readers with a guide to a better day by offering a mix of information on shopping, entertainment, dining and some of the newspaper's more popular features.

The debut of this section will be supported by a promotional campaign, and a half-price offer at most newsstands within the Route 128 area through the month of September.

This price is designed to showcase the new section to readers who do not purchase the Globe on a regular basis, and to positively affect our circulation, particularly with younger readers.

Our joint venture with Metro Boston, a free daily newspaper is going very well.

Several advertisers, including Cingular, Target, Comp USA, and Ford have, or will, run ads in it over the next few weeks.

Stories from the Globe are appearing in Metro and we are planning to start printing Metro on the Telegram and Gazette's press in 2006, which will significantly increase its color, paging, and volume capacities.

In addition, we're doing a great deal of cross-promotion with the Globe, Metro and Boston.com which together, this fall, will launch Boston Uncovered, the largest college publication and website in greater Boston.

Our regional media group experienced the strongest ad revenue growth of any of our units in the news media group, up 5% in the quarter.

As I have mentioned in the past, our regional media group strives to derive a third of its total revenue growth from new products and services.

It successfully did so this quarter through data base marketing, commercial printing, website, magazines, weekly newspapers, and select market coverage.

This was part of the reason that its other revenues climbed 18% in the second quarter and other advertising revenues grew 28%.

The company's total circulation revenue decreased less than 1% in the quarter.

The Times Media Group circulation revenues were flat.

At the New England Media Group circulation revenues decreased about 5%, and at the regional circulation revenues rose nearly 2%.

By the end of 2006, we plan to add seven print sites for the New York Times, which will increase the availability and circulation outside the metropolitan New York area.

Two will come on line this fall, Houston and Toronto.

Turning to online advertising, revenues for the News Media Group once again demonstrated exceptional growth, up 27%.

This very good showing comes at the top of the Group's already large revenue, digital revenue base.

Strong gains were posted in display and all of the classified categories.

We are excited about the launch of Times Select, a new fee-based service that includes our distinctive columnists, easy and in-depth access to the Times archives and other exciting features for just under $50 per year.

Times Select will debut this fall, further diversifying our online revenue stream, and speaking of our digital revenues, we're particularly pleased with the performance of About.com., the 10th largest site on the web.

It's already doing better than our acquisition assumptions.

While this is just the first full quarter of operations as part of our company, we are very excited about the early results and the potential for continued strong growth.

Based on the accounting records of the previous owner, and our own records since the acquisition, About.com's revenues grew approximately 39% in the quarter.

About.com's integration is progressing very well.

For instance, joint sales calls are underway with major advertisers and several nytimes.com advertisers have begun advertising on About as a result of these introductions.

We are also pursuing innovative ways of driving traffic between About.com and nytimes.com.

We have already begun promoting the Times' weekly short videos to About users.

In just a few weeks, and without any new designs on About.com, the number of plays of Tony Scott's movie reviews and David Poe's electronic gadgets reviews on nytimes.com has jumped significantly, and we think that's just the beginning.

The addition of About.com to the Times Company has resulted in the 11th largest corporate online network, which provides advertisers with a robust inventory of high-quality page views to market their products and services.

Turning to our Broadcast Media Group, revenues decreased just 1% in the quarter, despite the decline in political advertising.

In the second quarter, political advertising amounted to $800,000, compared with 3.4 million in the same period last year.

Gains in automotive, financial services, and home improvement advertising, particularly -- excuse me, partially offset the losses in political advertising.

To date in July, the trend in advertising revenue growth for the News Media Group is similar to that of the second quarter.

Performance varies across the News Media Group with properties in smaller markets continuing to show better results than those in large markets.

As has been the case throughout the year, there are considerable differences among categories of print advertising.

Online advertising remains strong and About.com continues to see very robust growth.

Our Broadcast Media Group still faces challenging comparisons to last year when it benefited from political spending.

Our pacings in July are currently down in the low, single digits.

We will continue to be very disciplined in managing our expenses, at the same time, we will strategically invest in new products that we believe will result in profitable revenues.

Now, let me turn the call over to Len.

Thanks, Janet.

During the quarter, we continued to be very disciplined on expenses.

Janet mentioned the cost associated with the staff reduction program and stock-based compensation.

In addition, the company had costs from About.com, which we did not own last year.

Excluding these three items, costs were up 3.2%, mainly because of higher distribution and outside printing expense, increased promotion, and higher newsprint costs.

