Good morning, and welcome to The New York Times Company's second quarter 2019 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 Toplitzky, Vice President, Investor Relations. Please go ahead.
Thank you, and welcome to The New York Times Company's second quarter 2019 earnings conference call. On the call today, we have Mark Thompson, President and Chief Executive Officer, who is joining us from our office in London. While in New York, we have Roland Caputo, Executive Vice President and Chief Financial Officer, and Meredith Kopit Levien, Executive Vice President and Chief Operating 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 2018 10-K. In addition, our presentation will include non-GAAP financial measures, and we've 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. Well, we had another encouraging quarter with good growth in both digital subscriptions and digital advertising, and the successful launch of our new television series, "The Weekly." We attribute these positive results to a sound strategy, the commitment, hard work, and growing digital expertise of all of our colleagues, and above all, to the dedication and talent of our amazing reporters, columnists, and editors. Having the best journalists in the world is our not-so-secret source, and that's why we continue to increase our investment in journalism. Let's turn to the quarter and begin as usual with digital subscriptions. Our core news subscriptions grew faster than we'd expected. This quarter, we added 131,000 net new subscriptions to our core news product. Of these, 8,000 came from a Google promotion and should be considered a one-off.
The remaining 123,000 net adds still represents a significant year-over-year increase on the 68,000 we saw in Q2 2018. It's the strongest Q2 performance in years, with a milder than expected second quarter dip. Several factors account for this. Some big news stories, the effect of the more aggressive introductory offer pricing we introduced last year, and growth optimization driven by a much higher number of better design tests. On the subject of the dollar-a-week introductory offer, the first U.S. subscriptions that began on this promotion are about to reach their first anniversary. We're obviously going to track them closely over the coming weeks and months, but I can tell you that retention continues to trend similar to previous cohorts. Now, as you know, we're committed not just to driving immediate subscription results, but to ensuring that we deliver strong growth in the medium and long term.
We've talked in recent earnings calls about the testing we've been doing to further optimize our pay model, with a particular focus on scaling direct relationships and engagement. When a user is registered and logged in, we can communicate with them and understand their preferences and patterns of consumption more effectively than if they're anonymous. That typically leads to higher engagement and subscription conversion. At the start of July, we launched more extensive testing of registration and login. The tests play out differently on different platforms, and we plan to experiment with a range of parameters and business rules, how many free articles a given user is able to read, for example, in return for registration over the coming months. We don't expect this testing to have a dramatic near-term effect on net subscription additions.
Over time, however, we believe that the growing numbers of registered and logged-in users of The Times will help us maintain or increase our momentum in building out our subscription base. Turning back to Q2 2019, we also added 66,000 new subscriptions to our cooking and crossword products. The cooking product, which crossed the 250,000 subscription mark in the second quarter, and the crossword product, with more than 500,000 subs in its own right, are two of America's largest digital subscription products from a news provider. Together with the growth in the core, that made for 197,000 new digital subscription adds and a grand total of 3.8 million digital-only subscriptions for the company. Q2 2019 was also a good quarter for advertising. Digital advertising grew by 14% year-over-year, with a strong performance in direct sales, including from The Daily and our creative services.
These gains on the digital side were more than enough to offset the familiar secular declines in print, and total advertising revenue grew slightly. Now, Roland will give you guidance on advertising for Q3 in a moment, but it's worth noting now that we don't expect the second half of 2019 to be as strong in digital advertising as the first half. In recent quarters, we've been tracking against relatively weak digital advertising comparisons from a year earlier. That's played a part in the significant year-over-year gains we've achieved in those quarters. From Q3 onwards, we begin to comp against the strong gains from last year, and we expect that to have an impact. One of the factors that contributes to the comp challenge is what I've previously called lumpiness.
