Good morning, ladies and gentlemen, and welcome to The New York Times Company Q4 and full year 2014 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. After the presentation, we will conduct a question and answer session. At that time, should you wish to ask a question, please lift your receiver and press star one on your telephone keypad. To withdraw your question, please press the pound key. Please note that this call is being recorded today, Tuesday, February 3rd, 2015, at 11:00 A.M. Eastern Time. I would now like to turn the meeting over to your host for today's call, Ms. Andrea Passalacqua, Director of Investor Relations of The New York Times. Please go ahead, Ms. Passalacqua.
Thank you, and welcome to The New York Times Company's fourth quarter and full year 2014 earnings conference call. On the call today, we have Mark Thompson, President and Chief Executive Officer, James Follo, Executive Vice President and Chief Financial Officer, and Meredith Kopit Levien, Executive Vice President of Advertising. 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 2013 10-K. 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, Andrea, and good morning, everyone. Before I turn to the detail of Q4, I'd like to offer a few observations about 2014 as a whole. This was an encouraging year for The New York Times Company. We made enough progress with our digital revenue to more than offset the secular pressures on the print side of our business and to deliver modest overall revenue growth. Especially pleasing was the progress on digital advertising. When I arrived at the company just over 2 years ago, digital advertising was in decline. In 2014, we reversed that with digital ad growth in all four quarters, which became double-digit growth in the second half with a 19% year-over-year gain in the fourth quarter. That great digital story meant that despite continued secular headwinds in print advertising, total advertising revenue for the year was within a percentage point of flat.
The decline was 0.7% compared to 2013. This was the most encouraging year-over-year trend for our advertising business since 2005. The digital growth came from the launch of Paid Posts, our native advertising solution, as well as strong growth in mobile and video. The digital advertising market continues to evolve rapidly with great new opportunities alongside pressure on some existing parts of the business. That means that we do not currently expect 2015 to deliver quarterly year-over-year gains as high as some of those we enjoyed in 2014. We have a strong team in place.
We are actively developing further new ad solutions, including in mobile and around sponsorship, and we believe there is immense further potential in Paid Posts, both in terms of media revenue and the growing additional revenue we're driving from T Brand Studio, the creative services team who produce much of the branded content that appears under the Paid Posts name. For all these reasons, we're confident we can maintain significant growth in digital advertising. We also saw progress in the digital consumer revenue business. Overall, we continued to build our digital subscriber total in 2014 and finished the year with 910,000 paid digital subscribers, an increase of 150,000 from the previous year, beating our tally of new additions in 2013 by 25%. In particular, we saw growth during the year among international subscribers.
Late in 2014, we introduced the ability for new customers to subscribe in their own currency to boost international growth further. We're now well on track to exceed the 1 million digital subscriber milestone in 2015. We don't believe we've yet fully exploited the full potential of our digital subscription business. There were many achievements in 2014. We showed that we have the journalistic design and product talent and capability to reach and satisfy new customers with great Times journalism packaged in new ways. NYT Now has demonstrated an ability to engage a younger audience, which is new to The Times, and both it and our cooking products were named among the best apps of the year by Apple. We've also learned some lessons about the need to spend sufficient time building the audience for a new product before full monetization.
This is how we're approaching our cooking product, and we're seeing very healthy audience growth as a result. Also, about the marketing challenge involved in presenting a bigger portfolio of products clearly to consumers, something that was certainly an issue for us with the launch of NYT Now. We will continue to develop our thinking about the portfolio over the early part of 2015, and we'll involve our new marketing and product technology EVPs, who we're currently recruiting, as soon as they arrive, and we will have more to say about this later in the year. As with our digital advertising business, though, we believe there is a real opportunity to scale the business more quickly than we are at the moment.
We also believe that both digital revenue streams will benefit from the focus on fundamental audience development that was inspired by last year's innovation report and which is now fully engaging our newsroom and product teams. Targeted investment in print was also part of the story of 2014 and will be again in 2015. You'll see some of the fruits of those efforts in the first half of this year, beginning with the relaunch of The New York Times Magazine later this month, followed by the launch of a new men's fashion and lifestyle section in April. This will be our first new print section in 10 years, and one we feel will be well-positioned to thrive given our success to date within the luxury advertising category.
