It’s a big bet. The New York Times (NYSE: NYT), which has been thrashing about every possible kind of business model in the last six months, is making the bet on metering, meaning readers will get some number of free articles per month, then be told to pay up to get more. Nine quick questions as we digest the news:
- Why now? The Times is making one, maybe penultimate, bid to save its cost structure. It still employs something more than 1100 journalists, at high wages. Those wages have been well-earned by dint of skill and accomplishment in most cases, the the internet economy and the advance of low-cost, “good-enough” content (make sure to read James Rainey’s great piece, “Freelance Writing’s Unfortunate New Model”) is doing further damage to professional journalism economics. The Times metering plan is intended to provide a strong second leg, after advertising, to support that plan.
- Won’t metering kill the golden goose of mass advertising? First, let’s note that Denise Warren, who runs advertising at the Times generally, is in charge of NYTimes.com. That provides a keen tie between the new experiment and the Times’ main source of funding. As Warren has recently said, “If we move in this direction, we want to make sure that we’re not
dipping into the advertising bucket to get money out of the subscriber bucket.” Of course, that’s easier said than done; the Times thought TimesSelect would be more controllable than it was. One curious potential upside here: those who do subscribe via metering may become among the most lucrative ad targets. Look at it this way: the Times will know the most about these customers — more frequency of usage; more clickstream data; more declared preference data — and that’s highly useful in targeting advertising.
- Where else might the Times find new revenue soon? Think the other Big Apple (NSDQ: AAPL). As Apple releases the tablet, it needs content friends. It can “pay” the Times in prominence; the two could also figure all manner of interesting revenue shares. Apple is already offering payments to companies like Disney (NYSE: DIS) and CBS (NYSE: CBS), as its next-gen Apple TV plans take on the cable giants. Why not pay for premium news content?
- What does“frictionless experience across multiple platforms,” in the Times release this morning, mean? I think this is one major move, if the Times can pull it off well and quickly. In the age of the smartphone, the coming tablet, and (coming a bit after that) the Internet-mediated livingroom TV monitor, readers are already coming to expect easy, and smart, access to the their content wherever, whenever. They also will come to expect — we’re seeing it in some iPhone apps already — the stories they save on one device to be known by another; ditto email sharing lists, stock portfolios, favorite sports team preferenes. If the Times can provide such synchronicity, then readers who are asked to pay can understand the charge as, in part, an access charge. We, Americans, love to pay for access — think massive cable and wireless bills — we just have thought digital news content should be free. At a panel I moderated yesterday in New York, Dow Jones (NYSE: NWS) consumer chief Todd Larsen, indicated a similar philosophy about universal access. One rub here to watch: who owns the customer relationship with the emerging tablet. Amazon (NSDQ: AMZN) has stubbornly clung to the position that it will “own” the customer (hey, wait a minute, that’s me), while news companies — getting a glimmer of an all-device-access future — have pushed back, and are negotiating with Amazon’s Kindle competitors, to keep their customer touch.
- Isn’t it suicide to charge your best digital customers for content, while allowing others to get some for free? Not really. In fact, that’s what the Wall Street Journal has been doing for years. Remember the numbers: about a million paying online subscribers…..and another 19 million uniques, who get to Journal content through search engines and all manner of side doors for free.
- What can we learn from the FT experience? It’s all about propensity modeling — learning patterns of user behavior, how many articles of what kind readers read within certain periods of time. It’s about tweaking the dials, up and down, to capture the payments of truly loyal readers who find continuing value in the brand, while not losing a critical number of occasional visitors. It’s about learning how to convert key parts of miscellaneous search engine traffic — and understanding that most of it will never be converted. The FT offers several tiers of access: a few free articles without registration, 10 with registration and then access through subscription. The big eye-catching FT recent announcement: Content revenues are surpassing its print advertising take.
- Is the FT experience relevant to the Times? Yes, no and we don’t know. That’s in part, what makes it a fascinating experiment to watch. FT.com managing director Rob Grimshaw has told me how much the company continues to learn about customers, based on its work. One major key: getting real smart about data. The FT has hired data whizzes, gotten outside news industry thinking working with the ideas of companies like eLoyalty and people like Jonathan Mendez, to expand its knowledge base — and then has worked the knowledge. Yes, we know business/financial content has been the leading edge of paid content, so far, but the modeling under the FT model may be the most instructive here.
- What’s the downside? Other than major blogosphere blowback — winds developing tweet by tweet — the Times runs the risk of TimesSelect 2. If readers, and lots of them run into paywalls and decide to quickly move on to still-free sources — sources as top-notch as the BBC, Reuters (NYSE: TRI), NBC, NPR and many more — then the model could fall apart: the Times would lose its mojo as top digital (non-aggregator) news site and retard its digital ad potential. That’s what makes it a big bet.
- What happened to the membership scenario? One strategy the Times considered and is now apparently letting go of is membership. That would have been staying all free, but, NPR-like, asking those readers who really value “the service” to pay up. MinnPost has surpassed 1500 members in the Twin Cities, while GlobalPost has signed up about 500. Membership is promising, but tough, and ultimately, it appears the Times believes metering will pull in far more money.
This article originally appeared in Newsonomics.