Our digital advertising business is increasingly focused on large-scale, multi-month, and in some cases, multi-year partnerships with some of the world's leading brands. Demand for advertising partnerships with "The New York Times" is strong. Indeed, in recent months, we've concluded some of the largest deals in our history as a company, deals from which we will see much of the benefit in 2020. These partnerships are distinctive and difficult to replicate and give us real pricing power, and that's why we're pursuing them so energetically and are willing to accept the increased variability that comes with them. A big moment for us in Q2 was the successful launch of our television series, "The Weekly," which premiered in June on FX and Hulu. "The Weekly" is a fabulous opportunity to expose Times journalism to new audiences in an exciting new medium.
Both we and our partners are very pleased with its progress so far. "The Weekly" was the largest driver of the 30% growth in other revenue in the quarter. "The Weekly" is important for another reason. Along with "The Daily," "Wirecutter," and our cooking and crossword products, it's evidence of the extensibility of "The New York Times" brand across verticals and across different media, and of our ability to delight and engage audiences far beyond our traditional heartland. It's this breadth of appeal and the enthusiasm and imagination with which our newsroom is embracing these new expressions of Times journalism, combined with the continued strength of our core digital subscription offering, that gives us so much confidence in our future. Let me hand over now to Roland for more details on the quarter.
Thank you, Mark, and good morning, everyone. As Mark said, we remain pleased with the progress as we continue to execute against our strategy. Adjusted diluted earnings per share of $0.17 was flat compared to the prior year. We reported adjusted operating profit of approximately $56 million in the second quarter, which is lower compared with the same period in 2018 by approximately $4 million. Total subscription revenues increased 4% in the quarter, with digital-only subscription revenue growing 14% to $113 million. On the print subscription side, revenues were down 2.5% due to declines in the number of home delivery subscriptions, a continued shift of subscribers moving to less frequent and therefore less expensive delivery packages, as well as a decline in single copy sales. This decrease in print subscription revenues was partially offset by a home delivery price increase that was implemented early in the year.
Total daily circulation declined 8.5% in the quarter compared with prior year, while Sunday circulation declined 7.1%. Quarterly digital news subscription ARPU declined approximately 9% compared to the prior year and approximately 2% compared to the prior quarter, as the impact from the number of newly acquired subscribers on promotion, largely at $1 per week, was significantly larger than the benefit from existing subscribers whose promotional offers ended and graduated to full price. We expect that the more aggressive promotional offer, which resulted in another strong quarter for net subscription additions, and other promotional tests will continue to put downward pressure on ARPU throughout 2019. Total advertising revenue grew 1.3% compared with the prior year, with digital advertising growing 14% and print declining by 8%.
The increase in digital advertising revenue was largely driven by growth in direct sold advertising on our digital platforms, including advertising sold in our podcasts and our creative services businesses. The print advertising result was mainly due to declines in the financial services, retail, and media categories, partially offset by growth in technology. Other revenues grew 30% compared with the prior year to $45 million, principally driven by the premiere of our television series, "The Weekly," which debuted on June 2nd, and from our commercial printing operations, which had not yet achieved full scale at this point last year.
GAAP operating costs and adjusted operating costs each increased approximately 7% in the quarter as a result of increased content costs, reflecting both higher staffing in the newsroom as well as production costs related to The Weekly. Expenses associated with our growth in the commercial printing business and higher advertising also drove the increase. Our effective tax rate for the quarter was 27%. On a going-forward basis, we expect our tax rate to be approximately 26% on every dollar of marginal income we record. Due in large part to a tax benefit we received in the first quarter of 2019, we now expect the effective tax rate for full year 2019 to be between the high teens and low 20s. Moving to the balance sheet. Our cash and marketable securities balance increased during the quarter, ending at $847 million.
Total debt and finance lease obligations, principally related to the sale-leaseback of our headquarters building, which we expect will be repaid in December 2019, were approximately $254 million. Let me conclude with our outlook for the third quarter of 2019. Total subscription revenues are expected to increase in the low- to mid-single-digit % compared with the third quarter of 2018, with digital-only subscription revenue expected to increase in the mid-teens %.
