Friday, March 18, 2011

NYT.Com pay scheme can succeed, but…

The long-awaited, much-delayed digital pay scheme at the New York Times should work just fine, but that doesn’t mean it can be replicated successfully in other markets. Accordingly, other publishers should proceed with caution.

After spending nearly 1½ years to retool its web publishing engine to accommodate what’s known as a metered pay scheme, the Times announced yesterday that it would begin charging for access to the online and mobile content it has given away for free since the paper abandoned its last digital pay initiative in 2007.

The prior pay plan, which was called Times Select and lasted for two years, charged $7.95 a month or $49.95 a year for access to such high-profile columnists as Thomas Friedman and Maureen Dowd.

The new plan, which debuted yesterday in Canada and goes into effect on March 28 in the United States, will allow visitors to read 20 articles for free before being required to pay for additional content on the web, on smart phones and on tablets.

After an initial 30-day introductory discount (pegged at 99 cents in Canada), readers will have to pay $15 a month to access content on the web plus a mobile phone or $20 a month to use the web plus a tablet. For those who can’t decide, the all-you-can-eat package is $35 a month. Home delivery subscribers will get digital access for free. Details are here.

A metered plan enables a publisher to have his cake (generating page views to create as much advertising inventory as necessary) and eat it, too (building a new revenue stream by charging for access to some or all of the site).

As reported here, it is possible for a paper like the Augusta Chronicle to give away so much content with a metered pay system that it can avoid sacrificing page views while tapping into what is likely to be a modest flow of ancillary subscription revenues.

Although the monthly 20-article limit at the Times will be more stringent than the implementation in Georgia, the new Times metering system will let the paper change the limit dynamically to produce as many page views as it needs to fill every advertising order.

An ad-revenue safety net can be put in place by any publisher who installs a decent pay wall system. So, that’s not the challenge to charging for content. The challenge is finding a sufficiently large number of willing buyers when less than 1% of the residents of a typical community are willing to pay for the news.

Unique among its fellow publishers, the Times is likely to be able to assemble a critical mass of paying customers because of the exceptional nature of its audience. Here’s why:

The world’s intelligentsia – including the elites of business, government, academia and the arts –read the Times because it contains information that is mission-critical to their activities. They are rewarded with rich and original international, national, political, cultural, science, fashion, lifestyle and economic coverage that is beyond the capability of any other publisher.

With sincere respect and affection for other publishers and their readers, no other American newspaper, save the Wall Street Journal, is in that position.

The Journal and the Financial Times, its counterpart in the United Kingdom, have proven that it is possible to get wealthy, powerful and busy people to pay for access to the digital media. Although some critics say the fees planned by NYT are high, they are trivial expenses – and just another cost of doing business – for the hard-core readers who rely on these publications.

While the WSJ does not disclose the performance of its online operations, the FT, which pioneered the metered model about two years ago, reported that it had 207,000 digital subscribers as of the end of 2010, representing fully a third of its readership base (the rest being print customers). The paper charges $25.99 a month for an all-platform digital subscription with some limitations and sells an unlimited digital package for $38.99.

Assuming equal distribution of both types of plans and that all subscribers pay for a full year, these disclosures suggest that digital revenues at the FT could be on the order of $65 million a year. Although the likely revenue opportunity at NYT is anyone’s guess (including the newspaper’s management), it seems comfortable to surmise that they can gross something in the low nine figures, given that the number of pre-meter unique visitors at NYTimes.Com is six times greater than the post-meter traffic at FT.Com.

While a revenue jolt like that is sure to grab the attention of any publisher, most newspapers in the rest of country lack the substantial body of compelling, exclusive content and the unparalleled concentration of wealthy readers that are enjoyed by the Times.

What the publishers do have, however, are any number of local broadcasters and other online competitors who will be only too happy to reprise, re-report or otherwise repurpose the stories for which the newspapers hope to charge.

Generally speaking, the bigger the market is, the more competition there will be. In Northern California, for example, no less than 244 local news and blog sites have been identified by my colleagues at the Graduate School of Journalism at the University of California at Berkeley.

This is not to say these sites are out to illegitimately poach anyone’s content. But once news enters the public domain, no one can own it.

This also is not to say that other newspaper publishers should dismiss the Times experiment as irrelevant. They just can’t assume that what happens in New York will play in Peoria, Poughkeepsie, Pomona or anywhere else.


