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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning everyone and welcome to The New York Times Company's Fourth Quarter and Full-Year 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please also note, today's event is being recorded.
And at this time, I would like to turn the conference call over to Harlan Toplitzky, Vice President of Investor Relations. Please go ahead.
Thank you and welcome to The New York Times Company's fourth quarter and full-year 2021 earnings conference call.
On the call today, we have Meredith Kopit Levien, President and Chief Executive Officer and Roland Caputo, Executive Vice President and Chief Financial Officer.
Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call. These statements are based on our current expectations and assumptions, which may change over time. Our actual results could differ materially due to a number of risks and uncertainties that are described in the Company’s 2020 10-K and subsequent SEC filings. Given the impact that the COVID-19 pandemic had on our business in 2020, we will also present certain comparisons of our operating results in 2021 to 2019, which we believe in many cases provides useful context for our current year results.
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.
And finally, please note that a copy of the prepared remarks from this morning's call will be posted to our investor website shortly after we conclude.
With that, I will turn the call over to Meredith Kopit Levien.
Thanks, Harlan, and good morning, everyone.
2021 was a terrific year for The New York Times Company. It was our second best year ever for net subscription additions, despite changes in the news cycle following 2020's historic period. It was also a strong year in advertising.
With these results, we saw the attractiveness of our digital-first, subscription-first approach show through. The company achieved $2 billion dollars in annual revenue for the first time since 2012, with revenue growing 16% compared with last year. Adjusted operating profit grew 34% and was our highest in many years, and we saw a 200 basis point improvement over 2020 margins, boosted by a recovering ad business.
Looking ahead, our priority is to continue this momentum by further penetrating our growing total addressable market, and leveraging our unique platform and the deliberate investments we've made in our journalism, technology, and adjacent products to build a larger and more profitable New York Times Company.
Before I go into more detail about the future, let me put these plans in context of the incredible growth and successful execution of our strategy over the last few years, particularly in 2021. In early 2019, we established a goal of reaching 10 million subscriptions by 2025. With the acquisition of The Athletic, which closed yesterday, and the 8.8 million subscriptions we achieved on our own, we have now surpassed this target. Even without The Athletic, we believe we would have reached 10 million subscriptions far sooner than we originally anticipated.
Our 1.273 million total net additions in 2021 were 23% higher than 2019, the year before the pandemic. Our profit growth in 2021 meant another year of strong cash flow that added to an already robust balance sheet, which has improved meaningfully over the past decade. This strong balance sheet and our confidence in the continued cash generative nature of our business model enabled our all-cash acquisition of The Athletic, a strategic move intended to further accelerate our growth.
This morning, we also announced that our Board of Directors has authorized a $150 million share repurchase and a 29% increase in the quarterly dividend. As is always the case, the unmatched impact and breadth of our journalism is at the heart of our success. That was clear once again in 2021, from our reporting on the violent aftermath of the U.S. Presidential Election, to our consequential investigation into America's systematic mistakes in the use of airstrikes, which prompted reform at the highest levels of the U.S. Military, to our expansive work on the ongoing COVID-19 pandemic, including our case tracking database, which just a week ago crossed a billion page views.
Turning to the fourth quarter, we drove continued growth and progress against our strategy. With 375,000 net digital-only additions, Q4 was our second best fourth quarter subscription performance ever. Our subscription results in News reflected progress in key areas we've talked about all year, including bolstering engagement for our live News formats and our growing suite of newsletters.
We continued to evolve the customer journey, including improving how we use machine learning to determine the ideal moment to ask people to pay, and better delineation of the experience between anonymous, registered, and subscribed user states. That work has meant greater success converting users earlier in the customer journey.
It was a record quarter for net additions to our non-news products. Cooking and Games each crossed a million subscriptions just before year end, the result of strong audience demand and product improvements such as the addition of Spelling Bee to the Games app. It was an especially strong quarter in Cooking.
We also had a record fourth quarter in advertising. It was our largest ever quarter for digital advertising, beating the record set in 2018 by 8%. This growth capped a year in which we were able to make the most of a recovering market with a suite of high-performing, proprietary ad products grounded in first-party data; a strong audio offering; and the ability to work with marketers on large, multi-platform partnerships.
This strong performance in 2021 was a result of our consistent strategy and focus. Since we launched our current strategy in 2015, we've been investing steadily into a once-in-a-generation opportunity to pioneer the development of a large and growing news and information market at a time when habits are up for grabs. Over that time, we've seen our audience reach new heights, with 100 million or more visiting each week during peak news periods, and more than that number becoming registered users. At the same time, we've increased digital subscriptions six fold.
