Grey Lady's Troubles With the P-Word

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UPDATED: Can you implement a paywall at a newspaper web site in 2010, or is charging users for content an act of slow-motion seppuku? What if it isn’t a paywall exactly (such a crude term, after all) but a series of turnstiles, or possibly a metered approach, like a hydroelectric utility? These are the kinds of existential questions that gallop through the fevered brain of many a newspaper executive these days, as ad revenues continue to slump and shareholders grow anxious.

Now the New York Times is (finally) poised to pull the trigger and commit to such a venture, if a recent report by New York magazine is to be believed. The magazine says that the Grey Lady is going to implement some kind of payment system soon — perhaps as soon as next month — and that the debate over doing so has split the paper into two camps (or perhaps only revealed a web-paper split that already existed). Mexican billionaire Carlos Slim Helu, the paper’s largest individual shareholder, is also apparently a fan of charging for content online. Update: The Times has confirmed that it is launching a metered-access system. Reuters has the news and the WSJ has the memo.

It’s hardly a secret that the NYT has been considering a paywall, or at least some kind of content-payment mechanism (you can almost feel executives at the paper wincing when someone uses the “p” word) for some time now. The paper was reported to be working on a new pay model as long as a year ago, and NYT Co. chairman Arthur Sulzberger Jr. confirmed as much in March 2009.

In May 2009, now-former NYT writer Jennifer Lee talked about a potential tiered-membership model on Twitter, after the idea was raised during an internal staff meeting. The paper’s president and its executive vice-president of digital have both talked about the debate over charging readers, and at one point last year the president said a decision would be made by June. In November, however, executive editor Bill Keller said that the decision had proven to be more difficult than expected (hardly surprising), but that an announcement was likely “within weeks.”

According to the NY magazine report — which it says is based on a source close to Sulzberger, as well as others within the NYT newsroom — the paper has apparently decided to go with a “metered” model similar to that implemented by the Financial Times. Under the FT system, which was launched in 2007, readers can see 10 pages for free per month, and then they are met with a subscription wall. Reuters media writer Felix Salmon (who wrote about his issues with the FT metered model here) has recommended instead a more subtle version, in which a reader’s actual consumption is measured, and then at some point they are billed for it — possibly through an iTunes account, if the NYT becomes part of Apple’s much-anticipated iTablet ecosystem.

So what will become of the NYT if and when it actually launches a pay system? The response from many observers seems to be binary — either it will succeed or it will fail. But the real danger is that it will be somewhere in between: neither a runaway success, nor an abject failure, but a slow and steady decline (Jeff Jarvis thinks it will likely be the latter).

The paper’s previous paywall experiment, Times Select, which was dismantled in 2007, arguably fell into that chasm too; plenty of people paid the monthly subscription, but not enough to make a real difference to the bottom line (for what it’s worth, the newspaper I used to work for had much the same experience with its own version of Times Select), and eventually the number of people paying leveled off. In the end, the paper decided (as my former employer did) that it just wasn’t worth it.

Will a metered model produce a different outcome? Perhaps. On the other hand, someone once said that insanity consists of “doing the same thing over and over but expecting different results.”

Image courtesy of Flickr user Transguyjay.

30 Comments

flopoke

Matt,
Good to see you out and about. Hopefully you will not have to play list mom:) here.

The NYT Paywall will fail if they insist on using it as the portal to subsidize their physical plant. And they are not setup to cannibalize their business as Om suggests. Nor are they going to be able to charge advertisers premium rates in a medium which is self limiting by the subscription model.
The idea of creating an online Fight Club and the first rule of Fight Club of not talking about Fight Club does not work on the web. Pay per View may work on a network where the pipes are controlled by cable companies, but online the pipes have no such central bottlenecks.

This is why general news organizations will never make a paywall work, regardless of reputation.

The trick to getting payment for content is to provide content that cannot be gotten elsewhere, or analysis of content that provides a ‘material’ benefit. ‘Material’ benefits are not always in dollars, but in large it usually comes down to that.

The former is getting harder as so many folks are online posting in so many ways that the ‘scoop’ is just not the thing that it was.

The latter depends upon folks whose understanding of a niche is such that the analysis has a material value that can be monetized. News reporting has a few superstars but not enough to support a mass media publication. A lot of these superstars are folks who have opinions on facts, which runs counter to the ‘just the facts’ constraints placed on ‘news’ organizations.