Blogger Stephen said...

Bottled water, people. "free" but sellable. You're gonna pay. Mark my words. At first I only heard suckas saying "well... the FT and WSJ can paywall because they have uniquie info" well, now people are willing to acknowledge that the NYT can do it too. And you're gonna pay. And if not you, you're neighbor. AND... for people who like to read financial balance sheets, we know that newspaper classifieds at many papers (like Lee Enterprises) have turned positive in several sectors so newspapers are looking good. Craigslist remains a place for people who look for crappy jobs, used crappy things, or to sell their bodies, or all three.
Some day you will eat the second half of that "Information wants to be free" line that dummies like to throw out. Let's not forget the second half of that statement as was originally posited at the 1984 hackers convention- "information wants to be free but it also wants to be expensive". Everyone forgets that second half.
The NYT paywall will start slow, but it will pay for itself by one year. Then advertisers will realize that they never really cared to advertise to freeloading losers in the first place. Then it will dominate. Go huff and puff with your HuffPo, just bought out by the biggest loser company on the planet- AOL. A match made in heaven, indeed.

1:31 PM  
Anonymous Anonymous said...

In comparing the subscription readers of the WSJ or the FT with the potential subscribers to the NYT plan you miss a major point.

Most of the subscribers to the WSJ or have their subscriptions paid for them by their employer.

Certainly you are not unaware of the fact that most of material on can be used for business purposes, where as only a small percentage of can be so used.

While there are certainly readers of who may be able to convince their employer to pay-for-read, it is highly unlikely most employers will pay for their employees to read

6:15 PM  
Blogger DANIELBLOOM said...

I blogged a year ago that it aint gonna work, and i still insist it anint gonna work, they will try it for 12 months and then admit they erred......WATCH! (and i am saving this comment in my comment files just to show everyone here that i could see the future..... as i could a year ago... and of course, i am not alone in my prescience,,,,we can all see it....paywalls do not work in the free internet, lowercase internet, age...

8:04 PM  
Blogger Unknown said...

Nicely stated!.

I agree that The Times has positioned itself as a leader in the industry, allowing them the ability to charge for the comprehensive information they provide.
My concern with The Times’ paywall is the pricing structure. Compared to it’s yearly home delivery subscription rate it’s a steal. However, I do think it will come as a shock to some who have to ante up after receiving the service for free since Times Select was abandoned.
For me the pricing structure left out a critical tier, mobile only. A modest five dollars a month for unlimited mobile device use would be enough to wet most appetites. In the vastly expanding market of smart phones and the like, this could be a separate market from the web and tablets.
Finally, for those not willing to pay, and I’m sure there will be plenty. It seems The Time’s has left room for users to sneak in through side doors using Facebook, Twitter, and even Google. Purposeful or not, this contradicts the Times’ goal. However, it will serve a second purpose, keeping their overall hit count high enough to keep advertisers happy.
Thanks for the informative post!
Travis S. Pratt

4:03 AM  
Blogger Znakit said...

It will succeed, if only b/c there is no other way. The future of publishing is digital and digital content can be monetized in so many ways, worldwide...

6:47 AM  
Blogger Reg Chua said...

"Most of the subscribers to the WSJ or have their subscriptions paid for them by their employer."

That's an often-said line but as far as I know - and I was at the Journal for 16 years - there's no evidence to prove that's true (or false). Dow Jones simply doesn't have the data to know if subscriptions are paid by employees or employers.

So it sounds nice. But it's not a fact. As least as far as anyone knows.

More broadly, I suspect the NYT paywall/meter will be more a test of social engineering/brand management than purely one about quality of content.

Bottled water is not a bad analogy; what determines pricing and willingness to pay is probably as much a combination of brand perception and social norms as much as it is the pure utility of the product.

4:22 PM  
Anonymous Anonymous said...

I agree with Reg. Most NYTimes readers buy a $3 coffee a day from Starbucks. That's $90 for coffee, compared to $15 for the best paper in the country. HBO costs $15, Netflix costs $12-$15. On the other hand, why are they charging an extra $10 to access news from the iPad? That's ridiculous.

8:39 PM  
Blogger Pulledin said...

This won't work because people will just hide or change they're proxy. POOF. 1.5 years of development down the tubes.

12:09 PM  

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