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The New York Times: Running faster and faster to stay in the same place

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“Here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” — The Red Queen, Alice in Wonderland

When it comes to the evolution of newspapers in a digital age, the New York Times is clearly something of a bellwether — and in particular, a sign of whether paywalls can (or can’t) make up for the ongoing dramatic decline in advertising revenue. Unfortunately for anyone in the industry who was hoping for a definitive answer, however, the paper’s latest financial results are a mixed bag. Subscription revenue rose, but both print and (perhaps most disturbingly) digital advertising continued to fall, raising the question of whether the Times will ever be able to close that gap, or whether it will have to become a much smaller and primarily reader-financed business.

The paper has already crossed the crucial point at which revenue from readers — whether through print subscriptions or digital subscriptions — has eclipsed the revenue the paper gets from advertising, a transition that other newspapers such as the Financial Times are also quickly approaching. But as more than one person has noted, there are two ways to reach that point: one is to have your subscription revenue increase, and the other is to have your advertising revenue decrease. Both of those are happening at the Times, and the only question is which one will slow down first.

Print ad revenue still falling, but digital down as well

As my colleague Jeff Roberts reported, overall advertising revenue for the company — which includes The Boston Globe — declined by 8.9 percent to $182 million, with print ads down by almost 11 percent and digital off by over 2 percent. For print, the story was the same as it has been for the past few years: continuing double-digit declines in real estate ads and other key classified categories that used to be bread-and-butter for newspapers. For digital, however, the picture was less clear. A spokesman for the paper said the drop in digital advertising was a result of:

“The challenging economic environment, ongoing secular trends and an increasingly complex and fragmented digital advertising marketplace.”

On the company’s conference call with stock analysts, the company tried to explain what one analyst called the “shockingly bad” advertising numbers, blaming “an abundance of inventory” and “efficient buying methods such as programmatic buying” offered by search engines and large advertising portals like Google and Yahoo. In other words, CPM rates — what advertisers are willing to pay for every thousand viewers of an ad — are continuing to fall, and the New York Times seems unable to shore that up at all (at least so far).

Subscription revenue was a much nicer story, since it rose by 7.4 percent to $235 million, but at least some of that has come from higher prices for the print product as well as an increase in subscribers to the digital product, where the paper now has 566,000 paying readers (although it’s not clear how many of these are subsidized in some way by discounts, etc.) And even though the boost in subscription revenue amounted to about $16 million for the quarter, that was still less than the $18-million or so drop in overall advertising revenue. So one of those factors is still falling faster than the other is rising.

The risk for the Times — and for a growing number of other newspapers that are making a similar bet on paywalls as a solution for their problems — is that advertising revenue could continue to fall, and even pick up speed, but the same probably can’t be said for the rise in subscription revenue. At some point, the number of people who want to subscribe to either print or digital will stop rising so quickly and begin to level off, the only real question is when.

A paywall can also reduce advertising revenue

There’s related risk with a paywall that the NYT and other newspapers face, but it’s one they don’t talk about much, and that is the effect that charging readers — which necessarily involves pushing some readers away — itself has on advertising. The Times has said that the decline in digital readership (and therefore the potential impact on advertising revenue) has been relatively modest, but results from comScore suggest otherwise: the numbers appear to show that pageviews have fallen by about 15 percent and unique visitors by almost 20 percent.

Newspapers like the Times could theoretically argue that each of their visitors or readers is much more valuable because a large proportion of them have paid to view the content, but it’s not clear whether advertisers will buy that argument, or be willing to pay higher rates for the privilege. It could be worse for the New York Times, of course — it could be reporting results like McClatchy, which saw both circulation and advertising revenues decline. But the question of what the NYT does as ad revenues fall and subscription revenues slow remains to be answered.

It’s true that no one is really doing a booming business in digital advertising right now, even Facebook, because the business is in the process of being disrupted. That’s why it would be nice to hear about how the Times is trying to change the way it does advertising as well as resting its hopes on a paywall — which is part of the reason why I think that if a paywall is your only strategy, you are probably doomed to be a much smaller business than you are now.

I’ve argued in the past that a membership model that provides added benefits for valued readers — whether it’s ebooks or live events or some combination of such features — is a better approach than a paywall, and the experience of some publishers such as The Atlantic seem to indicate that this is so. To me, newspapers like the Times would be better off trying to get to know their readers better so that they could offer them advertising or other features, rather than simply hitting them with an undifferentiated paywall.