However subscription based writings are profitable such as niche newsletters, primarily in the financial sectors, which begs the ‘material’ value, and also validates the Wall Street Journals success in the paywall game. But the WSJ is a niche publication with a ‘material’ value.

A good example of the upcoming paywall problem can probably seen by looking at Variety and Variety.com which has already gone to the limited view before pay model.(currently they rely on ‘cookies’ as their counting gateway, which by clearing the cookie in your browser and refusing the site to place new ones, allows you to bypass that restriction)

Variety is using the bundle strategy, by forcing you to buy online access which also includes a subscription to the dead tree rag as well. Which is an oxymoron of the first water, as the major selling point of online media of all types, is the ability of not having paper clogging up your mail box.

This is just as dumb as the telemarketer selling you light bulbs and including 6 free steak knives with your order. You probably don’t have these steak knives and buy your light bulbs at the hardware store like the rest of us.

Currently the largest issue in online content paid or not is the Other Peoples Money problem, aka Advertising Dollars. This model led to the growth of media, and is contributing to its death.
Subscriber based media is in its infancy with the poster child being Wikipedia not running advertising despite the pleadings and ravings from Calacanis and Mark Cuban to ‘monetize’.

Subscriber based media has a thin line to run as subscribers also want buyin as is being demonstrated with blogs enabling conversations, like this. It is a tough road as letting the inmates run the asylum is not usually in the best interest of everybody involved. You probably got a lot of that at the Globe and Mail as the Community guy.

This is not to say that you cannot or should not allow folks to throw money at you, but it should come as an afterthought and not as either primary or secondary revenue stream.

Something to follow up on would to take Om in the back and see if the GigaOm Pro Products are providing enough revenue not only to make your check good, but to offset the need for advertiser revenues.

Being able to eliminate the ad department could move those resources to actual reporting making any ‘news, or media organization more valuable. Or at least that is the view from the peanut gallery.

the head lemur

slim

there’s an old adage. you get what you pay for. maintaining a news org takes people and money. if you’re willing to get free news (sprinkled with much opinion) from blogs, so be it. otherwise, pony up some dough, b/c most ad supported models do not work well.

the NY Times is just late to the game that Murdoch and WSJ started. par for the course.

Shirley Brady

Welcome, Mathew! Great first piece, raises many questions, including what happens to the NYT API with a paywall — and how to be open when you’re partially closed (both a technical and philosophical dilemma). One indicator: @harrisj at the Times tweeted (after noting that the NY Mag report is a “rehash of rumors from summer”) that NYT reviews don’t require registration to view. NPR’s anti-paywall CEO Vivian Schiller, who ran nytimes.com during the TimesSelect experiment, I’m sure is watching how this unfolds with great interest!

Mathew Ingram

Thanks, Shirley. I agree it will be interesting to watch and see how the NYT manages to be both closed (restricted access to content) and open (in terms of its API) at the same time.

William Mougayar

Yes, it’s definitely a band aid that is becoming very stale, and I agree about the shades of grey pertaining to its failure of success. It’s squarely a ‘muddled middle’ approach, and a defensive move meant to protect/replace dwindling revenues. 1) most newspapers they have failed to innovate around the online model (and continue to show complacency), 2) their cost structures are still too high and reflective of the old model. Until they fix these 2 sources of ailment, nothing will make a ‘big’ difference as you point out.

Shiva Ramabadran

metered sites are horrendously complicated to manage. What if I go back to a page several times because I was interrupted, or click back and forth on a multi page article a few times to read it again and again ?

They will need a help desk and manned phone and chat lines to deal with the angst of the subscribers who feel over or mis charged.

I don’t think its a band aid. Its a lot of negative PR for them, esp. if an influential blogger runs afoul of their charging policies.

Eideard

I reference the NYT less and less already – for the blogs I’m involved with. Their decision to fold the online International Herald Tribune into a “world” version of the NYT website is a beancounters solution.

Put up a paywall, lots of people put up paywalls – and a significant chunk of talent is likely to migrate to other models better suited to the Web. Because the beancounters who put up the paywalls, who can’t find better solutions to revenue vs. sales – will also make cutting salaries of the talent part of the equation.

And beancounters ain’t talent.

Jane

In a sense, I want to pay for content because in paying for it I assert some control over the business. I become a revenue source and not just part of the ad fulfillment process. But the majority of people won’t apply this reasoning. They’re coming to the paper not directly but from search engines and they’ll go to the next result if the first one is behind a paywall.

Absolute best case scenario papers like The NYT, Guardian etc pull the paywall model off. But less prominent metro dailies, which carry way more syndicated wire content than original articles, will have a harder time implementing the same model.

