Continuing shift to digital over print  Economic conditions  Fixed costs Our Strategy Strengthening and extending The New York Times brand through our digital offerings P. 24 – THE NEW YORK TIMES COMPANY 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.  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.  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. 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.” 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. 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. 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. 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. 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.