We have a very strong presence in this category, and advertisers are eager to tap into our brand given our visibility and influence in the market. Recognizing the core strength of our brand, in 2014, we deepened our newsroom coverage on a variety of topics, such as with the April launch of The Upshot, which provides news analysis, data visualizations, commentary, and historical context from a staff led by Pulitzer Prize winner, David Leonhardt. After less than a year, this site has already won critical acclaim. In addition, our First Draft site and daily newsletter, which provides one-stop coverage and analysis of U.S. politics and elections, is off to a great start. New ventures such as these solidify the engagement of Times readers, drive new traffic, and create coveted new destinations for our advertisers. Let me turn now to the financial results for Q4 2014.
The company's operating profit was $62 million. That compares to $69 million for the same period in 2013, and the decrease was principally the result of severance expense booked in the quarter. Adjusted operating costs were roughly flat in the quarter. For full year 2014, the company had an operating profit of $92 million, compared to $156 million in 2013, with the decline primarily resulting from investment spending related to our strategic initiatives, as well as severance expense. Adjusted operating profit in 2014 was $256 million, compared to $277 million in 2013. Total revenues grew slightly for the quarter, which was the result of growth in both our digital subscriber base and digital advertising revenue. Overall, advertising revenues ended down 2% in the fourth quarter, which was better than we had anticipated. Print advertising did not see the late quarter rally that it enjoyed in the third quarter.
Over the fourth quarter as a whole, print decreased 9% year-over-year, a decline largely offset by that 19% growth in digital advertising. Print advertising is expected to face continuing headwinds in 2015. Circulation revenue performed in line with what we expected during the quarter, as the combination of 2014's increase in home delivery prices and continued growth in the number of digital subscribers more than offset a decline in print copies sold. The overall increase in circulation revenues was 1.4%. In the quarter, we added 35,000 net new digital subscribers, which is a 20% increase from the fourth quarter in 2013. The bulk of the growth again came from our core packages, including from international consumers, as well as from corporate and education group subscriptions. The relative improvement in advertising revenue trends, circulation revenue growth, and cost management initiatives drove our performance in the quarter.
Despite an increase in operating costs in the quarter and year, we will ensure that expense controls remain tight in 2015. We need to reduce legacy costs wherever we can to supplement our diversified efforts on the revenue side. Let me turn now to James Follo for a more detailed financial review.
Thank you, Mark, and good morning, everyone. As Mark highlighted, we closed 2014 on a solid note with notable digital revenue growth on both the advertising and consumer sides of the business. We're beginning to see the benefits of our strategic initiatives in transforming our organization, although there is much to accomplish in the coming year. Despite print declines for both our advertising and circulation revenue streams in the fourth quarter, the momentum in our digital business led to revenues that were up slightly overall. Expenses rose in the fourth quarter, driven by severance expense related to workforce reductions announced in the quarter, as well as retirement costs. Costs related to our strategic initiatives are beginning to flatten out according to plan, as we are now cycling a full year of that spending. Our focus on reducing core costs remains a top priority.
The cost reduction initiatives we recently implemented across the company should allow us to maintain stable or slightly lower costs in 2015 relative to 2014 levels. Adjusted operating profit was roughly flat in the quarter at $104 million. We reported GAAP operating profit of approximately $62 million, impacted by the severance expense and retirement costs I just referenced, compared with operating profit of $69 million in the same period of 2013. Growth in digital advertising and digital subscription revenues helped total revenues finish up slightly for both the quarter and the full year. Circulation revenues increased 1% in the fourth quarter, with our digital subscription revenue stream more than offsetting print declines. We benefited from 2014's home delivery price increase, although higher revenue from the new rates was outweighed by overall volume declines.
In the fourth quarter, digital-only subscription revenues were approximately $44 million, an increase of 14% from the same quarter in 2013. We did put through a New York Times home delivery price increase of approximately 5% at the start of 2015. Newsstand and digital prices were not affected. Advertising accelerated its momentum on the digital platform in the quarter, finishing up 19%, which despite a print loss of 9%, limited the advertising decline in the quarter to 2%. Digital advertising continues to see a boost from Paid Posts, as well as mobile and video. Moving on, overall advertising revenue in the quarter continued to exhibit month-to-month volatility and reflect short-term buying decisions, demonstrated by an October decline of 5%, flat performance in November, and a 1% decline in December. Print advertising revenue was down across the board, while digital was consistently strong.