Overall advertising revenues and digital advertising revenues are expected to decrease in the high single digits compared with the third quarter of 2018. Other revenues are expected to increase approximately 25%-30%, largely due to our television series, "The Weekly." Both operating costs and adjusted operating costs are expected to increase in the high single digits compared with the third quarter of 2018 as we continue to invest in the drivers of digital subscription growth. 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 one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from John Belton with Evercore. Please go ahead. Mr. Belton, your line is open on our end.
Thanks, everyone. I just want to talk a little bit more about the digital advertising business, which I'm sure is going to be a focus of attention here, given the new guidance. I was looking for any additional color on some of the underlying trends. Is there any part of the business that has meaningfully weakened recently? Is this more of a broader market issue, just kind of a lumpy business with tougher growth comparisons? Because I know if I look back over a five-year period, you've grown digital ad revenues at double digits on average. Is there any reason to think the trajectory of this business has changed now relative to where you saw it three months ago? Thanks a lot.
Good morning, John. This is Meredith. A couple things to say there. First, I think, broadly, in answer to your question, I would say demand for what the Times is selling in the ad business remains very strong. I think we've got a unique proposition which is grounded in brand safety and adjacency to IP that matters and is important, and an ability to sort of launch creative ideas in the world at scale. We don't feel demand changing for that in any way, and I don't expect that it will. I think what you're really looking at here is that the comps matter a lot, particularly in the back half of the year. I think we were up in the low 30% in the fourth quarter last year in advertising.
As Mark alluded to in his remarks, we feel quite confident in our strategy of selling a combination of media and partnerships and services, and each of those things drives the other. As the business becomes more about partnerships, there's just more variability in the system because the timing of these things differs from year to year. We remain very confident in the strategy. We remain optimistic that the demand that we've seen over the last number of years is very much there, and we remain confident and optimistic about our ability to deliver on that.
Great. Over the longer term, you still view this as a nice growth driver for the company?
Yes. As we've said in previous calls, I think it remains that, and also that the better we do on subscriptions and engagement, the better that is for the ad business over the long haul.
Great. Makes sense. Thank you very much.
The next question comes from Alexia Quadrani with JP Morgan. Please go ahead.
Hi. Thank you so much. I just have a few questions. Earlier this year, I think you spoke about exploring possible price increase in your digital subscription service. I guess any update or any more thoughts on that? Then I have a couple more.
Sure. Hi, Alexia. Yes, we did talk about that, and in the second quarter, we launched a pretty substantial price increase test on a population of users who had been with us, I think, for a couple of years or more, and we're very pleased with the results of that test. It exceeded our own expectations. I would say what we take from that is that we do have pricing power, and that there is a lever to be used sort of as we see fit, and remains to be seen when we may use that lever.
As I've said in previous calls, I think we've got real opportunity on price on both ends of the demand curve, and you're beginning to see us now sort of exercise that as I just described in the test at the high end, and also as we continue to make use of introductory offers at the low end.
On the churn, I know I think you had a promotional offer somewhat similar in Europe that you sort of
Yes
Achieved in August 2018. I think it's been now at least several months since that initial offer was anniversaried. Can you give us an update on how churn is trending from those subscribers? Maybe as a potential read-through to how we may see it from here in a month or a few months from here.
Absolutely. I would say just broadly to reiterate what Mark said at the top of the call, our sort of the picture of retention for the whole base of the dollar-a-week subscribers looks quite similar to previous cohorts. There's nothing in what we've seen so far, I think we're 10 months in domestically and 13, 14, 15 months in internationally. There's nothing we've seen so far that troubles us. We are two or three months into renewing the folks who came in on that promotion internationally, and I would say the same thing. We're pleased with what we've seen so far. I'll say something I've said in previous calls, which is, we've had very substantial cohorts of people in the past who sort of all over a three, four, five-month period, arrive at a step-up moment.
We had that at the end of 2017 and beginning of 2018. A very large cohort of people who came in just after the election of 2016, and we moved through that moment well ahead of our expectations. What that gave us is sort of the operational muscle to know how to move through this moment. I'm very confident that it doesn't all come at once. I think we launched a dollar a week domestically in the U.S. the end of August last year. Then it flows through, obviously, across the whole ensuing year. We are sort of very prepared to operationalize around if there are particular cohorts of people or users who we need to step up in price. I'm confident that we'll move through this moment as we have the prior ones.