Newsprint expense rose 7.7%, with 8.5% resulting from higher prices, partially offset by .8% decrease from lower consumption.

As part of our effort to reduce newsprint expense, we have already converted most of the Times' print sites and four of our other newspapers to a lighter-weight sheet.

We plan to convert the remainder by the end of the third quarter.

We expect to save $900,000 to $1.6 million as a result of this step in 2005, and we estimate annualized savings in the range of $2.5 million to $3.5 million.

As Janet noted, in the second quarter, we recorded a pre-tax charge of 10 million, or $0.04 for the cost associated with the Company's staff-reduction program.

In the third quarter, we expect to record an additional pre-tax charge of approximately 6 million, or $0.03 per share for completion of the staff reduction program we announced in May.

Capital spending in the quarter totaled 37 million, including 17 million for our new headquarters building.

Year-to-date, CapEx amounted to 71 million, including 31 million for our new building.

Our CapEx guidance for the year remains 215 to 245 million, as most of this year's new building expenditures will occur in the second half.

In the second quarter, we repurchased approximately 400,000 shares at a cost of $13.4 million.

Previously, the Company said that the amount of shares repurchased in 2005 would be at least equal to the number of shares issued for employee share plan.

Year-to-date, option exercises have been lower than anticipated.

In the first half of 2005, the Company repurchased approximately 1 million shares, but issued only about 300,000 shares, a net decrease of 700,000 shares.

In the second half of this year, the Company is also likely to repurchase a greater number of shares that are issued, subject to market or other conditions.

At the end of the quarter, we had 145.4 million shares outstanding, down 2.8 million shares from the end of the second quarter last year.

As Janet mentioned, the advertising environment remains uneven across our properties.

Because of this, we remain very focused on managing and reducing costs throughout the Company.

We're continuing to drive down operating costs.

At the same time, our efforts to find ways to operate more efficiently have been accelerated.

Several weeks ago, we announced that Stu Stoller, our Corporate Controller, would take on the additional responsibility of overseeing all of the Company's process engineering initiatives.

Under Stu's leadership, we believe we will be able to save at least eight to 10 million this year, which will help us to achieve our cost guidance, and going forward, we believe the number will increase to more than 20 million.

With regards to the rest of the year, based on our first half results and the current marketplace, our full year 2005 guidance remains unchanged.

We plan to update you later in the quarter on our third quarter progress.

And now, we'd be happy to answer any questions you might have.

Thank you.

The question-and-answer session will be conducted electronically. (OPERATOR INSTRUCTIONS.) We'll take our first question from William Drewry from Credit Suisse First Boston.

Hi, thanks.

It's Debra Schwartz on for Bill.

I was just wondering if you could break out help wanted between Boston and New York for the quarter and also, comparisons for help wanted are difficult the rest of the year.

Based on your guidance for the rest of the year, what are you expecting in the help wanted trends?

The percentages in regard to the quarter for New York and New England, New York was down 2.3% in the quarter and New England was up 2.5% in the quarter.

I will speak for New England, and then I will turn it over to Scott for help wanted, but we're expecting modest growth for help wanted in the second half of the year.

We have seen very strong online growth in Boston with our program called Boston Works which, of course, is strong online and print activity.

We think that that will continue.

There are particular segments of the market, biotech, technology and health care that have shown strong signs of growth, and we think that will continue going into the second half.

At the Times, we expect the second half to resemble the first half, the job market in New York remains lackluster.

Our online component had very healthy gains in the first half and those will continue into the second half.

On the print side, we have seen very strong gains on the display side offset by losses on the [inaudible] side and that netted out in the first half to a slight decline and we expect the same in the second half.

Yeah, just one more point.

The regional newspaper group was up in the mid-20s, and I think that's an important note that our small market recruitment classified is still growing quite well.

Right.

Thanks much.

We'll take our next question from Craig Huber from Lehman Brothers.

Yes, good morning, thank you.

Non-newsprint in the second quarter, or just that division, was it up about 3, 3 1/2 % and also, you going forward, do you think you'll really keep it with that level, or are we going to dip down a little more here?

We can't quite hear you, can you speak up a bit?

I was asking for non-news print in the second quarter, what the percent change was?

Huh?

Secondly, should we expect any further one-time items in the back half of the year, above and beyond this $0.03 charge.

