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Summary:

Plenty of people seem convinced the New York Times paywall is working. But what does that mean? Is the NYT getting readers to pay? Yes. But the long-term value of that is still an open question — and a paywall remains a fundamentally defensive strategy.

If you follow the media sphere, you might have seen some news articles and blog posts recently about how the “New York Times paywall is working,” or words to that effect. They were all over the place, including a piece by Reuters media writer Felix Salmon, in which he admitted he was wrong about whether the paywall would succeed or not. Salmon has now written an update to his original post, with some of the reasons he thinks the paywall is working. But what is meant by the term “working?” Is the NYT getting readers to pay? Yes. But the long-term value of that is still very much an open question — and a paywall remains a fundamentally defensive strategy.

Salmon said in his original post that he had been forced to admit the NYT paywall is working because the paper has been able to attract about 400,000 paying users in a variety of forms, according to Seth Mnookin, in a piece for New York magazine about how the newspaper company has defied expectations that it would fail (although no specific expectations are ever attributed to anyone in the article). When the paywall launched, Salmon made a bet with Financial Times writer John Gapper  — whose newspaper also has a paywall, although a much less porous one — that the NYT would be able to get 300,000 paying readers within two years, which now seems pretty likely. Said Salmon:

I was very much a skeptic with regard to the paywall experiment, but I’m extremely happy that it’s working, I’m a big fan of the NYT, and I sincerely hope it has found a predictable and dependable new revenue stream in the volatile and treacherous media business.

In his follow-up post, Salmon says that some of the reasons the paywall is working are that it doesn’t take a hard line on reading the digital product, the way the paywalls at the Financial Times and other papers such as News Corp.’s Times in London do. Instead, the NYT allows readers who come in from social media such as Twitter or blogs to read articles for free (only 20 of these non-social links are allowed per month). And Salmon also notes that some people are clearly just happy to pay for the NYT, in the same way they pay for things like museum memberships, even if they don’t have to.

First we need to define what “working” means

That may all be true, but does that mean the NYT paywall is “working?” I’m not convinced yet, and I’m not the only one. Felix Salmon may have lost his bet with John Gapper, but why is 300,000 subscribers the magic number that determines whether it’s working? That may mean it’s off to a good start, but it doesn’t mean it’s a raging success. Don’t get me wrong; I agree with Salmon that it’s great to see the the NYT with a recurring stream of revenue — but by that criteria, the newspaper’s last paywall in 2005 (which inadvertently helped fuel the rise of The Huffington Post) also “worked,” because it made money. But as Josh Benton at the Nieman Journalism Lab notes, the number of subscribers peaked quickly and never grew again, and the wall was dismantled.

What kind of growth will the NYT see from its paywall? Will it peak at 400,000 or so (some of whom were provided by advertisers such as Ford, which subsidized them, and so don’t really count), or will it continue to grow? And at what rate? Those are the criteria for a successful digital strategy, it seems to me, not whether a percentage of existing subscribers pay a few dollars a month for the paper out of charity.

Will the paywall result in a single new reader coming to the New York Times? That seems unlikely at best. While it’s not impossible that someone might suddenly decide to pay for the paper despite not being a regular reader, it seems more likely that the people currently paying are die-hard NYT fans. And that’s great — although the comparison Salmon makes to a museum might cut a little close to home — but it’s hardly a forward-facing digital strategy, as I’ve argued in the past (and others have argued as well).

The bottom line is that the paywall is arguably producing about $35 million or so a year at the current rate of subscriptions — but as Salmon notes, that is a relative drop in the bucket for a corporation the size of the NYT, which has revenues of about $2 billion. And will that number grow, or will it stay the same or even shrink? Even if it doubles, that’s still a fairly small contribution to the overall business. Is it better than nothing? Sure it is. But it’s not going to make or break the newspaper.

But the biggest knock against the paywall is that it has virtually nothing to do with actually taking advantage of the digital world in any concrete way. It’s just charging people nickels and dimes for their paper, the way the NYT and other newspapers have for a century and a half or so. In that sense, it’s not really a strategy at all; it’s more like a line of sandbags designed to shore up the print business and squeeze as much money out of it as possible as it declines. A wise move? Perhaps. Something to get excited about? No.

Post and thumbnail photos courtesy of Flickr users U.S. Army and jphilipg

  1. i agree w/both you and felix:

    it’s ‘working’ by nailing its target market: those who feel guilty by the siren call of ‘great journalism deserves to be paid’ and are also technologically inept. (one word: mtr.js, research it matthew)

    it’s also not working as a long-term strategy that will guide the nyt to a wholly digital future.

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    1. Thanks, Robin — well said. We are in complete agreement on that: it is kind of working, in that people are paying, but I’m not prepared to call it a success just yet, either as a revenue-generating strategy or a digital strategy.