With this foundation, we believe we are in a strong position to drive greater subscriber growth. To penetrate the market more deeply, we now aim to be the essential subscription for every English-speaking person seeking to understand and engage with the world. That starts with building on our lead in News by continuing to provide the highest quality, expert journalism on the broadest range of subjects. Dominant coverage of the biggest News stories has proven to be the largest single driver of our growth. At peak moments, we've reached as many as one in two adults in the U.S and millions more internationally. News drives tens of millions of people a week into our subscription funnel, and 85% of our digital subscriber base pays for our News product today either on its own or together with other products. We believe news will always be core to our growth story and the company's most important economic driver and we remain confident that strong demand for news will continue.
Our ambition is to leverage the power of our brand and that News audience to also become a category leader in other areas that can occupy a big place in people's lives, like games, cooking, shopping advice, and sports. That's the reason we bought the wildly popular word game Wordle earlier this week. It joins our portfolio of original, engaging puzzle games that delight and challenge solvers, and it gives them reasons to come to The Times every day.
All of this means we are now pursuing an enormous opportunity through a broader portfolio of products to meet more needs for more people. Our latest audience research suggests that there are now at least 135 million adults worldwide who are paying or are willing to pay for one or more subscriptions to English-language news, sports coverage, puzzles, recipes, or expert shopping advice. That compares to the 100 million we had previously estimated for English-language news.
Sports, in particular, is a big category in its own right, which is what makes our acquisition of The Athletic so compelling. Our research indicates that about 25 million adults in the U.S. alone are either paying or willing to pay for sports information. The Athletic has also been demonstrating strong international potential, particularly in soccer. Today, our overlap with The Athletic's subscriber base is modest and we believe there is ample runway for growth.
We are increasingly optimistic about The Athletic as we've solidified our integration plan. The exhaustive diligence and analysis we did before coming to an agreement supports our belief that this is the right time, the right category and the right model to add to our platform.
As we said in January, The Athletic's business isn't profitable today. But as we apply many of the same insights that drove our subscription business to grow six fold since 2015, including widening its audience, building a deliberate customer journey, and driving repeat engagement we believe that it will be a driver of The Times achieving a larger scale in subscribers and profits over time. We also believe there is a lucrative advertising business to be built, and we have the capabilities and track record to build it.
Everything I've described continuing to lead in news, building strength in other categories, adding sports is about unlocking our potential to become the essential subscription. In service of that vision, I'll note a key change in how we are measuring our progress and talking about our strategy. We are moving toward an emphasis on individual subscriber growth rather than growth of total subscriptions. A central part of this strategy will be offering a single, high-value New York Times subscription or bundle of interconnected products. We believe this will create an even more compelling value proposition for the enormous audience of potential consumers of our non-News products, and, this diversity of value will give people multiple reasons to engage with us every day, whatever the newscycle.
To attract the widest audience, we will continue to offer standalone subscriptions to each of our products. But by focusing on the bundle, we are providing the most value to our customers, and in turn, building the best opportunity to monetize the entirety of our platform.
While we are in the early days of a true multi-product bundle playing a leading role in our strategy, the data so far are encouraging. Over 30% of our subscribers now pay to access more than one of our subscription products. Subscribers to our existing bundle have lower monthly churn rates than news-only subscribers, and significantly higher ARPU. And with our research showing that most of our addressable market is interested in news and one or more other products, we believe moving toward a bundled offering will be an increasingly large profit driver.
Putting it all together, we still believe we are in the early days of an extraordinary opportunity to win a larger share of a still growing market. Given our success to-date and the platform we've built, we are now, for the third time in six years, setting a new, more ambitious target. This one is based not on total subscriptions, but on the number of unique subscribers.
We ended 2021 with 7.6 million total subscribers to The Times. Beginning in 2022, we're now aiming for a new goal of at least 15 million total subscribers by year-end 2027 a number that would be larger if expressed in individual subscriptions, and a number that represents roughly doubling the number of total subscribers The Times had at the end of last year. Roland will have more to say about our shift from subscriptions to subscribers in a few minutes. This new goal is meant as yet another mile marker, not an end state. And based upon our analysis of the opportunities ahead of us and the portfolio, products and platform we've built, we believe the journey to this new subscriber target will drive meaningful revenue and profit growth. In order to accomplish this, we'll continue to invest into the opportunity and we won't sacrifice long term growth in the name of short-term profit.
