## Continuing shift to digital over print 

Circulation revenue is a significant source of revenue for us and an increasingly important driver as the overall composition of our revenues has shifted in response to the transformations in our industry. The largest portion of our circulation revenue is currently from traditional print products, where we have experienced declining print circulation volume in recent years. This is due to, among other factors, increased competition from digital platforms and sources other than traditional newspapers (which are often free to users), higher subscription and single-copy rates and a growing preference among some consumers for receiving their news from a variety of sources. 

Advances in technology have led to an increasing popularity in the distribution of news and other content through smartphones, tablets and other mobile devices, reshaping consumer behavior and expectations for consuming news and other information. Our ability to retain and continue to build on our digital subscription base and audience for our digital products depends on continued market acceptance of our evolving digital subscription model, consumer behavior, pricing, available alternatives from current and new competitors, continued delivery of high-quality journalism and content that is interesting and relevant to users and other factors. 

In addition, the advertising industry continues to experience a secular shift toward digital advertising, which is less expensive and can offer more directly measurable returns than traditional print media. The digital advertising marketplace has become increasingly complex and fragmented, particularly as digital advertising networks and exchanges, real-time bidding and other programmatic-buying channels that allow advertisers to buy audience at scale play a more significant role. Competition from a wide variety of digital media and services, many of which charge lower rates than us, and a significant increase in inventory in the digital marketplace have affected, and will likely continue to affect, our ability to attract and retain advertisers and to maintain or increase our advertising rates. 

## Economic conditions 

Global, national and local economic conditions affect various aspects of our business, particularly advertising spending, which drives a significant portion of our revenues. The level of advertising sales in any period may be affected by advertisers’ decisions to increase or decrease their advertising expenditures in response to anticipated consumer demand and general economic conditions. Changes in spending patterns and priorities, including shifts in marketing strategies and budget cuts of key advertisers, in response to economic conditions, have depressed and may continue to depress our advertising revenues. 

## Fixed costs 

A significant portion of our costs are fixed, and therefore we are limited in our ability to reduce these costs in the short term. Our most significant costs are employee-related costs and raw materials, which together accounted for approximately 50% of our total operating costs in 2014. Changes in employee-related costs and the price and availability of newsprint can materially affect our operating results. 

For a discussion of these and other factors that could affect our business, results of operations and financial condition, see “Forward-Looking Statements” and “Item 1A — Risk Factors.” 

## Our Strategy 

Our business is operating during a period of transformation for our industry and amidst uneven economic conditions. We anticipate that the challenges we currently face will continue, and we believe that the following elements are key to our efforts to address them. 

## Strengthening and extending The New York Times brand through our digital offerings 

Our priority is to better position our organization for innovation and growth, while maintaining a robust news- gathering operation capable of continuing to provide the high-quality news and information that sets our Company apart. As we continue to face a challenging advertising environment, we are focused on building consumer revenues. Our paid digital subscription model has created a meaningful revenue stream that has partially offset declines in our advertising and print circulation businesses. The continued growth in our digital subscriber base in 2014 underscores the willingness of our readers and users to pay for the high-quality journalism we provide across multiple platforms. 

We aim to continue building our digital subscriber base by increasing engagement and subscription opportunities. In 2014, we introduced several new digital products, including NYT Now, Times Premier and NYT Cooking. 

