SAN FRANCISCO--(BUSINESS WIRE)--Aug. 2, 2002--Salon Media Group, Inc. (Nasdaq:SALNC - News), one of the Internet's leading media companies, announced today its operating results for the first quarter fiscal 2003. For the quarter ended June 30, 2002, Salon reported revenues of $972,000 versus $973,000 for the quarter ended June 30, 2001, representing a stabilization of revenues.
Net Loss Decreases Significantly
Salon's first quarter fiscal year 2003 net loss decreased 43% to $1.7 million or $0.12 per share versus $2.9 million or $0.22 per share in the first quarter of fiscal year 2002. First quarter fiscal year 2003 amounts decreased 16% after adjusting for a first quarter fiscal year 2002 non-cash charge of $0.8 million related to the write-down of long-lived assets, reflecting cost reduction efforts begun last year.
"Salon improved its operating results significantly during the June 2002 first quarter from a year ago, reducing our net loss 43% despite a flat revenue picture," said Michael O'Donnell, Salon's President and Chief Executive Officer. "We like the diversity of our revenue streams, with advertising accounting for 49% of revenues and paid subscriptions, a major initiative for Salon, increasing to 43% of revenues in the June quarter."
(Thousands) COMPARABLES
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1st QTR 1st QTR 4th QTR % Change % Change
Fiscal 2003 Fiscal 2002 Fiscal 2002 1Q03vs.1Q02 1Q03vs.4Q02
-------- ----------- ------------ ----------- ------------ -----------
Revenue $ 972 $ 973 $951 - +2%
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Net loss $1,663 $2,920 $1,353 +43% -23%
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On a pro forma basis (excluding amortization of intangibles, depreciation, non-cash advertising, stock-based compensation and the write-down of long-lived assets), Salon lost $1.0 million or $0.07 per share during the quarter, down from $1.6 million or $0.12 per share in the same period last year, a 36 percent improvement. Financial results for the current quarter reflect a continuing industry-wide weakness in advertising.
Advertising Sales
Advertising sales for the June 2002 first quarter of fiscal year 2003 at $0.5 million were down compared to first quarter fiscal year 2002 amounts at $0.6 million. Salon saw a sequential, two-percent increase from the advertising revenue reported in the quarter ending March 2002.
"Advertising sales seem to have bottomed out in the June 2002 quarter, and we're already seeing a pickup with orders booked for the September quarter. We had 31 advertisers running on Salon during the quarter and signed seven advertisers who were either new or returning to Salon after a long hiatus, including American Airlines, Marriott Hotels, Microsoft, The New York Times, Progressive Insurance, Las Vegas Convention Visitors Association, and Trip.com," said O'Donnell.
Salon's Subscription Business
Salon continues to enlarge the subscriber base for its paid subscription offerings, including Salon Premium, as well as Salon's two online communities, Table Talk and The Well. During the June 2002 quarter, Salon added 12,700 new paid subscribers, increasing the total number of paid subscribers to its three subscription services to 47,700, of which 42,300 remain as current subscribers. Compared to the year-ago period, paid subscriptions have grown 130% as a percentage of overall revenues for Salon.
"Paid subscriptions are a major priority for Salon. We're capitalizing on a new trend on the Internet and growing consumer acceptance for paid content," said O'Donnell. "We continue to aggressively promote Salon Premium, The Well and Table Talk to our large base of readers (over 3 million) each quarter."
Salon as of June 30th had a total of 42,300 active subscribers. "It's a very efficient strategy as we expend few "out of pocket" marketing dollars to promote our paid services directly to the Salon audience already coming to www.Salon.com," added O'Donnell.
"While new signups are important, renewals are key to any successful subscription business. We're experiencing Salon Premium renewal rates of 66%, a vast improvement from traditional print magazines," added O'Donnell. "We believe we can improve those renewal rates to 70% plus going forward."
Online Publishers Association consumer survey
According to a recent study by comScore & the Online Publishers Association in July 2002, a growing number of U.S. consumers are paying for online content. Consumer acceptance of paying for online content has increased 75% in the last year. Key findings from the study include:
Salon's Recent Financing
"Salon was working during the quarter on financing and successfully completed a July bridge loan of approximately $700,000," said O'Donnell. "We are seeking further financing, both a bank credit facility and equity investment to strengthen the company's balance sheet going forward."