But let me share a few topline thoughts about how we are thinking about costs in this next phase of our strategy. Given that our investments in journalism, our digital product experience and tech continue to yield strong organic subscriber conversion, we expect that we'll be able to improve the overall efficiency of our marketing spend for our core product set. We intend to continue to invest in our digital product development and our underlying tech, but in doing so; we believe we will see further benefit from it's capabilities as they improve. As an example, we plan to apply some of the machine learning practices we developed for our news product to Cooking to identify the right moment to prompt a user to subscribe.
We expect our people costs will rise in order for us to continue to attract and retain top talent that reflects the state of the talent market generally, and we also expect that we'll continue to add people in journalism, other content areas and tech. However, the unique nature of our product means that every dollar we invest here goes a long way.
Turning to how we expect this to play out in 2022. We expect to grow adjusted operating profit dollars in our core business in 2022, before the previously disclosed impact from The Athletic, though we do not expect that growth to entirely offset the dilutive impact of The Athletic in our first year of ownership. While we understand there is a short-term impact on profitability, we are confident in the long-term opportunity that The Athletic represents.
Given our progress in 2021, we're at a natural time to provide a strategic update to our investors. We plan on hosting an Investor Day in the middle of this year, where we look forward to sharing more about our outlook for the company and the opportunities ahead of us.
Before I hand it over to Roland, I want to say just how proud I am of our team and for all they accomplished last year journalistically and commercially. And I want to express how optimistic I am about this next phase in our growth journey. I believe we are still in the early days of building our business. We have a leading but low penetration of a large market that we think will continue to grow for secular reasons. And we have a business model that can scale and deliver meaningful revenue and profit growth as it does. Our 15 million subscriber target represents what we're aiming for in this next phase of our strategy, but is by no means an end point, and I believe our journey to achieving it will yield an even more exciting, resilient and valuable New York Times Company.
Over to you, Roland.
Thank you, Meredith, and good morning.
Fundamental strength in the underlying business exemplified by strong digital subscription unit growth, and healthy growth in both subscription and advertising revenues resulted in strong financial performance in the fourth quarter.
Adjusted diluted earnings per share was $0.43 in the quarter, $0.03 higher than the prior year. We reported adjusted operating profit of approximately $109 million, higher than the same period in 2020 by $12 million and higher than 2019 by $13 million, an important comparison point given the impact that the pandemic had on our 2020 results.
We added 171,000 net new subscriptions to our core digital news product and 204,000 net new standalone subscriptions to our other digital products, for a total of 375,000 net new digital-only subscriptions. The international share of total news subscriptions remained at 18% as of the end of the quarter.
Total subscription revenues increased more than 11% in the quarter with digital-only subscription revenue growing 23% to approximately $205 million. Digital-only subscription revenue grew as a result of the large number of new subscriptions we have added in the past year and continued strength in retention of the $1 per week promotional subscriptions who have graduated to higher prices.
It's worth noting that digital subscription revenue in the quarter was slightly lower as a result of the impact from a one-time adjustment made to reflect a change in the way we charge for subscriptions in a grace period.
Digital news subscription ARPU for the quarter increased 5.5 percentage points compared to the prior year and was slightly lower compared to the prior quarter. This improvement in the year-over-year rate was primarily due to subscriptions graduating from their introductory price to either full price or an intermediate step-up price in the quarter, while the sequential pressure is largely a result of higher subscription additions at introductory promotional pricing.
ARPU related solely to domestic news subscriptions increased nearly 7 percentage points versus the prior year and was slightly lower versus the prior quarter.
As we predicted would happen on our third quarter earnings call, churn rates increased in the fourth quarter within a range we had been expecting as a result of three factors. A one-time effect of a regulatory change in an international market, a tightening of the rules governing the overall payments environment, and the impact of optimizations we've made to intentionally convert users earlier in the customer journey, whereby we are accepting slightly higher churn rates in exchange for higher conversion rate starts and cumulative lifetime value.
Now I'd like to take a moment to expand upon our plan to begin disclosing the number of subscribers to our products, which Meredith mentioned a few moments ago. As we begin to more intentionally market a bundled subscription, the number of individual subscriptions becomes a less useful measure of our scale. For instance, an individual who separately subscribes to our news and cooking products is currently counted as two subscriptions while an individual subscribing to all of our products through a bundled offering, which includes News, Cooking & Games, among other items, is only counted as one news subscription. To put this into the context of our current results, we reported 1.273 million total digital net subscription additions in 2021 bringing the end of period digital subscription number to 8 million. These subscription numbers equate to net digital subscriber additions of 936,000 and end of period digital subscribers of more than 6.8 million.