During the fourth quarter 2014, the company began reclassifying advertising revenue by a slightly different set of categories. In today's earnings release, you'll see that display now includes a combination of the prior national and retail categories. Classified now includes only agate listings, and the new other advertising category includes such items as preprints and production fees generated from our branded content studio. The release also provides the Q4 and full-year growth rates based upon similar prior year comparisons. We decided to make these changes as the lines between national and retail continues to blur. Other revenues grew 10% in the quarter, driven by higher revenues from our online store and content licensing. Expense management efforts remained an intense focus in Q4 as we moved ahead with plans to lower core costs while maintaining critical investment spending.
Early in the fourth quarter, we announced a cost-cutting plan that involved headcount reductions across the company. We believe that we achieved these reductions without impacting our world-class journalism. This plan reflects our commitment to strengthening our operating efficiencies while safeguarding our long-term profitability. We remain committed to investing in certain areas of growth. Costs are up 3% on a GAAP basis in the quarter and reported diluted earnings per share of $0.22. Costs rose due to severance expense related to headcount reductions, as well as higher retirement costs, partially offset by distribution efficiencies. Adjusted diluted earnings per share was $0.26 in the fourth quarter compared to $0.29 in the prior year. Our non-operating retirement costs increased by nearly $4 million in the quarter, and retirement costs are expected to flatten out in 2015.
We expect non-operating retirement costs in the first quarter to be approximately $10 million versus $9 million in Q1 2014 due to higher multi-employer pension withdrawal costs. In the quarter, we also completed the rental of an additional floor of our headquarters building, which makes up a total of 31,000 sq ft. We'll begin recording the associated rental income in the first quarter, and this will bring us to a total of seven leased floors. During the fourth quarter, we recognized an impairment charge of $9.2 million for our joint venture, Madison Paper Industries. The company's proportionate share of the after-tax loss was $4.7 million after adjusting for the allocation of the loss to the non-controlling interest. Moving to the balance sheet, our strong liquidity position remained intact in the fourth quarter.
Our cash and marketable securities balance was $981 million, and our total cash position exceeded total debt and capital lease obligations by approximately $331 million. During the fourth quarter, we repurchased approximately $20 million principal amount of our 5% senior notes due in March. You likely saw at the beginning of the first quarter that as part of a warrant exercise, we announced the intention to make share repurchases of approximately $101 million, equal to the proceeds we received from the warrant transaction. We believe a repurchase program is the best use of cash in this instance, since it will largely neutralize the transaction's impact on our diluted share count. The impact of the warrant exercise was to increase our diluted share count by approximately 8 million based upon current stock price.
I do want to emphasize that this is a one-off program that should not be viewed as a change in our capital allocation plan. For accounting purposes on a GAAP basis, based upon preliminary results, the underfunded status of our qualified pension plans at December 20th, 2014, was approximately $264 million. That compares to $80 million at the end of 2013. The funded status of the company's qualified plans was negatively impacted in 2014 by interest rates, and as we previously disclosed, the adoption of new mortality tables issued by the Society of Actuaries, partially offset by strong asset performance. Also in the fourth quarter, the company offered participants of the various defined benefit plans the option to immediately receive lump sum payments or to immediately begin receiving a reduced monthly annuity.
We will begin making settlement distributions of approximately $98 million on that offer in the first quarter, all of which will come from pension assets. The purpose of this offer was to reduce the overall size and inherent risk of our plans, as well as to modestly improve our funded status. We also expect to book a special.
$40 million in Q1 as a result. Moving to our outlook, first quarter circulation revenues are expected to increase at a rate similar to the fourth quarter trend, driven by the benefit from our digital subscription revenue stream and January's home delivery price increase, despite continued challenges, particularly for newsstand volume. We expect the total number of net new digital subscriber additions in the first quarter to be in the mid-30,000s. Advertising revenues are currently expected to be down in the mid-single digits, driven by print declines, partially resulting from challenging year-over-year comparisons. You'll recall that advertising revenues increased more than 3% in the first quarter of 2014, including growth in print advertising of nearly 4%, due to strength associated with a strong Oscar race and the New York area Super Bowl. As Mark mentioned, print will face ongoing headwinds and continued volatility in 2015.