In the end, I think you’ve hit the nail on the head… some die-hard fans will fork out (more in the case of the premium newspaper brands) but not enough to budge the needle in the long run.

The sad part of the story is not the print industry being in trouble but quality journalism and writing being on the line. Sure, writers can blog and sometimes blogs have more integrity than print or online media (because they seem to serve readers over advertisers). But if those journalists can’t bring home the bacon, how can continue producing the same quality?

Rob Hyndman

It’s a good question, John. I got a Kindle as a gift recently, and the first thing I did was subscribe to a magazine and a newspaper.

I’m intrigued by the question of whether increasing the utility of content will make it more valuable to consumers. Not sure.

But I’m waiting for the Apple Tablet too.

David Chandler

This is an interesting post, and it will be interesting to see what they actually do and whether it works. I think the 10-stories-free-then-subscribe model could work, if the subscription fee is low enough.
One small but embarrassing error, however. You wrote:
“Mexican billionaire Carlos “Slim” Helu, the paper’s largest individual shareholder, is also apparently a fan of charging for content online.”
“Slim” is not a nickname, as your putting it in quote marks suggests. It’s his actual family name (in typical Spanish style, the family name is in the middle). He is generally known simply as Carlos Slim.

Mathew Ingram

Thanks for the comment, Jeff — and for linking to your piece, which I read with interest. It’s interesting that the FT has actually dramatically scaled back the number of pageviews they allow for free. I wonder what that says about their success with that model.

Steve’s post is also a good one, along the same lines of Felix Salmon’s piece. Thanks for the link.

Mo Kilma

They need a much better job monetizing their page-views. As an example, they should be an Amazon affiliate of Amazon and have links to purchase books directly from their book reviews.

Geoff

I like this debate because it strikes to the heart of what had been the lifeblood of media; advertising. When digital distribution is super-cheap and if circulation is the key to Ad rates, it’s a bit of a paradox… er, catch-22… something!

I kind of liked the Turnstile idea. But, have the turnstile be Advertising. The FT tiered system is okay, but it still leaves questions for the purchaser about how and when to blow past the freebies. Maybe this month I would be motivated to view 11 articles (1 over the limit). So, in effect, I’m paying the monthly fee for 1 article in this case.

Consumers need an easy system. Newspapers need readers. Advertisers need to know they are getting value. Within this context, the answer lies.

Great debate. No easy answers. Cheers.

aprildunford

I’m with Rob in that I love the Times but I can (and do for periods) live without it. I can’t believe that this won’t result in a slow steady decline. It’s a bandaid, as Om puts it, not a cure.
April

John Philip Green

Mathew, you mentioned Apple’s tablet briefly… do you think, as I do, that mobile devices could be the savior of newspapers?

I bought my wife a Kindle (the smaller one) because she reads a lot of books and, among many other good reasons, we were running out of shelf space. But I love the screen (!) and would much rather consume the NYT every morning on that than in any other way. (I use the iPhone NYT app a lot, but the experience is totally different.) Amazon charges $14/month for the Kindle version of the NYT. Seems like a deal to me.

Everybody wins, no? You know this industry… how do the mobile device subscription economics work?

I am waiting to hear Apple’s plans for a tablet on 27th before putting in an order for a Kindle DX of my own.

John

Mathew Ingram

It’s funny you should mention that, John :-) I’m working on a post about mobile and the iTablet as well, and how they aren’t likely to be the saviour of media. Could they help? Sure, as Rob suggests — but I don’t think there is any magic bullet at this point, and I certainly don’t believe in any magical “iTunes of news” model.

Rob Hyndman

I think you and Jeff have it. Some people will pay, many won’t, and the NYT won’t get a clear indication one way or the other – or rather no better an indication than it should already have – about what’s next for it.

At the end of the day, too much of what the NYT produces is essentially fungible, and – as much as I love it – there is no one thing there I can’t live without. A pretty toxic combination.

Mathew Ingram

Agreed, Rob — fungibility is the key. What is unique about the Times, and does that have anything to do with frequency of access? I don’t think so.

Om Malik

Hey Mathew

Welcome aboard and congrats on your debut post. I think it is going to fun times to read your views on this whole concept.

In my opinion, I think the big media is afraid to do what innovator’s do: cannibalize its business and think differently about itself. The whole notion of what is “media” is changing. You and I have talked about this in the past. From where I sit, pay wall is a bandaid for now.

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