Said differently, as of the end of Q4 2021 we had 6.8 million digital subscribers paying for more than 8 million digital subscriptions, or an average of just under 1.2 subscriptions per subscriber. In addition, we have approximately 800,000 home delivery subscribers for a grand total of more than 7.6 million total subscribers. This would mean that the 15 million subscriber target we've set for year-end 2027 would be closer to 18 million subscriptions under our historical disclosure assuming the current 1.2-to-1 subscription per subscriber relationship.
As a result of this change to subscribers, beginning with our Q1 2022 reporting, we will supplement our quarterly reporting with the number of unique subscribers and unique digital-only subscribers, as well as a number of other metrics, including average revenue per subscriber.
We expect to continue to report on the number of subscriptions, as we currently do, for at least a full-year, but with our first quarter earnings plan to discontinue the breakout of digital subscription revenue between News & Other since we believe it provides little insight as bundled subscriptions crossing these categories become more prevalent.
I'll now return to my commentary about our fourth quarter results. Print subscription revenues declined approximately 2% as overall volume declines in both single-copy and home delivery more than offset the benefit from the first quarter home delivery price increase. Total daily circulation declined approximately 9% in the quarter compared with prior year, while Sunday circulation declined 7.6%. Compared with 2019, print subscription revenues declined approximately 5%, as single-copy and international bulk sale copies declined, while revenue from domestic home delivery subscriptions grew 1.1% over this two-year period.
Total advertising revenues increased approximately 27% in the quarter with digital advertising growing more than 23%, largely as a result of our proprietary first-party targeted advertising products and expanded audio product portfolio. Compared with 2019, digital advertising grew 20.5% as a result of higher direct-sold advertising, including traditional display and audio. Meanwhile, print advertising was higher by more than 33% compared with 2020 primarily driven by growth in the luxury and entertainment categories; however, print advertising remained below 2019 levels by 17%. Taken together, total advertising revenue exceeded 2019 by 3%.
Other revenues increased approximately 22% compared with the prior year, to approximately $66 million, primarily as a result of revenue from live events which were more severely impacted by the pandemic in the fourth quarter of 2020, as well as higher commercial printing and television series revenue.
Adjusted operating costs were higher in the quarter by nearly 18% as compared with both 2020 and 2019. Cost of revenue increased 12% as a result of growth in the number of employees who work in the newsroom and on our Games, Cooking and audio products; as well as higher advertising servicing costs; subscriber servicing costs; costs in connection with the production of audio content; and print production and distribution costs, largely as a result of growth in commercial printing.
Sales and marketing costs increased 50% driven primarily by higher media expenses. When compared to 2019, sales and marketing costs increased nearly 37% while media expenses were more than 58% higher. We had two brand campaigns in market in the quarter magnifying the year-over-year increases including a campaign to highlight the breadth of our overall coverage and a large campaign in support of Cooking, designed to increase awareness of the product during the holiday cooking season.
Product development costs increased by more than 12%, largely as a result of growth in the number of digital product development employees in connection with strategic initiatives related to growing digital subscriptions.
General and administrative costs increased by 10% largely due to a higher incentive compensation accrual, growth in the number of employees and higher consulting costs.
Our effective tax rate for the fourth quarter was approximately 24%. As we've said previously, we expect our rate to be approximately 27% on every dollar of marginal income we record with the possibility of some variability around the quarterly effective rate.
Our qualified pension plans ended the year 105% funded with an approximate $74 million surplus. This is an improvement from the 102% funded status we reported at year-end 2020.
Moving to the balance sheet, our cash and marketable securities balance ended the quarter at $1.074 billion, an increase of approximately $32 million compared with the third quarter of 2021. We announced this morning that we completed the acquisition of The Athletic, for an all-cash purchase price of $550 million, subject to customary closing adjustments, using cash on-hand. The company remains debt free with a $250 million revolving line of credit available.
As you know, over the last several years we have been investing into the drivers of digital subscription growth both organically and off the balance sheet. Over this timeframe we balanced these uses of cash with a modest level of shareholder return by increasing the dividend each of the last three years. With our recent acquisition of The Athletic, we have also invested $550 million to further propel our digital subscription growth strategy. Today, given the continued strength of our balance sheet and the confidence we have in the cash generative nature of our business model, the Board of Directors has approved both a $0.02 increase to our quarterly dividend to $0.09 per quarter and a $150 million share repurchase authorization, our first since 2015.
Share buybacks under this authorization are expected to be used primarily, but not exclusively, to offset dilution associated with stock-based compensation, which we expect will increase over the next several years.
Let me conclude with our outlook for the first quarter of 2022 on the core business, which does not reflect our acquisition of The Athletic. The effect of the Athletic acquisition on our consolidated guidance has been included in the Outlook section of the earnings release that we published this morning.