Digital is expected to maintain positive growth in the low double digits in the first quarter. Other revenues are expected to increase in the mid-single digits. First quarter operating costs and adjusted operating costs are expected to be roughly flat as we have now cycled the start of our strategic initiative spending, and we get the benefit of late 2014 cost reduction initiatives. With that, we'd be happy to take your questions.
At this time, I would like to remind everyone, should you wish to ask a question, please lift your receiver and press star one on your telephone keypad. To withdraw your question, please press the pound key. Your first question comes from the line of Doug Arthur with Evercore ISI. Your line is open.
Yeah, thank you. Mark, I think the last time you guided on digital for the fourth quarter advertising, you cited a somewhat tougher comp, and somewhat of a decel from the strong growth rate of the Q3. Obviously, that didn't happen. You accelerated. I guess, what caused that? I guess by turn, is your Q1 guidance on digital therefore possibly conservative? A second question, just I'm wondering if you can elaborate on the relaunch plans for sort of the desktop version of the low price digital sub package. Thanks.
Okay. Doug, good morning. Let me deal with the second one first and say that we are still working and are continuing to test options around the expression of the low-cost offer in the kind of non-app environments, desktop, and also essentially mobile web as well. That's part of a broader look at our digital portfolio, with a focus both on that but also a focus on optimizing the way our products play out in mobile as well. As I said, we'll come back to you later in the year with some fresh thinking about that. On advertising, I'll let Meredith answer the question. Just to say, the way we go about our guidance is to genuinely aim for a mid-case projection for the quarter. That's what we did in Q4. We outperformed that.
We saw some real success both in the Paid Posts and elsewhere in our digital offering, and we did better. Our guidance for Q1 2015 is absolutely aimed not to be artificially conservative, but a mid-case projection as our guidance was in Q4. Meredith, you want to add any color to that?
Yes, I would agree with that. I would say we did see in Q4, we saw Paid Posts continue to grow. We saw mobile and video continue to grow. We also had the benefit of some very large enterprise deals where a lot of the revenue was particularly in Q4. I'm with Mark. I stand by the guidance for Q1.
Okay, thank you.
Your next question comes from the line of William Bird with FBR. Your line is open.
Good morning. I was wondering if you could talk a bit about the digital subscription game plan for the year ahead. What are some of the things that you're looking to do to sustain your digital sub gains? Thank you.
Thanks, Bill. You've heard us talking about them. We have a plan which we're rolling out to boost international subscriptions. That in-currency capability is part of that. We're also at work experimenting with other ways. We're going to be doing some experiments with in-language versions of the Times to see whether we can exploit that. We think there is considerable further development potential in both our corporate and educational businesses. We're exploring that. As I've said already, we're looking fundamentally at optimizing the core digital portfolio of products and services.
We think that although, as I said, I think we've shown, and we showed in 2014, an ability to continue to grow this business, we don't yet think we've achieved its full potential.
Just to follow up on the Paid Posts business, where do you think you are in the progression of developing that business? Is your ad inventory at a fully distributed level where you feel that you're striking the right balance for the consumer?
Very good question. I think we're still early days in the business. We have a lot of demand, and we're continuing to fulfill that demand. We've staffed up in T Brand Studio, which is where we produce a lot of the Paid Posts content, and we'll keep staffing up as that demand grows. We're also going to see Paid Posts grow in mobile and in video. They'll be major components of the mobile and video ad solutions, and we're generally optimistic about it. In one sense, to your inventory question, Paid Posts are self-generative of inventory. They're creating new inventory as they go.
It's a really important point Meredith makes, that they are additive to the existing digital advertising inventory. We think there's immense further potential in Paid Posts.
Yeah.
Immense further potential.
Absolutely.
Great, thank you. Just a follow-up for Jim, just a point of clarification. Does your pension underfunding necessitate a pension contribution this year?