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  2. I think the thing a lot of people are excited about is that there is ANY number of people willing to pay for news content online, whether that number eventually flattens out or not. I think this is the reason people would eventually cite if you pressed them hard enough on why they’re thrilled at the NYT paywall’s “success.” A lot of these people just don’t care about the other metrics and measures, whether this constitutes a good long-term strategy and whether this is really a good use of the web. These people just want to be assured that consumers will pay for something other than Angry Birds and for now they have that assurance.

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    1. Thanks, Anna — but we already knew that, since the NYT had hundreds of thousands of people paying in 2005. I don’t really see what this proves at this point.

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  3. Mr. Ingram,
    If I may point out-
    1. The NYT is well on its way to 300K fully paying online subscribers, which at $20 per subscriber per month is $72M dollars per year, or an extra 3.5% in revenue. ANY revenue growth in ANY industry in an environment of decreased expenses (like the NYT) is a big deal.
    Furthermore, the NYT’s revenue shortfall in this last quarter was about 13 million dollars. This is about another 225K subscribers. This is really not that far of a goal. In fact, I would say that it is more likely than not that the NYT will have another 225K subscribers by this time next year.
    2. Online ad revenue at the NYT INCREASED during this period, even though the digerati exclaimed that online ad revenue would be exactly the thing to be decimated by a paywall. If I may speculate, it seems that advertisers are paying more for a self-selected well-heeled clientele, not freeloaders.
    3. As stated in a Buniness Insider article, the NYT states that in the period of the paywall, print subscriptions have increased. Frankly, Mr. Ingram, this is an astonishing development. It is the reversal of a multi-year trend. If true, this deserves serious consideration.
    4. It took ‘Times Select’ over two years to get almost the EXACT number of subscribers that the NYT paywall has gotten in about three months. Furthermore, Times Select cost about 3 times LESS than the current average cost for NYT paywall users. In this light, dismissal of the paywall by mentioning ‘Times Select’ is utterly baffling. There is simply no comparison.

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    1. Thanks, Stephen. To your first point, we don’t know how much those subscribers have been subsidized, but it’s almost certain they have been — so your $72M figure is over-reaching a bit, I think (check the link in my post to Ken Doctor’s estimates).

      To your second point, it’s true that online advertising revenue did increase, but we don’t know why — the Lincoln deal that gave free subscriptions to 100,000 people or so could have played a role in that.

      On the third point, I’m not convinced that increasing print subscriptions is a good thing — they are expensive when compared to online subscriptions, even though the NYT makes more money from each print sub in ad revenue.

      As for TimesSelect, you are right that it took longer to get the same number of readers, even though it cost less — obviously the two are not identical. But that doesn’t mean the current wall won’t max out and stop growing just like the previous version.

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      1. “so your $72M figure is over-reaching a bit”

        The nyt paywall at 325k is making an annual 67m. Looks like i was underreaching. They will be making 100m by the end of the year. Hey, Matt, can i get a witness?

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  4. What comes to my mind after reading your article is that the NYT, and others, are just trying to put their newspaper in digital form on the web. That’s fine, but the question about the paywall is really about the NYT evolving into a digital media company. The website itself has to have bring value to people. Having a vision where integrating social media tools with the quality content of the NYT would be a start.

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    1. It is definitely true that news organizations are also transitioning their ability to report the news on the new digital platforms. They have a lot to learn…and they need time to learn it.

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    2. That’s a great point, Peter — I completely agree.

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  5. Matt, I think you aren’t giving them credit for at least creating a “value” for the content online. Besides the actual subscribers, they are leveraging On-line subscriptions as a reason to subscribe to the print version, even if only the weekender, and that appears to be working to shore up print subscribers at a time when they are worth a lot more to the bottom line. Technology is evolving that will ultimately shut some of the loopholes and links, but frankly this is a transition period and the trick is to get NYTimes readers used to reading it on all platforms, protect what traditional revenue you can, while gradually shifting readers and advertisers to the new world. And while it’s obvious to me they will both get there …the ultimate value is high…they are asking them to change habits and that takes time. They just have to survive the transition.

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    1. Thanks, Larry — I am not saying the NYT has failed, or that they haven’t created any value. I’m just saying it isn’t enough to call the paywall a success yet, and that there is a lot more that needs to be done. And I’m not sure adding to print subscribers is such a great idea, to be honest. That’s going to make it harder to move to a more digital future, not easier.

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  6. Technological change, in particular, the rise of tablets and the I-Pad’s, along with ever more capable smart phones, has had a huge impact on consumer demand for digital content. It’s great to just download the NYT and read it on the train or on breaks from work. Something you would never do with a laptop.