For the core New York Times, excluding the impact of The Athletic total subscription revenues are expected to increase approximately 9% to 11% compared with the first quarter of 2021, with digital-only subscription revenue expected to increase approximately 18% to 21%. Overall advertising revenues are expected to increase 16% to 20% compared with the first quarter of 2021, with digital advertising revenues expected to increase approximately 18% to 22%. Other revenues are expected to increase approximately 15% to 20%.
Both operating costs and adjusted operating costs are expected to increase approximately 13% to 15% compared with the first quarter of 2021 as we continue investment into the drivers of digital subscription growth and compare against a quarter of relatively low spending growth last year. However, we expect cost growth on our core business to slow considerably beginning in the second half of 2022.
And on The Athletic, as we said on the deal call in early January, we continue to forecast a slight improvement in operating losses relative to its approximately $55 million loss in 2021 as the company plans to make additional investments that will mostly offset revenue growth.
And with that, we'd be happy to open it up for questions.
Ladies and gentlemen, at this time we'll begin the question-and-answer session. [Operator Instructions].
And our first question today comes from Thomas Yeh from Morgan Stanley. Please go ahead with your question.
Thanks so much. Quick question on -- and you're shifting focus for unique subscribers rather than individual subscriptions. Is there any change in your approach at the consumer level for those subscribers who are signing up for separate services currently? You mentioned keeping standalone services in place, but do you anticipate any near-term ARPU headwinds if subscribers have multiple services shift towards a premium bundle? And then, Roland, last quarter you spoke about expectations for core margins remain similar in 2022 versus 2021 pre-Athletic. Given some of the advertising strength that we're seeing flowing into this year, should we anticipate some benefit there or do you see opportunities to reinvest that upside? Thanks so much.
Hi, Thomas. I think Roland loves to answer both of those. Go for it, Roland.
Yes, thanks, Thomas. So let's talk about the ARPU first. The driving motivation behind moving to a more intentional marketing of the bundled offering is that Meredith talked a little bit about there's higher retention, but there's also higher ARPU, right. So folks are willing to pay a higher price to be able to experience more of the breadth of the whole New York Times offering. So actually over time, we expect this to be a tailwind to ARPU as more folks are subscribing to a higher price bundle. We don't expect to offer the bundle to anyone say today who's got a multi-product subscription. We wouldn't offer this bundle for less than they're already paying. So I think it's more of a tailwind on ARPU than a headwind.
Yes, Roland, I'll just add that we're still experimenting with pricing. And you're going to see us do that for a while.
And then you asked about, I guess, a little follow-up on the margin question. And you heard, Meredith, in her prepared remarks describe what we think that the profit contour is going to be for 2022. And that is an increase in dollar profits this year ex The Athletic, probably not covering the full expected Athletic loss, but we will have growth in our absolute profits.
Okay, that's helpful. And then just maybe a last one for me on the advertising strength. Can you revisit the plan to drive the ad opportunity at The Athletics, and maybe some of the timing and operational goals that you're hoping to get you to -- to for the rest of the year?
Sure, Tom, I'm happy to take that one. I would say we expect the business at The Athletic, we characterize to look very much like the business we have at the Times, which is an ad business to get this differential value from being subscription first, meaning premium ad products, first-party data, the opportunity to work with a select group of marketers on multi-platform, partnerships and an audio opportunity. So I think it's our expectation is characterwise, it will be quite similar. This is a playbook that we really understand. And we've been running now for some time, at the Times quite well. And we're really excited to get started now that we're closed on applying that to The Athletic and we think it can be done in a way that is subscription first and consistent with our subscription ambitions.
And our -- our next question comes from Kannan Venkateshwar from Barclays Capital. Please go ahead with your question.
Thank you. Roland maybe, just for -- just to put a finer point on some of the guidance. If you just take your first quarter guidance on The Athletic on numbers with and without The Athletic and analyze that it seems to imply roughly an annual loss of about $80 million for The Athletic. Is that roughly in the ballpark? And is it fair to just extrapolate the guidance from the first quarter to the rest of the year and I don't know if there's some front-ended costs because of the integration there. So that's one? And then, when you think about the ARPU in the quarter, it was sequentially lower. But I think, I mean, earlier in the year when you've talked about ARPU, I think there was an expectation that it would actually accelerate through the year as we reach Q4. So if you could just help us understand what really changed with respect to the cadence there? And I have one last follow-up on costs. Maybe we can do that later?