Thank you. Just one quick follow-up on the digital. I know you guys have talked about digital advertising a fair amount already on this call, but I just want to clarify, it sounds like demand is very, very strong, just a little bit lumpier, and obviously the comps are a challenge. I guess my question is how much visibility do you have, or how far out do you see that demand on digital advertising? Doesn't the strong demand at The Daily, which I believe is lumped in there, as that becomes bigger and bigger, doesn't that maybe take away a little bit of the volatility?
I think it's a big ad business, so something has to be very, very big to take away volatility in a meaningful way. I'll say The Daily is certainly much larger than we expected as an ascendant ad product. It's still, think about the scale of our ad business. Generally over time, I think it will do that. We added a second ad into The Daily at the end of June. I expect that to over time also have a positive impact. I'll just say in general, and you're getting at this, there is real demand for audio advertising in association with quality, unique content that has big audiences. We're optimistic that over time, our other podcasts, in addition to The Daily, will become meaningful ad products.
Alexia, if I can just add from London. I've been in the room for some of these deals. The large-scale partnerships we're doing, I think, for example, our partnership with Verizon around 5G is something which extends over a long period of time, months and indeed years and is shaping up to be really quite a deep partnership. I think as we scale these big partnerships, over time, that will to some extent offset the lumpiness that we've seen in recent quarters. I think it's fair to say that this is probably going to be always a somewhat more variable business than the old, as it were, fairly pure kind of simply display-based business. We do know that some of these partnerships are lasting so long that we have some visibility into the future for those deals at least.
I think, just to reemphasize what Meredith said, the demand for what we're doing, I've just come from some sales meetings here in London, remains very high indeed. We feel very excited about the salience of The New York Times and the new people who want to work with us.
That's right. I would also just add the fact that we have a uniquely wide asset base of sort of media possibilities to put into a partnership, digital advertising, the paper, audio, creative services, live events. There are few, if any, who can match that at the scale of The New York Times, and I don't think demand. I've worked in the ad business for a long time, I don't think the demand for that goes away.
Thanks very much.
The next question comes from Vasily Karasyov with Cannonball Research. Please go ahead.
Thank you. Good morning. Roland, I wanted to ask you a couple of questions on the cost growth in Q3 and what it implies for Q4, hopefully for outer years too. Can you give us an idea, A, what the growth rates would be for production costs and SG&A maybe? And then what percentage of the cost growth is variable versus fixed? And if it's variable, what is it driven by? Is it related to the $1 a week promotion rolling off? Just help us dimensionalize how this will be, what the trajectory will be.
Yeah. Let me start a little bit, maybe the best place is to start by breaking down what happened in the past quarter so that there's some clarity there. Of the total operating costs, the increase was 7.2%, and that broke out to be 11% growth in production costs. What was the driver there was investment in content, so news and editorials, so the newsroom. Also, we've had the costs for production costs associated with creating the television show, The Weekly, for the first time. Then we had commercial printing at full scale, cycling on commercial printing at less than full scale. SG&A was just about a 4% increase, and that increase was kind of spread amongst a bunch of areas. I'll highlight that marketing was not a significant driver of SG&A.
We don't typically get into the details of future quarters, but we talk about what our investment thesis is, and so we could expect a similar breakout of cost growth. We'll continue to invest in our content. We'll have a full quarter of production of The Weekly. We'll finish the cycle on the scaling up of the commercial business. We are focused, as we go forward into future quarters, to drive our LTV to SAC ratio up. We're expecting to continue to invest in our product capabilities and with the desire to drive up our % of organic versus paid starts and drive our LTV to SAC ratio up, which is going to benefit profitability of the company.
Worth saying, which we saw in the second quarter. The product itself in the second quarter was a better engine of making people form a habit and pay and stay than in previous quarters versus paid marketing.
If I looked at the last year quarter-to-quarter progression of SG&A, for example, that would not be a good indicator for how things will go this year.