No, it does not. We don't anticipate any sort of discretionary contributions. Actually, that probably holds for several years now. We're well ahead of any required funding.
Okay, thank you.
Your next question comes from the line of Craig Huber with Huber Research Partners. Your line is open.
Yes, good morning. Thank you. Just a few questions. The first one, can you give us a sense, please, of the % of your digital ad revenue, I guess, in the fourth quarter that was Paid Posts, mobile, and video combined, just so we can get a sense?
I'll say broadly, we're pleased with the trend. We've said that mobile for the year is now slightly more than 10% of our digital ad revenue. Video is a growth business, smaller number, but had a similar growth trajectory. Paid Posts was inside of 10% of the overall business but has a very strong growth trajectory. We expect these to be three of the four or five things that will keep driving digital growth in 2015.
Yeah. It's fair to say that on Paid Posts, we expect to more or less double our capability in T Brand Studio to make Paid Posts in 2015.
Exactly. I'll add to that, we expect the creative work to be a meaningful line of that business.
Yeah. With Paid Posts, obviously there's a block of revenue which is associated with the media buy.
Yep.
In addition to that, there's the revenue against the production fees we get.
Right
... for making the content in almost all the campaigns.
Right, for selling the creative work.
On the cost front, as we look out beyond the first quarter for the remaining part of the year, can you maybe just help us, give us an idea of what to think about when we do projections here for expenses for the second, third, and fourth quarter year-over-year, please?
Yeah. Well, as I said in my remarks, we expect costs to be kind of flat to slightly down.
Okay.
That's kind of a net number. We'll be investing, as we said, in some of the areas that Meredith talked about, Paid Posts. There's dollars being put against that. Audience development efforts and growing our digital audience costs against that. We'll be taking cost out of what we consider the core business. Print, we'll continue to see opportunity to reduce cost. Newsprint, we think, will be favorable for us next year on the price basis. G&A will come down. On a net basis, we think flat to slightly down is probably a good way to think about cost for the full year.
My last question, please, just a housekeeping issue. For daily and Sunday print circulation volume, what was the % change there in the quarter year over year, please?
In the fourth quarter, our daily circ was down about 6.7%. Sunday was down about 4.5%.
Great. Thank you.
Your next question comes from the line of Alexia Quadrani with J.P. Morgan. Your line is open.
Thank you. Just two quick questions. One, thank you for giving the detail on the ad number by month in the fourth quarter. I assume that was total advertising. Do you have those October, November, December, just for print as well?
If you just give us a second, we'll pull that up.
Yeah, a little bit.
Yeah. My second question, just while I guess you're looking that up, is really just a broader question on, we saw an impressive growth, I think as you highlighted, in the international digital sub growth in the quarter. I guess, is there any way you can size how significant an opportunity that could be, either longer term or just in 2015?
Alexia, I don't have much to add to what I've said in previous calls. Around a third of all traffic comes to "The New York Times" from users outside the U.S. The base case two years ago in terms of the percentage of international subscribers was around 10%. I think that one way of thinking about the opportunity is the delta between 10% and, if you like, 33%. Now I'm not suggesting that you can necessarily close that gap completely, but we're very interested in. As you know now, really since the middle of 2014, we've been very focused on audience development.
I think one thing I want to say is that we're very focused on international audience development and figuring out what combination of better tools for developing audience and figuring out ways algorithmically, but also with human editorial engagement, we can make our news report more relevant to users in different countries as a way of driving usage and not just overall reach, i.e., unique users, but also engagement so that you begin to drive those subscriptions. I think we have an answer on advertising for you.
The print number for October was, we were down about 12.5%, November was down 6%, and December was down 8%.
Any early read into January, or better, worse?
Yeah, I think Jim already gave some guidance for Q1. I'll just say it's one of our hardest comps for the year. We're comping-
We had these one-off events last year.
Super Bowl," "MetLife Stadium," a very strong Oscars race for the "Times," and then some big corporate campaigns that aren't repeating.
Okay. All right. Thank you very much.
Your next question comes from the line of John Janedis with Jefferies LLC. Your line is open.