In the end, newspapers watching the Times have to ask themselves not just whether they can duplicate the short-term revenue success of the paper’s paywall (which some or all of them may be unable to do), but also what happens when that still doesn’t make up for the decline in ad revenue.

Post and thumbnail images courtesy of Flickr users jphilipg and Flickr user Giuseppe Bognanni

16 Responses to “The New York Times: Running faster and faster to stay in the same place”

  1. Amazing how different the “rating” services’ numbers are – Quantcast has the NYT at 16 or 17 million uniques per month – or about half of ComScore.

    I think there is an article in taking a *close* look at raters who use “sample panels” instead of pixel beacons.

  2. “although it’s not clear how many of these are subsidized in some way by discounts, etc”

    It is long past due that somebody starts challenging the NYT on its unwillingness to break out details about its digital subscriber base.

    I suspect that there are many in the besieged MSM who may not like the less than sunny answers to that question – therefore they don’t ask it…

    For all anybody knows the DNC could be spending millions per year block buying NYT digital subs on the down low – there is a long history of political sliminess when it comes to block buys of political autobiographies.

    Having crossed the revenue source Rubicon, it becomes less and less plausible to keep aggregating digital revenues into one undifferentiated, impossible to analyze, lump.

  3. DesDizzy

    I think part of the problem is the old fashioned/juvenile way media looks at the subject. They should be saying, what is our USP, it is not advertising, it is intelligence (i.e. news discovery) and intertwinement. Next, what does digital media enable. Answer, it enables delivery of said USP to users in a differentiated way (shorter/longer/more pictured/deeper/more sourced etc).

    Next step, what do successful etailers have. Answer, the platform. What the strategy should be? Suck them into your platform for 99p and offer differentiated use cases for more. This is business school 101.

  4. Greg Golebiewski

    Yes Chris, and there is plenty of evidence that readers like and — when offered — use the option of micro-paying for selected pieces of content as-they-go — with great results for the publishers.

    Unfortunately, micropayments do not have any Matt to write about them as a valid alternative to paywalls. Some day it will change, of course. We will even have experts on micropayments claiming that they have always favored them over any paywall or velvet rope. In the meantime however, the publishers will continue to lose tens of billions of dollars trying all kinds of partially working solutions.

  5. Reblogged this on and commented:
    Signs of changing times. When one of the most prestigious and most respected news sources in the world, really starts to struggle, it is a sign that the tipping point of change has started in the media industry. New York Times stream of advertising revenue is reducing to a trickle. With all of it’s competitors in the same boat, it begs one to ask, where is all the ad revenue now going? There are two place to look; first and obviously is online PPC ads, Google’s adwords and to some degree, Facebook. The other area that advertising dollars is quite interesting. A growing trend and a pre boom market, is where the advertisers move their advertising budget, to a media or content budget. Companies are now creating their own news and information channel, online, with strong and longer impact on their readers, who are only a few clicks away from becoming their customers. So from paying ‘Rent’, companies are now buying their own ‘Real estate’, creating solid online assets.

  6. Why is the iPad app more expensive than the iPhone app? Why is the digital subscription more expensive than a print subscription?

    The idea of a paywall is fine, but when it’s so expensive and nonsensical ($35/month to have it on my iPhone and iPad?!?), it’s difficult to support it.

  7. “A membership model that provides added benefits for valued readers is a better approach than a paywall.”

    That’s clearly true. To the readers, a paywall is a *penalty* and therefore pushes them away, which is the last thing a newspaper wants. The right technique is to *attract* readers with features. If the editors can’t see something so obvious, their business will shrink, or worse.

  8. The Times is in a dying industry; print is obsolete. So the biased left wing “Newspaper of Record’ will join Karl Marx in the “dustbin of history.” As for their propaganda spewing “journalists,” I here McDonald s and Burger King are hiring.

  9. Chris Corrigan

    I think the membership idea has potential, but I have always thought that “micro payments” could be a good way to harvest revenue from people not willing to pay for a subscription. That is, 10 cents (or some other small amount) per view/article paid from a digital wallet.

  10. I have very mixed feelings about the NY Times paywall. When it went up a while back I made the choice not to pay. I felt that with so many other choices out there, it didn’t make sense to pay for ‘commodity news’. I even wrote about it:

    But in the past few months I’ve had a softening of that positon. As I see the quality of journalism decline across the board and watched more and more stories sourced form fewer places, I’m starting to think that maybe we really need to support strong publications with high journalistic ethics just to keep the system honest and the news from becoming ‘lowest common denominator’.

    I’m still watching from the sidelines but maybe I’ll cross my personal picket line and pay.