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  7. newsjunkie247 Sunday, August 14, 2011

    I think Felix Salmon is making a false assumption though. He is assuming that a majority of those 200 000 plus users are paying out of choice and that they see the choices that they have. But I think the first comment on this post illustrates the opposite. It isn’t necessarily the fact that people are considering both options realistically and choosing to pay. We don’t know who makes up those 200 000 people. Techsavviness and psychology play a really big role here. If a majority of those paying are somewhat older and less techsavvy, they might think the paywall is harsher than it is and harder to get around. When I shared this video on Facebook showing the workaround (http://www.youtube.com/watch?v=N5R4CgDwFX), several otherwise intelligent college grads were very thankful and had not realized how easy it was, just like the commenter above and simply believed that because the marketing painted the idea of a paywall, that one really existed. The NYT doesn’t market this as a low paywall. They emphasize that one still get in through links on blogs/social media, but believe it or not, most people don’t realize that one can also in matter of seconds create such a link in their address bar. If hypothetically, the Times created such a video as posted above, this would be a very different story. There was a really great comment in the German Frankfurter Allegemeine Zeitung that unfortunately has been translated. But it had this key sentence. “The only people who pay are the ones who are too dumb, too lazy or too nice, or those who want to read the paper on an iThingy”. And these are the people the advertisers want to reach? How about the young techsavvy people who aren’t repelled from reading the Times by a non-existing paywall? http://www.faz.net/artikel/C31013/zeitung-im-internet-die-dummen-die-faulen-und-die-netten-30480810.html

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  8. Paramendra Kumar Bhagat Sunday, August 14, 2011

    You are right. I am not excited.

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  9. Mathew – understanding that digital is clearly the future, its obvious that you are approaching this topic with an agenda.
    The Times online numbers are impressive, the audience that they can deliver –
    (most subscribers pay, many at the onset were subsidizes, which is another word for advertising, the same way every other website exists) – is beyond compare,
    regardless of if their legacy is print or not.

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  10. Anirvan Lahiri Monday, August 15, 2011

    I agree with the broad thrust of your skepticism but for one issue. Why do we assume that this is not a learning experiment? If it is perfectly fine for any other service to take a few years to work out its product market fit, to come up with a business model, to pivot a few times en route – if all of those are just natural milestones in start-up evolution, why then this assumption that what you see of the NYT paywall now is all there will ever be to see? Surely, you would expect NYT to be poring deeply through clickstream and subscriber data to see what is working and what is not? The fact that version 2 is already off to a much more robust start than version 1 – is that not reason to hold out hope for a still better version 3 in due course?

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    1. They spent tens of millions “developing” version 2. You really think they are going to scrap it soon for version 3? That seems far-fetched.

      I’m of the opinion that this experiment has already failed. It’s more or less capped already at a relatively low revenue number. Someone needs to explain to me why someone who hasn’t already decided to pay is going to pay. Marginal Times readers online are as likely to get bored of the article limits and find other sources of news as they are to suddenly pay to sub.

      People like me who are paying for the Weekender just to get the online stuff generally crack open the Sunday paper for 10 minutes. And I feel like an idiot for doing it; what a waste of paper. I’m probably going to cancel soon enough and dance around the paywall as needed.

      Honestly, I don’t believe “all content ought to be free” but this trend of getting people to pay without offering much in return is bizarre. The reality is that the Times on the web is festooned with tons of annoying ads. Does my paid sub get me a cleaner, better experience? No. And the iPad app was a giant chance for high-value targeted ads and a free app — get people off the low-value web site. But instead they charge money for it and ensure it never reaches any kind of mass market. This I would call idiotic thinking, but instead it’s more like “non-thinking”.

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      1. Anirvan Lahiri Monday, August 15, 2011

        Mark,

        Scrap is too harsh a word – it suggests a write off. I am talking about iterative evolution building off learnings from each product version – the same process that drives innovation elsewhere on the web.

        I generally agree with the criticism that the current experience is not innovative enough and is flawed in important ways. My only point is – so what? Most services start off as flawed and suitable for only an early adopter minority willing to overlook those flaws. The interesting question for any service in its early weeks is not if it is flawed but how rapidly can it spot them and fix them.

        I haven’t seen the evidence to suggest that NYT doesn’t realise or cannot learn from its flaws. Give them a chance – or the same temporary suspension of disbelief that we grant other early stage ventures. That is my only beef with the article, really.

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      2. Cynthia Typaldos Monday, August 15, 2011

        Mark – interesting point you make “Someone needs to explain to me why someone who hasn’t already decided to pay is going to pay.”

        The price point is such that very few of the 44M unique visitors are going to pay. One estimate says less than 1/2 percent are paying.

        When “Enormous” is Picayune: the NYTimes.com Paywall
        by Vin Crosbie
        http://www.digitaldeliverance.com/2011/08/03/nytimes-paywall/

        Their growth is capped unless they can develop a service that is attractive to millions at a price point millions are willing to pay. That probably means micropayments and networked (e.g. not just for the NYTimes). Given that they are site-centric, rather than user-centric, I doubt this evolution will happen.

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  11. Cristeta Boarini Monday, August 15, 2011

    I am a journalist and I am 21. I subscribe to the paper copy of the NY Times and I’m a member of my local public radio station. Unlike people who don’t want to pay for other people’s hard work, I understand that without support these news entities that we value will eventually disappear. Buck up, people. If you really are reading more than 20 articles/month than support the Times.

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  12. I still believe the NYT paywall is a membership program in disguise and the quicker they treat it as such – the quicker they’ll have growth.

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