Hi. Thanks. Good morning. Just a couple of follow-ups. Just first on digital, to what extent have you been able to broaden your base of advertisers, and what are you seeing on the pricing front in digital broadly and maybe Paid Posts specifically now that you've been selling them for a few quarters?
Sure. On the first question, I'm happy to say I think we have a very broad base of advertising. We get advertising from a lot of different categories. We actually, I think you'll see in 2015, we'll break into some new categories that we haven't necessarily played in in a meaningful way before. That will continue to improve. On Paid Posts specifically, I'm not sure if you're asking the same question, but you will see in the coming months Paid Posts from new categories. We have some stuff in the works coming from categories that haven't been out there yet. In Paid Posts, generally, one of the things that's gone well, we are probably 40 advertisers, and I want to say 50 or 51 campaigns in, and they come from many different sectors, luxury, financial services, corporate, automotive, and so forth.
That will continue to broaden. I think you had a third question in there as well.
Just on the pricing environment, broadly speaking.
Pricing? In general, we have not seen tremendous pressure on CPM, and we remain confident that particularly, actually, in both print and digital, our product is sufficiently differentiated that we should be able to maintain that CPM.
Okay, thanks, Meredith. Maybe Mark, you referenced corporate and education packages. Has there been any change in promotions for the core digital subscription offering for either maybe 1Q of this year or 4Q of last year relative to the prior year? As subs have increased, has there been any change in churn?
Well, I mean, there's a constantly kind of shifting set of promotional offers that we use, and our tactics change quarter by quarter. I think the ARPU number, which you can derive from the numbers we give, gives you a sense of the overall track of the business. There was a slight decline in ARPU in 2014, as you would expect with the launch of lower-priced offers, and with success in corporate and educational sales. We remain very pleased with ARPU. Our ARPU remains higher than the sticker price, as it were, for the main core digital subscriptions at somewhat over $15.
On the churn side, look, the deeper you get into marketing products, you see slight declines in kind of retention rates, 12-month retention rates, is something we've got pretty carefully, but it's very modest. I would say it's a consistent trend you've seen since the beginning of the model, whereas the deeper you get, it ticks down just a little bit.
Yeah.
We're still at a very healthy.
Yeah
Pretty good 12-month retention rate. We feel pretty good about it.
It's fair to say we've done some experimentation in 2014 around pricing outside the U.S. in terms of promotions. Price sensitivity, you would expect to, and indeed, it does indeed appear to vary by territory. That's been one feature of 2014.
Thank you.
Your next question comes from the line of Kannan Venkateshwar with Barclays. Your line is open.
Thank you. Just a couple of questions. The first is on, Jim, I think one of the comments you made was that the price increase overall had a negative impact on revenue on the print side. Is there any way to get a sense of the transition between print and digital as you increase prices, and what kind of an impact it has on contribution margins overall on the circulation side? The second question is, in terms of frequent visitors, I think when you had launched the digital plan, you had given us some sense of how many of your unique visitors are frequent visitors and so on. If you could just update us on that number, that would be pretty useful. How's the conversion rate on those frequent visitors in terms?
The first question, I'm not sure, you may have misread what I had said about price increase. We put through a price increase early in the year on home delivery of about 5%. That's consistent with the price increase we've put in place for many years now. We're seeing kind of similar performance. Net net, those price increases have allowed us to maintain essentially a kind of a flat print consumer revenue line. This year was down a little bit, but mainly because of single copy sales. We expect similar performance from the home delivery price increase. It doesn't just allow you to kind of keep constant, at least constant, maybe a little growth in home delivery. There's a little bit of a benefit on copies produced.
The loss from a price increase, we still feel is quite manageable, and we think that's a good tactic for us.
Okay. Well, let me struggle to answer the second question. I believe at the time that we launched the digital subscription model back in 2011, before my time, we said something like that 10%-15% of unique users were in quotes, heavy users. I mean, what is definitely true about nytimes.com and our other digital assets is that, in terms of engagement, time spent across the board, even with, as it were, an average of unique users, we do extremely well, both in terms of time spent on individual articles and, I believe also in terms of repeat business across the month. We think that one of the reasons that we are both a very strong advertising platform and have shown the ability to move more engaged users towards subscription is because the levels of engagement.