Are we going to have a series of these workforce reduction charges as we have seen a few years ago?

Thanks.

I think the question was non-cash cost expenses, we were up about 3.4% approximately in the quarter, and we have no expectation of further charges, other than the charge I mentioned in my opening remarks later on this quarter.

And lastly, if I could, do you plan on stepping up the pace in the share buybacks in the second half of the year?

We're, obviously, opportunistic.

We think our share price is very attractive and this leadership group believes in the future growth of the company.

So, I think share repurchases is part of, one part of our use of cash going forward.

And it's certainly at the top of our minds.

But if you feel that way, why don't you take on significant amount of debt then?

Granted you just did this large acquisition, you're doing the building.

Why aren't you taking on a lot of debt here to buy back your stock in the low 30s, I wonder?

As I said, it's one part of one component of how we use our cash, and we're fairly conservative with the balance sheet.

We don't want to overleverage ourselves.

We are cognizant of debt ratings and interest costs, and so, for us, it's a balancing act as we go forward.

Okay, thank you.

Next, we'll go to Paul Ginocchio from Deutsche Bank.

Yes, hi there.

Just two questions.

First, you mentioned the wireless merger and ad revenues being down, can you quantify what the combined entity was, how much it was down this year relative to the two companies combined last year?

And, second on the color upgrade, or the increased capacity, are you selling out color ad pages today, and how do you think that impacts the increased capacity?

How do you think it impacts you going forward?

How much more will you be using [inaudible]?

Thanks.

First with regard to color -- there is -- it's seasonal.

There are days when we effectively sell out, so we work with advertisers to move in to days of the week when there is capacity, and as you would expect, that tension, that demand grows considerably in the fourth quarter.

With regard to telecom, we were down in the second quarter in the 20% range.

This has been the trend all year long.

We expect to cycle past the effect of the AT&T Wireless merger beginning in November and start to do better.

We're having a better-than-expected July in telecom.

It's different from all the other months of this year.

We're seeing good, competitive spending this month.

So just reading into that, I guess, the combined entity relative to last year is down much more than 20%?

For just AT&T and Cingular?

I'm not quite sure I understand your question?

AT&T Cingular this year versus AT&T Cingular last year.

Okay, I got it.

Sorry.

I think we have a policy of not speaking -- .

Okay.

With specific advertiser questions.

Understand.

Thank you.

Next we'll go to John Janedis from Banc of America Securities.

Hi, good morning.

Janet, you talked about the ad revenue picture lagging in your larger markets.

How much of that, do you think, is related to the economic picture, I guess, versus the more competitive environment across media and what gets that trend to reverse itself?

Can you also give us a quick update on the IHT.

How does the revenue picture look there and is it near profitability?

Thank you.

Particularly in Boston, the economic, the situation in Boston is affecting the performance in the large market.

That, I think, we see, we also see a bit of that in New York, as well, but not to the degree that we see in Boston.

That said, both Boston and New York have put wonderful revenue-generating opportunities in front of clients with more to come in the second half of the year.

And I think from that perspective, I think that it bodes well for what we will be seeing in regard to commitments not just in the second half, but, hopefully, going toward 2006.

But from a standpoint of the IHT, we're seeing advertising revenue growth at the IHT.

As I think I have noted before, because of a very strong showing in regard to the European business reader survey and the Asian business reader survey, we have been able to Garner more advertising dollars out of the market, and consequently, more share.

That said, with the increase of the -- the improvement of the product, I also think that has had bearing in regard to the advertising support.

Next, we'll go to Karl Choi from Merrill Lynch.

Hi, good morning.

A couple of questions.

One, this morning, Dow Jones mentioned they're seeing some more positive signs from technology advertisers, knowing that they're more [inaudible].

But I just wonder if you were seeing similar signs, as well, and, two, as they're selling their weekend edition out there are you seeing any impact on advertising?

Thanks.

We're not seeing any impact from their advertising efforts on the weekend edition, and with regard to technology, we're having a particularly good month in July with technology, but our outlook for the second half is continued unevenness.

If I could follow up, could you also update us on your expectations for Entertainment, please, do you expect a ramp-up?

Thanks.

Entertainment, we're expecting a better second half than the first half.

We're approximately flat in the first half and that was largely driven by the fewer wide screen releases in the marketplace.