I'm not sure how valuable that would be.
All right. Thank you very much.
The next question comes from Douglas Arthur with Huber Research Partners. Please go ahead.
Yeah, thanks. Roland, just to clarify, the paid marketing spend in the second quarter was not as high as expected.
Yeah.
Do you anticipate in your third quarter guide that you'll get back to kind of that 45+ million area you had been running?
Well, our goal, and whether this explicitly happens in the next quarter or over several quarters, is to get the product to do more of the work that marketing has been doing in the recent quarters. We would hope to be able to accomplish that over the next few quarters.
Marketing spend may not get back into the mid-40s to high 40s%, then is the bottom line.
May not.
Okay. Meredith, to your point on the tough comps on digital advertising, you're going up against a 32% growth comp in the fourth quarter. That's 32 against an adjusted, taking the extra week out of 17. Is it reasonable based on your sort of second half guidance that we could be down double digit in digital ad in the fourth quarter?
I think Roland's already given the guidance. Sorry. Yeah, I don't think we're guiding past the third quarter.
Okay. Just finally, just to clarify or I don't know if you can clarify, but as you anniversary these one-week price promotions, are you intending to take them to full price or is it to be determined or any kind of guidance on that?
What our history suggests is that we'll be able to move a lot of them to full price. We, as I said, in response to a related question, we're also operationally prepared to make step-up offers as necessary, and that's been how we've managed through these moments previously. I think that probably answers it.
Okay. Got it. Thank you.
The next question comes from Kannan Venkateshwar with Barclays. Please go ahead.
Thank you. I guess, first on the ARPU side, I guess, Roland, you mentioned that we might see the pressure in the second half of the year as well, and you will have easier comps or I guess, from an ARPU perspective, your promotions started Q3 of last year. When you think about ARPU pressure on the second half of this year, if people do step up, we would expect the cadence to change in the opposite direction. Just wanted to understand what the thinking is there on the ARPU side of it. Secondly, on the subscriber growth side, over the last four quarters, your second derivative has accelerated. Year-over-year, the number of subs you're adding has accelerated. As you go into Q3 and Q4, you do have these tougher comps coming in.
Is it fair to say that, given your retention rates in Europe and some of these other promotions you've run in the past, the trend lines seen over the last four quarters, that may not be fair to extrapolate going forward? Thanks.
Okay. On the ARPU question. Just to kind of level set here, we are happy with the way the $1 a week promotion has been working, both on the starts and retention side, as we've discussed. As a continuing large number of subs come on at $1 a week, that's going to overwhelm the numbers stepping up. That said, in terms of the trajectory of that, over the next several quarters, we could expect the downward pressure on ARPU to start to moderate, because we're going to have large numbers of folks stepping up either directly to full price in one shot or stepping up to something between their current promotion and full price. We'll see downward pressure continue because we aim to continue to bring on large numbers of subs, but the quarter-to-quarter sequential numbers should moderate. The drops should get less.
Yeah. I think I'll take the second question, and I'll just say broadly that I think quarter-over-quarter our understanding of the drivers of the business, what makes someone form a habit and pay and stay is getting better. Mark alluded to this in his remarks. I think we are also getting sequentially better at intervening to move those drivers. There are three places, kind of three ways to think about that. One is on the customer journey. We are, as Mark said, in a position now to run many more tests on sort of everything about friction and value exchange in that journey. Where do you intervene? At what meter count? How do you message? What offer do you show people? I think we're also getting better sort of quarter-over-quarter at optimizing every part of the conversion funnel.
From the time we show somebody an offer until they get to a thank you event, we've done a lot of work to optimize along that funnel, and there's still more room to go. Then I would say the same about retention. On retention specifically, I think we've been very good at managing the mechanics of retention better, things like grace and involuntary churn and how we message through those moments and intervene. What we still have a lot of room to get a lot better at is engaging people from the moment they subscribe and getting them to form a habit and sort of behave virtuously by signing up for newsletters and downloading the app and registering and logging in. All of that has real room for us.