Which means they're doomed. And that suits me fine.
Salon continues to enlarge the subscriber base for its paid subscription offerings, including Salon Premium, as well as Salon's two online communities, Table Talk and The Well. During the June 2002 quarter, Salon added 12,700 new paid subscribers, increasing the total number of paid subscribers to its three subscription services to 47,700, of which 42,300 remain as current subscribers
A lie by omission. They added the new subscribers only because they started offering monthly subscriptions for six bucks; before you had only one choice: to ante up $30 for a full year. Also note that they have already lost a whopping 11.3% of their subscriber base due to nonrenewals. In fact, if I'm interpreting the sentence correctly, what they're actually saying is that the 11.3% drop occurred ENTIRELY in just this one quarter, which means that fully 42.5% of the people that signed up this quarter had already left for good 90 days later.
Also note that they're intentionally conflating the subscription numbers to Table Talk and the Well with the actual Salon subscribers in order to pump up their numbers. This is about as legitimate as if Newsweek included all the subscribers to the Washington Post in its numbers, just because they're both part of the same company.
Compared to the year-ago period, paid subscriptions have grown 130% as a percentage of overall revenues for Salon.
More spin for the purposes of lying. Paid subscriptions have grown 130% from a year ago because in the first quarter last year they had JUST STARTED their paid subscription crap right before the end of the quarter. Going from 10 to 23 subscribers in the course of a year would not be very encouraging, but it would still be a "growth of 130%."
"Paid subscriptions are a major priority for Salon. We're capitalizing on a new trend on the Internet and growing consumer acceptance for paid content," said O'Donnell. "We continue to aggressively promote Salon Premium, The Well and Table Talk to our large base of readers (over 3 million) each quarter."
Stupidity #1: There is no growing consumer acceptance of paid content for paid content's sake. People have always been willing to pay, as long as the content was original, extremely useful stuff that couldn't be obtained anywhere else (example, the Wall Street Journal site). But they are not going to start shelling out $30/yr or more to every single site they visit now for free. At best, they'll pick one or two sites and completely abandon all the others forever. (And almost everyone's going to end up picking their favorites from only 5 or 6 big sites that really offer a lot of bang for their buck.) Salon is not going to be one of those sites. It is a shell of its former self, with only a tiny fraction of their original editorial staff left, and 100% of their truly good writers long gone. And the simple fact is that Salon offers nothing that isn't available elsewhere for free. Ninety percent of the major newspapers and news channel sites offer far more fresh content every day with the same major liberal bias, and there's no charge for any of it. For the true hard core leftists, there's Alternet, the Village Voice, the Nation (well, they charge for some stuff), Mother Jones, tompaine.com, on and on. A lot of the people who currently have subscriptions to Salon are either doing for only because it's "for the cause" (Salon shutting down will be interpreted by the entire country as a total repudiation of their viewpoint), or because they really wanted access to one or two of Salon's really good writers, who have of course all long since left. In either case, these are not situations in which subscribers will continue paying up month after month, year after year. The ones doing it for the cause will get "donor fatigue" eventually, and the ones who were in it for the writing no longer have any reason to stick around even now. In the end, only a sizable amount of extremely high quality content will allow a publication to continue publishing in perpetuity. Salon ain't got that.
Stupidity #2: 42,300 paid subscribers out of 3 million readers? That's 1.5% of their readership who have signed up. Not something to brag about.
"While new signups are important, renewals are key to any successful subscription business. We're experiencing Salon Premium renewal rates of 66%, a vast improvement from traditional print magazines," added O'Donnell. "We believe we can improve those renewal rates to 70% plus going forward."
Without knowing the details, this statement is meaningless. A renewal rate of 66% is a death spiral if you can't generate a large number of new subscribers at the same time. It's actually a loss of fully 1/3 of your subscribers, followed by another 1/3 loss of what's left, another 1/3 loss of what's left after that, etc. Also, we have to know how many of those are the $6 monthly subscriptions and how many are the yearly subscriptions. If a new monthly subscriber decides to stick around for two more months before dumping Salon, that's a hell of a lot less meaningful than a full-year subscriber who re-ups.