There is a much more robust wide screen release schedule for the second half, there are 10 more releases planned for the third quarter, beginning with August and then 14 more for the fourth quarter, so we're expecting that to drive some positive results in the entertainment category.

Thank you.

Now, we'll go to Alexia Quadrani from Bear Stearns.

Thank you.

Referencing back to your comments on the IHT, could you just remind us what percentage of revenue, I guess, it contributes to now, sort of give us an idea of how much of an impact it's having on your revenue growth?

And then following up, you made some positive references to July being strong in telecom, and I think you said in technology as well.

Overall, July, is it looking look a better month than June?

Alexia, with regard to the IHT we don't break out the results separately, but what I can tell you is in the last year that we did, which was in 2003, the IHT total revenues was approximately $75 million.

With regard to July, let me just clarify what I said about telecom.

We're not seeing steep declines in telecom this month.

We're expecting to end the month up flat to slightly down, which is a significant improvement from the rest of the year.

July is looking to shape up more along the lines of the results we saw in May.

We expect to see some overall growth.

Thank you.

Next, we'll go to Doug Arthur from Morgan Stanley.

Yes, I'm wondering if you can just drill down on the travel category, I mean it's an area that has been weak, virtually everywhere, although everybody in travel says business is very strong, so what is going on there and what possibly could turn it, and what do your comps look like in that category in the second half.

Thanks.

We're already seeing -- there are two components to our travel category.

There's general transportation and hotels.

We have already seen a turn in hotels.

Hotel spending fell back quite dramatically through the first three, four months of the year.

It's been in positive territory for two months and we expect that to carry over for the second half of the year.

Transportation has also experienced some pretty deep declines in the first half.

We're expecting those to mitigate in the second half.

The, just speaking for New England for a moment, they are continuing to see softness in the tour and travel, airlines and hotels, but they're seeing a particular bright spot in regard to New England travel.

And, in fact, there will be a launch of a travel website, a New England travel website on Boston.com in the October timeframe because they're seeing that strength.

I also would like Martin to comment in regard to the online activity as far as the travel category.

Sure, just a quickie, travel is one of our lead categories.

It was up 72% in the quarter, so the business is very robust at nytimes.com.

And there is increased selling across platforms, both in New York and in Boston, not only in that category, but in many of the categories, I think, is evidenced by what you saw with our promotion of Mary Jane Petrone and Denise Warren into the roles of Chief Advertising Officer.

The key ingredient behind those promotions is primarily to get the online and print working together even more than they have in the past to ensure more dollars where the Company is going forward.

And it falls, if I may, this, the strength in retail in New York is -- has that been an upside surprise and do you expect it to continue in the second half?

It's performing as we expected.

It's strong, as you note, particularly benefited by the luxury categories, luxury goods categories.

And we're going to see it continue into the second half.

In addition to the specific retail categories, such as department stores, fashion jewelry, mass markets.

There are the, the luxury categories, international and American fashion.

All of those are being benefited by the T-brand magazines this year, and while I'm on the topic, the key women's issue, which will be published in July -- I'm sorry, in August, is going to show growth versus last year.

When we launched the T brand and had a spectacular inaugural issue.

It's also important to note there are two new T Styles planned for the fourth quarter.

One on T Beauty and one on T Holiday, which will be brand new to the stable.

Thank you.

Thank you.

Now, we'll go to Christa Quarles from Thomas Weisel Partners.

Hi, a couple questions.

First, you indicated that About's performing better than you had anticipated.

If that continues, is the $0.04 dilution something that we should think of as conservative, i.e., would you -- if you had upside in revenue, would you plow that back into spending?

And, then, did I catch the online ad growth, did you say it was up 27%, just trying to confirm that there?

And, then, in terms of your core business, you highlighted travel where you're seeing strong growth in the online versus the offline.

What are you looking for macroeconomically, in terms of what is going to turn around the national ad market for you or the secular issues, just something you will have to continue to fight through in the near term?

Thanks.

Yeah, hi.

I will touch on the $0.04 dilution.

That's a reasonable approximation.

At this point, it's much too early to talk about changing the guidance or expectations with that.

We'll update you down the road as we collect more information.

And just to the more specific about the ad growth rates, the ad growth rate of 27% applies to the two newspaper websites, nytimes.com and Boston.com.

About is broken out separately in the advertising growth rates of About, which include, by the way, a small line for e-commerce, as well as paper click revenue, we're up 40.4% in the quarter.