Okay, great. Those are two really good questions. I'm glad you asked The Athletic question in terms of the run rate. So the first quarter expectations are not representative of the run rate. We still believe that and I think I did have that in my prepared remarks that we believe that the dilutive effect of The Athletic will be a bit below the $55 million that -- that that they lost in 2021. So you would not want to extrapolate in the first quarter. I don't know quite how you get to $80 million, but there are some increases in upfront costs that will not run through the year. So again, I think I'll turn everyone back to the prepared remarks where it should be something less than the $55 million.
On the ARPU question, I do recall in prior calls that we expected year-over-year ARPU to continue to increase, while sequentially it wouldn't necessarily happen. Now, specifically for the fourth quarter, couple of things. The net ads, the really healthy net ads in Q3, and they were heavily weighted towards the last part of the quarter. So that effectively dilutes ARPU going into the next quarter, and we hadn't -- we hadn't a quarter where we had a good amount of net ads on promotions in Q4. So when you take those two effects together, that is -- that's affecting the sequential ARPU event.
Got it. And on the cost side, I mean, you've come in ahead of the cost guidance, or your costs have been lower than guidance. I think for a couple of quarters or a few quarters now. But is that because of conservativeness or is that because something in your plan changed? And cost got pushed out? So how should we think about that guidance?
Yes, so in 2021, I think the market for talent was such that we didn't end up growing our net heads, quite at the rate that we had expected. And that held back our cost growth a bit. Our guidance, we aim to be accurate, we don't aim to be too conservative. So I would not chalk it up to conservativeness. And we feel good about our guide of 13% to 15% core business for Q1.
Thanks. One last, if I may. In terms of a follow-up on the churn comment you made? Is it possible for us to get some context around the three components of churn and what the contribution was in the quarter? Thanks.
So the one-time event that I mentioned in the international market was pretty substantial. The card processes didn't have time to adjust to the announcement of the changes in regulation. So that was a pretty big chunk of it.
But the other thing I'd point to is just overall, we did make this intentional change in the way we're working with the journey and trying to get folks to subscribe earlier in the journey than we previously had. Because we believe being a subscriber is the best way to actually engage and interact with the product. So we did tradeoff a little bit of initial early tender churn for that. And as I mentioned, we think that's going to pay off in the long run in terms of cumulative lifetime value, because the conversion rates are that much higher and net ads are that much higher. And that was also a fairly sizable chunk.
And our next question comes from Vasily Karasyov from Cannonball Research. Please go ahead with your question.
Good morning. Roland. I think my questions are for you. Can you please tell us how Q4 net ads actually came in relative to the expectations that you shared with us on the Q3 call. And then I wanted to ask you to talk about the LTV to CAC ratio that you saw in 2021, how it compares to 2020, what the drivers are and then what does your change of focus that was the net subscribers mean for your LTV to CAC calculations? Thank you.
Okay. So let's talk about net ads a bit. First thing I want to say is, we're really confident in our subscriber growth potential in all categories, in news, in our other products, in the bundle. And I think, the real hard evidence for that confidence is we've just shared a new target, publicly. And with that target, you can track our progress. That said the newscycle is going to ebb and flow and we don't live and die on one quarter. Q4, I just emphasize that specifically in Q4, we pulled back on friction a bit, which is what we told you, we would do on the Q3 call. I won't repeat myself on optimizing the journey in pay flow which I just spoke to, and so that made churn a little worse, made net ads a little lower. None of this was outside of our expectations. And I believe we did our best to signal that on the Q3 call.
Okay. On the LTV to CAC?
Yes, let's start here. LTV to CAC and you asked versus 2020 and 2020 was an exceptional year, really a Black Swan year and especially in terms of LTV to CAC because the organic demand was so strong. And we took advantage of that by pulling back on our marketing. So in 2021, a more normalized year, the LTV to CAC ratio obviously went down a bit. And as we told you, we've had a little bit, a little bit, a little bit worse churn, which takes the LTV down a little bit. So the combination of those two things, the first being the most prevalent driver here, both lead to LTV to CAC coming down but we're really comfortable where the LTV to CAC ratio is right now, we think it's healthy.
And what do you think happens to it, when you -- with your focus shifting towards unique subs as opposed to product specific subs?
Yes, it's a good question. I don't really see. Let's talk about the components little bit, I don't really see the percent of organic starts to pay starts changing all that much. And as I mentioned in response to Kannan's question, we expect a change in mix meaning mix of bundle versus individual products. As that becomes more weighted towards -- more weighted towards a bundled subscription, there's two effects that should help lifetime value. One is the ARPU, and the other is being better retention.
And our next question comes from Craig Huber from Huber Research Partners. Please go ahead with your question.
