New York Times Paywall Cost: More Like $25 Million

Arthur Sulzberger, Jr. insists a $40 million estimate for building New York Times (NYSE: NYT) Co.’s pay scheme is “vastly wrong”. But that’s where the NYTCo chairman stopped in a Q&A at Columbia University earlier this week.

I think I can come close to filling that gap, despite the continued lack of comment on the specifics by Sulzberger or other company executives. Based on my reporting, the real number is closer to $25 million.

The bulk of the spending was in 2010 and early 2011. That total includes development, connecting the legacy systems, research and marketing.

People familiar with print and online publishing infrastructure say the amount likely would be higher had the Times not developed the new e-commerce platform itself and had it gone to outside vendors.

My understanding is that about a third of the company’s reported $35 million in 2010 capital expenditures went to the metered system. Projected capital expenditures for 2011 range from $45 million to $55 million, according to the 2010 annual report, “as we invest in, among other things, digital initiatives across our company.” That includes development of and the Boston Globe‘s hybrid pay model for launch later this year. It doesn’t include all of the expenses related to the launches — technology can be a capital expense, while marketing is not — but at least half, possibly a little more, is meant for digital.

Parsing that out at this point is close to impossible. In fact, people familiar with how this works at other companies say probably only a very few people at the Times even know the full amount that has been spent or is in the budget.

But most of the spending on the development for is done and it’s always possible the Times will take down this particular wall at its Q1 earnings call, even though executives have said the amount isn’t material and doesn’t have to be disclosed.

Some key elements remain — for instance, the family plan that will allow multiple logins from one household is still in the works and may not be ready until late this quarter or early Q3. The Times‘ marketing plan, which includes multiple research rounds, runs into the millions. Again, no exact number — sorry, it’s driving me batty, too — but the strategy includes TV ads in multiple markets, direct mail, outdoor, online, print and promos. Half-off offers are running for print and digital, plus the intro of 99 cents for four weeks.

For some perspective, News Corp (NSDQ: NWS). is investing $30 million in its fiscal 2011 to launch The Daily. Some of that is for development but the bulk of the weekly run rate is for expenses related to a full staff. People inside the Times have stressed all along how difficult it is though to compare what the paper is doing to other companies, its own previous efforts like TimesSelect or even the that of the Globe.

The combination of legacy resources that had to be incorporated for circulation, billing and customer service, the need to manage a large print subscriber database as well as registered online users, coordinating access across multiple devices, formats and platforms and developing e-commerce that works with it all took more than a year to go live and — no matter which number you prefer — cost tens of millions.

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