With regard to the national category, I don't think it's quite so simple as the secular pressure, or economic cycle.

The travel category is maybe a good example where that's taking place.

We have strong in-paper and online initiatives.

We're getting some very strong branding advertising, our key travel magazine continues to show growth and it's going to show growth for us in the second half.

But across the board, we're seeing healthy performance in the automotive category, financial services, books.

As I said by the end of the year, we'll cycle past the telecom, fiscal telecom comps, corporate is going to perform well for us in the second half.

Financial services will continue to be good for us, and as I've already said, hotels is going to have a positive second half, we believe.

Media is going to be up against difficult comps with the political advertising from last year, but overall, we'll show strength.

So, and then I have also talked about the entertainment category.

So, it's not a simple secular, non-secular kind of question, we have very healthy portfolio categories and we see some of the national categories starting to cross over into a positive outlook.

It's also important to note that the redesigns of the sections that you have seen at the Times and at the Globe and certainly the buildout of many of the verticals at Boston.com and at nytimes.com are very much geared towards national category growth.

So we think that that will be attractive to advertisers, as well, going forward.

Have you been able to quantify how those have impacted, I mean, the redevelopment T and Thursday Styles and some of the new -- .

Absolutely.

We monitor all of the -- there is a very strict discipline.

If there is a watch word for the leadership effort here at the Times, it's definitely the word "discipline."

There is rigorous discipline being exerted against our revenue-generating activities, looking at every redesign and every section in regard to how it's performing and how that investment has worked for us, and at the same time, there is rigorous discipline being exerted towards the expense management as well, making sure that the process re-engineering we have undertaken is looking at sustainable, systemic cost reduction.

The product enhancements and introductions we have done at the Times Media Group will easily add 10 million to revenue this year.

Great.

Thank you.

Now, we'll go to Peter Appert from Goldman Sachs.

A couple of questions for Martin.

I'm trying to dig and understand the economic [inaudible] a little bit better.

So the 40% second revenue growth rate, how does that compare with recent trend lines there, number one.

Number two, it looks like you did a 45% EBITDA margin in the quarter which, is impressive.

I'm wondering if there is any seasonality in that and what you think about the sustainability of that margin number, and lastly, you talked about some combined sales efforts.

Is there an expectation you will combine the sales organizations going forward?

Well, let me start with the -- well, all the questions.

The 40%, as you know, represents the first, basically, the first quarter of our ownership.

So, it's very difficult to say whether that is a trend line or not.

I mean we have, as Janet said, very robust expectations for the business.

The ad revenue line, as I sort of alluded to before, is broken out into a number of different segments.

It includes the display advertising revenue, which grew very robustly in the quarter, it, it was the leading line in the quarter -- put it that way.

It also includes a substantial amount of revenue from our paper click line, which is a relationship that we have with Google, and as you know, or as you may know, this is the fastest-growing part of the web advertising space.

The New York Times Company, as a whole, I believe, is Google's second largest revenue relationship, so we're a very large player in that new revenue stream going forward.

I alluded to a small e-commerce line, as well as some other revenue.

The, the second question, just please repeat it again.

It looked like you were doing something close to a 45% EBITDA margin.

I wondered if that was -- .

Oh -- oh, yes.

There is, there may be a little bit of seasonality in there.

Historically, the second quarter on the web has been a good quarter.

The summer quarter tends to be a little slower and, of course, the fourth quarter is very robust.

So there may be a little seasonality in there, but, again, we expect to run the business with a great amount of discipline.

We are making some minor investments in the business in order to improve the content, and I think we talked about that in prior calls.

With respect to your question about the sales accommodations, I think we have already alluded to one major initiative there.

We put people in place at -- in both Boston and New York.

Denise Warren in New York;

Mary Jane Petrone in Boston who now have umbrella responsibility for both the print and digital businesses.

In doing that, they can bring to market packages that represent total audience rather than just a print audience, or a digital audience.

They can bring very robust, very creative packages to the marketplace.

At the same time, as Janet alluded to, we have initiatives underway which bring a very large digital base to the marketplace.

We have, we are, as she said, the 11th largest provider of users on the internet right now, and above that, you have guys like eBay and Amazon and the U.S. government.

So from a content perspective, we're one or two, depending upon the month over the last three months, and we can leverage that very large audience and we're doing that, increasingly across a broad number of clients.