I mean, a large part of what we're trying to do with audience development is to grow the breadth of the audience, i.e., to increase the number of unique users in the U.S. and beyond, but without reducing the levels of engagement we've seen. I think one of the things that you can expect to see us doing in 2015 is looking quite closely at each stage, as it were, of the funnel in terms of how you encourage already fairly engaged users to become more engaged. Get them to the point where the value they derive from consumption of our digital assets is such that they think it makes sense to subscribe. I don't know if that helps, Tor.
Could you give us some sense of the conversion rates on some of these visitors in terms of the frequent visitors that you've had in the past?
Again, we've not typically disclosed the finer points of conversion.
Okay. All right. Thank you.
It's fair to say that there's no, I'm not aware of any kind of, as a word, decline in conversion rates at the point of a gate, as it were. When we can get engaged users to the moment when they're asked to subscribe, conversion rates have remained very steady over the course of the model.
All right. Thank you.
Your next question comes from the line of Edward Atorino with Benchmark. Your line is open.
Good, well, it's not quite afternoon. Good morning. You talk about where the cost reductions have been concentrated. Was it in the sales force, in the press room, et cetera? Secondly, regarding the circulation trend, has there been such a, I mean, it's been fairly static, I guess, in terms of this conversion, and is there much of a difference between, let's say, the New York pricing and circulation versus the rest of the country?
Yeah. The pricing, the 5% price increase is pretty much across the board, all frequencies, both in the kind of in-market and out-of-market. You asked a question about where kind of the cost reductions were. They were broadly across the board. I think it was well reported there was positions coming out of the newsroom, about 100 gross, although we've added a number of positions as well in that area, around audience development, for example, and the launch of the Sunday magazine. They've added some resources there as well. Advertising has taken some positions out, but we've invested elsewhere. As usual, it's pretty broad-based, but it's pretty strategic. We don't take a kind of a blunt instrument. We try to do it in the best way possible.
The really important thing to say is that we are very aware that we have to be incredibly mindful of the quality of the journalism we offer our users. Although we have to look at every single part of the cost structure, we're very anxious, Dean Baquet and his colleagues in the newsroom, and all of us are very anxious to make sure we're properly investing in Times journalism.
I think a year or so ago, you started a program of special content sections. I don't know what you really call them. Has that been maintained? Can you give us an update on how it has been received by the readers?
I'm assuming you're asking about the Paid Posts business or the branded content business, and I would say that has been. It was definitely one of the big growth areas of 2014, and we expect it to continue to be.
Is that a separate circulation price to people that sort of take advantage of that program? Is that sold separately?
Well, I mean, the Paid Posts are available to everyone who comes to our digital assets, anyone who comes to nytimes.com or to the apps can look at Paid Posts. They're not behind the paywall. Obviously, advertising partners who want to take advantage of the program have to pay us both to be displayed, that's the media revenue, and also most of them are paying us additional money to actually make the content which appears under that brand.
Thank you.
Our next question comes from the line of Doug Arthur with Evercore ISI. Your line is open.
Yeah, Jim, just a clarification. You reported $0.26 from continuing ops, which takes out a lot of these charges. That includes the impairment charge at the Madison plant?
Excludes it.
It-
We treat it as a special non-recurring item. The $0.26 is kind of a pro forma number that would exclude. I'll give you the components that it largely excludes. It largely excludes that item, the impairment charge, it largely excludes a fairly large tax benefit in the tax rate that we've gotten through a reversal of certain tax reserves. It excludes severance, and it also excludes non-operating retirement costs. Those are the exclusions to get to that number.
What is the imputed normalized tax rate then, excluding all these items?
Well, it's always complicated. We still say for every dollar we earn, we basically pay tax of somewhere around 41%, 42%. That tends to be quite lumpy. That's the rate that we've largely guided to, and we've done that for a while. I think when you back out all these things for a whole host of reasons, you actually get to a number which is probably close to about 45% rate.
Okay. All right. Thank you.
I'd say on every incremental dollar, I'd still use 42.
Okay, thanks.
I will now turn the call back over to Ms. Andrea Passalacqua for any closing comments. Thank you for joining us, and we look forward to talking to you again next quarter.
Thank you, everyone. Goodbye.
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.