Thank you. My first question, I guess, Meredith, obviously your digital ad revenues are doing quite well here up about 20%, 21% over two years. If you could just talk about the environment for digital advertising beyond maybe just the first quarter, if you can think a little bit further there. And also curious the changes with Apple's iOS system with data privacy, et cetera on their, is there any material impact to your gross rate of digital advertising. I have a follow-up.
Yes. Hi, Craig. I'll pick the second one first, and just say no, not that we've seen. So in terms of impact on Apple, and I'll add that we think our own proprietary first-party data products make the Times a compelling place for marketers, particularly in an environment where people are more concerned, not less about privacy, so no particular impact and we think the winds are blowing in our direction in terms of what we've built with first-party data.
More broadly, I'll go back to something Roland and I have both been now for a few quarters, which is we like our ad business better today than we have been in quite some time. We've worked really hard to have a business that sort of runs on the same high octane gas as the subscription business, which is register of logged-in deeply engaged users whose data we can use and privacy board ways to target ads. And we're optimistic that that is a sustainable strategy. And you're hearing on optimism in our descriptions, I always get the caveat that digital advertising tends to be a demand-driven market, not a supply-driven market, we -- but we're -- we certainly feel good about where we are and good about the competitive nature and differential value of our products that. And as I've said, one of the things we're particularly excited about is pretty close to a Greenfield opportunity with The Athletic to build a similar business in nature and character to what we have at the time.
Then also want to ask, given this environment of the much higher inflation numbers out there roughly 7% year-over-year, how do you think that impacts your business here or is it immaterial in terms of how you think about your revenues and obviously, the cost as well, if you could touch on that? Thank you.
I'll just say, Roland you can add to this as well. But we've sort of broadly considered everything we understand today about the macroeconomic environment in what we've shared with you thus far.
And my last question that I haven't heard you guys talk much lately about your various audio products, maybe if you could update us on that? And is there any chance down the road, you guys might start charging for any of that? Thank you.
Yes, I'm happy to do that. I will take few things about audio, we had another strong year in engagement with our audio products, led by The Daily, which I think celebrated its fifth birthday yesterday. So we continue to be very, very happy to have one of the largest general interest news podcasts there is and it continues to be a huge performer for us in every way audience advertising and directing attention to other podcasts.
So I'll say we continue to be excited about experimenting with what I would describe as the multiple different ways. Our differentiated audio offerings can play a role in our subscriptions funnel. And you're seeing us do that indirectly, we bring people into the funnel through The Daily. And the other podcasts we have the Ezra Klein Show, has a strong listenership and growing and we're excited about all the podcasts we have with the potential to do that.
And then you saw us make a move, gosh now losing track time, but a couple of years ago, a year ago, to acquire Audm, which is -- it was a small acquisition. But it's a really cool audio app for read aloud audio, long-form narrative journalism. And that gives us a real petri dish to experiment with a destination product where people come specifically to listen to read aloud journalism.
And then I'll also say we have still a beta in the market, around NYT Audio, which is really experimenting with the possibility of the Times having an audio destination. And I would say, we've got lots of irons in the fire. In any scenario, we're optimistic that audio is going to play a big and important role in either directly or indirectly, in our subscription business. And there's a ton of demand for it as an advertising business. And we're excited about the products that we have and expect to continue to add to it.
That's great. Sorry, my last question on that. What is the number of unique listeners that you have either daily or monthly and that's all I have. Thank you very much.
We -- I don't think we've disclosed that. I'll just say it continues to be strong. I think we've said stuff in the neighborhood of a couple million people a day to listen to The Daily. I don't think we've disclosed beyond that. But it's in the range of a couple million or a few million for The Daily.
And our next question comes from Vijay Jayant from Evercore ISI. Please go ahead with your question.
Hi, it's Davis [ph] on for Vijay. Just a few questions if I could. Have all non-promotion digital news subscribers received a price increase now and how should we think about price increases for your digital news product going forward? And how does bundling kind of effect how you think about price increases. And then I just had a second question, want to follow-up to the LTV to CAC question. I understand it's worse than 2020. But compared to 2019 levels, how does the LTV to CAC compare?
Okay, so I'll take the pricing question. So let me be clear. Are you asking about the price increase on the tenured subscribers or the step-up of the promotional? I think I heard the question. I think the intent is about the price increase on the tenured subscribers.
Yes, correct.
Okay. So, yes, we are almost done with that program. There are not that many folks who fall into the category of getting moved from 15,000 to 17,000 months left. So the effect of that the little boost we get from that is pretty much exhausted. And at this point, we don't have any plans further on tenured price increases. As far as I'm sorry, Davis, can you repeat the second part of your question?