We have recently went on joint sales calls in Chicago, on a number of CPG accounts together, we're obviously leveraging the time strength in the entertainment category [inaudible], so there are a whole range of initiatives, both print and digital, and all digital going on throughout the company.

That, actually, Martin, gets to my first question.

My sense is that About hasn't grown anywhere near 40% in recent periods, but you're not willing to say that, you think the growth rate is accelerated under New York Times ownership.

I will turn that over to -- to Len, first.

Peter, I think what you're seeing is what I talked about in the past with regard to the assumptions we made when we valued About.com, which were quite conservative, and didn't account for what we know are the synergies between the two companies.

Martin mentioned one of them in terms of the joint sales calls.

Part of the growth that both newyorktimes.com and About.com are experiencing are a result of the symbiotic relationship between these two companies, and it's why we, when we made this acquisition, felt quite comfortable with the amount of the evaluation and we feel that, over time, you will begin to recognize the fact that this turned out to be a pretty good deal.

Let me make one more comment.

We have had, since we acquired About.com, an intense focus on yield management at the property.

As I think you probably know, the property reaches 22 million users and delivers over a half a billion page views.

In order for us to see these kinds of numbers take shape, the yields that we get on a revenue per thousand basis from these pages need to increase.

We have focused on that.

So I think you can take that as a sign the increases have been engineered.

The second thing we have done, that I think About had a competency going in, one of the things we a required was something called search engine optimization, or SEO.

We're now leveraging SEO back into the Times and Boston.com properties in a very real way.

For example, in Help Wanted we just completely restructured nytimes.com job market business, so that it takes advantage of SEO.

So that when someone goes to a search engine and types in sales manager, New York, that link comes up much higher or over time will come up much higher in search results.

Everybody needs to understand that search is becoming a very, very important portal in to content and commerce, and we have a particular competency now in that arena that we're leveraging across the board.

Great.

Thank you.

Now we'll go to Fred Searby from J.P. Morgan.

Thank you.

I just was wondering on newyorktimes.com, I didn't find a breakout for online properties, as About.com.

I was wondering about the growth rate and some color on CPMs and whether you're seeing any kind of deceleration, or the outlook, in the second half or principally newyorktimes.com, but your newspaper online properties?

Our online revenues, Fred, were up 27% in the quarter, and I'll let Martin talk to the CPM issue.

We have been very aggressive at nytimes.com in rates and in price increases.

We have had double digit increases in our premium inventory and our rich media inventory on the homepage.

I think we've raised rates something like four times in the last year.

So we're very rate sensitive and we are very aggressive, in terms of our premium price position in the marketplace.

I think if you were to ask clients in the marketplace, they would tell you the Times on the web has a premium position in the market.

With respect to your question about the second half, I don't think we give too much color on, you know, forward-looking statements, but the outlook for online advertising, as you know, for the second half is probably pretty strong.

Across the industry.

Fred, just to clarify, the 27% that I mentioned is for all of our online properties.

We don't break out results for nytimes.com or Boston.com separately for competitive reasons.

But that's x About.com?

Yes.

Can you give me the absolute dollar amount?

No.

Okay, thank you.

Once again, star 1 with any questions.

Now we'll go to Bill Bird from Citigroup Smith Barney.

You mentioned that 29% of advertising at the Times is now color.

Just wondering with the additional capacity coming on line, where you would expect that to be, maybe in a year or so, and then, second, when do you expect to complete CapEx on the new building?

Thanks.

I would expect the capacity increase to increase our color revenues next year by at least 10%.

Could I just add in regard to Boston, as well, because color is showing some very substantial growth in Boston, as well.

In Quarter 1, 33% of all of their advertising was color and in Quarter 2, 36%.

That compares to 30 and 31 the prior year.

So they're on a growth path in regard to selling more color in the Globe, as well.

You had a question, Bill, I think, on the building spending.

We expect to complete that towards the end of 2007 and all of our spending will be done in 2007.

And just to be clear on the first response, you mentioned at least 10% growth in color.

Does that mean the proportion rising from 29 to 39, or am I misinterpreting that?

That was calculating off of our total color premium revenue base.

Okay.

Does that clarify?

Yes.

Thank you.

It appears there are no further questions at this time, Miss Mathis.

I would like to turn the conference back over to you for any additional or closing remarks.

Thank you, everyone, for participating today and if you have any other questions, please give me a call.

Bye now.

That concludes today's conference, you may now disconnect.