The New York Times Co beat quarterly revenue and profit forecasts because of cost cuts and higher newspaper prices even as advertising sales fell, sending shares up 19 percent on Thursday.
Ad revenue in its news media group, which includes the Times, Boston Globe and other papers, fell 30 percent, in line with declines that other U.S. newspaper owners are facing.
But for the first time, circulation revenue in the group eclipsed ad revenue, reversing the order at most papers where the money that people pay for subscriptions is less than the money the papers make from advertising. Many papers in the past got as much as 80 percent of their revenue from ads.
This change suggests that the Times can hold a loyal reader base, and charge them more money for news, even as advertisers shrink their budgets and pursue readers elsewhere.
Despite the news, the Times reported a third-quarter loss of $35.6 million, or 25 cents a share, which included pension obligations and other items. Last year's loss was $106.3 million, or 74 cents a share, which included a writedown.
Excluding charges, the Times reported profit of 16 cents a share, up from 5 cents last year, reflecting deep cost cuts.
Revenue fell 17 percent to $570.6 million on ad declines, beating the average analyst forecast of $561.6, according to Thomson Reuters I/B/E/S/. A 6.7 percent circulation gain contributed to the revenue beat, and the company said fourth-quarter ad performance looks better.
Despite the positive news, ad sales are still down and look as if they will stay that way for a while. That is a concern for the Times, which has $28 million in cash and equivalents, and hundreds of millions of debt to pay -- though much of it is not due in the near future.
To keep costs down, the company is cutting 100 jobs at The New York Times newsroom, and earlier this year extracted painful concessions from unions at The Boston Globe after threatening to close the paper.
It forecast saving $475 million in operating costs, and has cut staff and pay. The company's workforce was 20 percent lower at the end of September than last year.
The Times said it is moving ahead on a plan to sell its interest in the group that owns the Boston Red Sox baseball team. On October 14, it said it was scrapping its plan to sell the money-losing Globe.
The Times, like other U.S. newspaper owners, has been fighting revenue declines as more people get their news for free online and the recession cuts ad budgets.
Other publishers including Gannett Co Inc, McClatchy Co and Media General Inc have said that future ad revenue, while still down, might not fall as steeply as it has so far this year.
The Times' Internet properties, including online reference tool About.com, reported an 8.2 percent ad revenue decline, with the news media group contributing to that with an 18.2 percent drop. The About.com group posted a 7.2 percent revenue gain.
New York Times shares were up $1.49, or 17 percent, at $10.24 on the New York Stock Exchange. That is near their 12-month high of $13.08 last October. Their 12-month low last February was $3.44.
(Reporting by Robert MacMillan, editing by Dave Zimmerman and Maureen Bavdek)