Yes. And then how does kind of bundling affect, how you think about price increases?
Yes, pretty good. So a couple of things. One is we are still in a kind of a testing mode as to what the right price will be for that bundle. But you could expect it to take sort of the same approach, we would take a similar approach to what we've done, meaning there'd be a promotional price, and then a step-up, and then a full price. And some folks would go to full right away, and others would step-up. So that's probably the model, but we're still testing what those right price points are both in terms of the promotional rate, and the full list wrap rate. That said, ultimately, the play here is that ARPU will increase, as folks are subscribing to the full breadth of The New York Times, which provides a lot of value on an everyday basis for a lot of needs beyond news. So longer-term, ARPU should increase as that mix changes, and we're confident that that mix will change in the right direction.
That's right. Well, and I'll just add two things to that. The bundle is a bet on both volume and ARPU. We're still in the early days of penetration of the data in growing market, and we think it helps us get to more volume, and also with the more valuable products that that people engage with for more needs in their lives. So we get is about both those things. And we think given where we are in the journey still early, we can grow both, we believe we can grow both volume and ARPU.
And then your question was, I guess a follow-up on LTV to CAC. And I guess I'll just -- I'll add a little bit to what I said before. And that is, we -- Meredith mentioned in the prepared remarks that we expect to get more efficient on the marketing side, because of the improvements we're making in the product and the like. So that's going to actually help our LTV to CAC ratio, because we don't expect to be marketing at the same -- necessarily at the same rate. So as that efficiency goes up, that should also be a tailwind to LTV to CAC. I don't have the 2019 figures in front of me, but again, the numbers are very healthy, we're happy where they are, and I suspect they are -- they would be higher.
And our next question comes from Doug Arthur from Huber Research Partners. Please go ahead with your question.
Yes, thank you. Can you hear me?
Yes.
So good morning. Meredith it's early days on The Athletic, is it safe based on the numbers you threw out in the press release and what's been reported there're around 1.2 million subscribers. Is there any way to sort of discuss longer-term kind of aspirations there is sort of the first line of offense to kind of protect the level it's at now given the change in ownership and kind of it's new for The Athletic being under your umbrella, and then grow it from there or anything you can add or sort of frame that over the next -- your aspirations over the next three to five years would be helpful and then I have a follow-up?
Yes, let me say a few things about it. Number one, we certainly acquired The Athletic because we believe there's real growth potential for subscribers, particularly in an Athletic that's owned by The New York Times. And we see that growth potential three ways. We think owning The Athletic and being able to meet daily needs in sports helps bring more people into The New York Times funnel that we think it helps us sell more news and bundled subscriptions. We believe that the platform and the products that we've built will enable us to direct some of that funnel to grow subscriptions pretty Athletic, which we prescribe, we -- some of the first moves we'll make will be about distribution and audience development at The Athletic applying the insights we've gained from our customer journey to The Athletic and also applying a lot of what we've learned about how to drive engagement and repeat engagement. So we see growth in both those places so to The Athletic and so standalone subscription, and also for the broader sort of potential of times bundle or The Times News product.
And in addition to that, we see a real opportunity with the ad business, which I think I've described now in both of my prepared remarks and the answer to your question. As far as how to kind of characterize the ambition, what we've tried to do in this moment is to give you another mile marker of what we're aiming for on the journey. We've expressed it in subscribers versus subscription so 15 million subscribers would translate to a larger number of subscriptions. And you can imagine that that is a combination of more New York Times new subscribers and bundled subscribers and standalone subscribers, including The Athletic. So we've got a lot of confidence and optimism in what we've described to you so far. And I think that headline number, a rough doubling of where The Times was, at the end of last year, is the best way we can describe it to you and our ambitions for The Athletic are within that.
Excellent. And then as a follow-up, Roland in terms of the guidance, you do make the comment in the press release that you expect core business costs growth to slow considerably in the second half. Is some of that the marketing efficiency you talked about? Or is there more at work there?
Some of that is yes, clearly some of that is marketing efficiency. And if you look at the comps specifically on sales and marketing, but the marketing component within that we spent quite a bit in the back half of 2021. We don't expect to do that in 2022. So that's -- that is that plays a big role in the slowdown in cost growth in the back half of 2022.
And ladies and gentlemen, at this time, we'll conclude today's question-and-answer session. I'd like to turn the floor back over to Harlan Toplitzky for any closing remarks.
Thank you very much for joining us this morning and we look forward to talking to you again next quarter.
And ladies and gentlemen with that we'll conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.