I guess my broad answer to you is I still think there's a fair amount of room in the model for acceleration, and I would see it as us just getting sort of steadily better over time as opposed to a discontinuous moment.
Okay. Can I ask one follow-up question, Meredith? In terms of the marketing and advertising budgets.
Yes
... when you think about the framework, broadly we've seen digital businesses say Spotify and so on. When we look at their marketing budgets as a proportion of revenues, it tends to be more in the 12%-15% range, depending on who you're looking at. I think New York Times runs it more at roughly about 8%, if I'm not wrong. When you think about the framework for what your marketing budget looks like over time, is that a framework we should be thinking about, which is normalizing it as a proportion of revenues? How are you thinking about that evolution over time? Thanks.
I would say two things about it, and then Roland should add anything I've missed. Our stated strategy is investing in the product itself to be a better engine of what drives growth in the business. By that we mean both the journalism and the kind of combination of user experience and customer journey. We've talked about that at some length. Over time, and I mean sort of over a long haul, you imagine that makes your marketing more efficient. You can spend more to drive more growth, or ultimately you may spend differently or less. The thing we've been able to do so far, which has worked very well for us, is to really shift the marketing mix.
In the time that I've been here, I think we've probably come close to tripling what we spend on marketing and gone from spending 100% of those dollars on performance marketing and direct response to nearly half, and in some cases more than half on things that move sentiment or get people to sort of think or connect differently to the Times emotionally. I think that what I've just described, I would say is a longer-term bet and one that I think pays off over a longer period of time.
I would just add, over the long term, we would like to see the LTV to SAC ratio move up consistently, not in any drastic fashion. If you kind of translate to how that plays out represented as a marketing expense to revenue percentage, you would not expect us to drive that percentage up in the future.
All right.
Yeah. If I can just add that we're taking really quite a broad view about how we get the message out about the Times. Although it's fundamentally a journalistic project, I would say that The Daily, which is intrinsically cash positive, generates revenue in its own right, and indeed has got a very good, as it were, gross margin attached to it, is a fabulous way of telling the story of the Times. We do indeed, inside The Daily, often mention the opportunity to subscribe to the New York Times.
What we're doing in podcasting, what we're doing in television, are also intended, and indeed the return to brand marketing for The Times is intended to, at the very, very top of the funnel, to get new audiences engaged in journalism, understanding the brand and getting ready for, if you like, the tactics we can use further down the funnel and ultimately the conversion tactics. I think that our strategy, which is investing very heavily in content first and foremost, above all in journalism, and in improving the way in which our product engages and brings people back again and again in a given week, is new to us. At the end of it, if we can efficiently, with economic efficiency, we can continue to spend money actually at the conversion stage.
I would say as long as it makes economic sense, we should spend as much as we can. Generally, I think high numbers out of marketing, we associate with very big periods where there's a lot of demand for the product.
All right. Thank you.
The next question comes from Craig Huber with Huber Research Partners. Please go ahead.
Yes, hi there. I have a few questions. One, your cost growth outlook for the third quarter is up high single digits. If I heard you right, I think you were saying that marketing costs in the third quarter should not be up an overly significant number year-over-year or even sequentially. If that is the case, can you maybe just help us understand better what is driving the cost growth of high single digits in the third quarter? Thank you.
First thing we have is a full quarter of The Weekly. We had a partial quarter of The Weekly in Q2, so that's a large driver. The other really is investing in the two other components of our growth strategy for digital subs, and that's content and product and technology.
Okay. Also, just want to better understand, it seems like you guys are getting more and more efficient, I guess, or is it just timing in terms of the marketing spend here in second and third quarter? In other words, you're not spending up dramatically year-over-year. Is it kind of what you were hinting at or saying that it's sort of a slower growth of digital subs, so we're not going to spend overly aggressive here with marketing here, but in a period of the cycle, when we get into more of the political season here, that's when you would expect the marketing spend to pick up significantly?
I'm going to hand it to Meredith in a moment, but just one point I want to make is we govern our direct spend based on internal rate of return. When there's demand and we can spend wisely and spend dollars we're going to get a sufficient return on, we will spend them. That can vary quarter to quarter and does vary quarter to quarter. From a bigger picture perspective, I'll pass it to Meredith.
Yeah. I'll just kind of reiterate some of the things I've already said. We've got a stated strategy of making the product itself, which is the combination of journalism, user experience, and customer journey, a better engine of growth, of the things that make people engage and pay and ultimately stay a subscriber and advocate to others. I think you saw some of that in the second quarter. I think we see a real opportunity in the market. I think we have real running room to do better on what I just described and to get more out of the model based on what I just described. I don't think that obviates the need for marketing.
I think we've just described it can allow us, in some cases, to shift the mix and put more of our marketing dollars to work for more long-term efforts to move sentiment and to make our way into people's lives we're not already in. The more starts and retention that we can drive organically through our own product, the better. Just going back to your question, and I think the previous one of the unique things about The Times, and news as a digital subscription business that I think is different from music and entertainment is we have 150 million people who are engaging with our product at any moment, and only what now, 4.7 million who are paying us.
There is a giant audience of people who are already coming to us in some way organically, and a lot of what we're describing is making the most of that audience.
Also, Mark, if I could ask you, could you be a little more specific on where you're investing in for content and journalism, both in the U.S. and outside the U.S.? Where are those dollars going towards?
Sure. I want to say that these decisions are not taken. We absolutely make investment available to the newsroom. The decision is taken by the newsroom itself and by the publisher, A.G. Sulzberger. I would say current focuses have been on building further our capabilities in investigative journalism, in investing more in tech coverage, and that's globally in particular, trying to make sure that we cover the way in which tech in Asia is becoming a geopolitically and economically incredibly significant force. Those will be examples. We're obviously going to be investing into the political cycle as we head towards the 2020 election period. We're looking hard at ways in which we're also investing more in climate coverage, and doing, I think, probably more climate stories than I think pretty much any other news organization on the planet at the moment.
We're also looking for ways, we've talked about this previously in earnings calls, of building out our podcasting capability and for further opportunities in television and film.
My last question, Mark. Given the ongoing demise of the smaller, mid-size newspapers out there, and you have this announcement of Gannett and then New Media merging, talking about $300 million of cost cutting. I'm sure some of that, good chunk of that's going to come at the expense of journalism. At the end of the day, doesn't this all sort of make The New York Times much more of a major source of news in the U.S.? In other words, doesn't it work to your benefit as the last man standing almost in the industry?
Well, I understand the point, Greg. I want to say first and foremost that we love competition, and we think the plurality in journalism is very important, and we are dismayed by the tribulations of the broader news business in America, and indeed, throughout the developed world. We think that's a bad thing. What is true is that we've got a model where we've been investing in journalism. We have more journalists in our newsroom than we've ever had, and we'll have still more to hire this year. By the end of this year, we'll have something like 1,750 people involved in journalism at The New York Times, by far the biggest in our history.
As I've said before, we take the same view about content that Reed Hastings and Netflix do, which is, if you want people to pay for great content, you need to invest in the content so it's there for them to buy and delight. If we can help other news organizations with our expertise and with partnership, we'll do that, and we're looking at ways in which we could potentially do that. We do have a thesis that America and the world is crying out for high-quality journalism delivered effectively in engaging and attractive digital products and monetized significantly through subscription. That's our thesis. We're determined to go on investing in it.
Mark, my last quick question. That 1,750 number of total people involved in journalism today, where was that number when you started the company five-plus years ago? Thank you very much.
I haven't got an exact number for you, but hundreds fewer. We're very substantially larger than we were. As I said at the start of my remarks, we attribute the success of The Times in building out its digital subscription business very significantly to the investment and the focus that we put on journalism. We think many news organizations have somehow tried to make a go of things through cost-cutting and reducing their newsrooms. We think exactly the opposite, that to get a great journalism business to work, you have to invest in great journalism.
Great. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Harlan Toplitzky for any closing remarks.
Thank you for joining us this morning. We look forward to talking to you again next quarter.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.