Friday, March 18, 2011

Two blows this week: AT&T and The New York Times

Both of these news items involve "money" and a way of limiting the user. AT&T announced that they will limit DSL customers to 125G/month. Anything over that will cost more. They failed to explain how the user was to monitor their usage. And The New York Times announced that they on March 28th will put into effect a "paywall" limiting users, unless you subscribe, to 20 articles/month. [They did reveal several ways to obtain five articles/day using alternate sources.] Overall, none of this is good for the consumer.

"The Times Announces Digital Subscription Plan"


Jeremy W. Peters

March 17th, 2011

The New York Times

The New York Times introduced a plan on Thursday to begin charging the most frequent users of its Web site $15 for a four-week subscription in a bet that readers will pay for news they are accustomed to getting free.

Beginning March 28, visitors to will be able to read 20 articles a month without paying, a limit that company executives said was intended to draw in subscription revenue from the most loyal readers while not driving away the casual visitors who make up the vast majority of the site’s traffic.

Once readers click on their 21st article, they will have the option of buying one of three digital news packages — $15 every four weeks for access to the Web site and a mobile phone app (or $195 for a full year), $20 for Web access and an iPad app ($260 a year) or $35 for an all-access plan ($455 a year). All subscribers who take home delivery of the paper will have free and unlimited access across all Times digital platforms except, for now, e-readers like the Amazon Kindle and the Barnes & Noble Nook. Subscribers to The International Herald Tribune, which is The Times’s global edition, will also have free digital access.

No American news organization as large as The Times has tried to put its content behind a pay wall after allowing unrestricted access. The move is being closely watched by anxious publishers, which have warily embraced the Web and struggled with how to turn online journalism into a profitable business.

“A few years ago it was almost an article of faith that people would not pay for the content they accessed via the Web,” Arthur Sulzberger Jr., chairman of The New York Times Company, said in his annual State of The Times remarks, which were delivered to employees Thursday morning.

“This move is an investment in our future,” he said. “It will allow us to develop new sources of revenue to support the continuation of our journalistic mission and digital innovation, while maintaining our large and growing audience to support our robust advertising business. And this system is our latest, and best, demonstration of where we believe the future of valued content — be it news, music, games or more — is going.”

Mr. Sulzberger acknowledged the hurdles The Times must overcome in the minds of many readers, saying he harbored no misconceptions.

“The challenge now is to put a price on our work without walling ourselves off from the global network, to make sure we continue to engage with the widest possible audience,” he said.

Not all visits to will count toward the 20-article limit. In an effort to reduce losses among the Web site’s more than 30 million monthly readers, The Times will allow access to people who arrive at its Web site through search engines like Google and social networking sites like Facebook and Twitter. There will, however, be a five-article limit a day for people who visit the site from Google.

The 20-article limit begins immediately for readers accessing from Canada, which allows the company time to work out any software issues before the system begins in the United States and the rest of the world.

For years, newspaper companies have been offering Web access free in hope that the online advertising market will cover their costs. But while online advertising has grown, it has not increased quickly enough to make up for the decline in traditional print advertising. Many publications have been looking at ways to make online consumers pay as they do for print.

“This is practically a do-or-die year,” said Ken Doctor, an analyst who studies the economics of the newspaper business. “The financial pressures on newspapers is steady or increasing. They’re in an industry that is still receding. Newspapers are trying to pay down their debt, but they have fewer resources to do it.”

The debate consuming the newspaper business now centers on the question that The Times hopes to answer: Can you reverse 15 years of consumer behavior and build a business around online subscriptions?

“The nature of how we access news online, in an episodic way throughout the day, tells me people just aren’t going to pay,” said John Paton, chief executive of the Journal Register Company, which publishes papers in the Midwest, upstate New York and Connecticut. “And of course there’s the 15-year history of people not paying. We’ve trained them not to.”

The model The Times is putting in place represents a recognition among some newspaper owners that a successful online business model rests on a relatively small portion of highly engaged readers as opposed to a high volume of page views.

“What matters is, how can you attract a sizable group of core readers who are loyal to your news brand and get most of them — not all of them — to pay for access? And that’s the core of the new business,” Mr. Doctor said. “It’s a major shift in psychology.”

If enough readers balk at paying, The Times risks losing its status as the most-visited newspaper Web site in the country — an important distinction with many advertisers. But revenue losses from any declines in traffic could be offset because advertisers were willing to pay a premium for an audience they know is highly engaged.

“Advertising is about adjacency,” said Andrew Swinand, president of global operations for the Starcom MediaVest Group, a media-buying agency. “I’m paying for an engaged audience, and if that audience is willing to pay, that demonstrates just how engaged they are.”

The Times estimates that 85 percent of its online readers will never reach the 20-article ceiling. The paper has also agreed to abide by Apple’s terms for selling subscriptions through its popular App Store, a move most major publishers have resisted because Apple takes a 30 percent cut of the price of the subscription.

The fragile condition of the industry has left newspapers with few choices. Even as other media have recovered, newspapers have experienced little gains from the end of the recession.

Advertising revenue for American newspapers in 2010 — including digital and print — fell 6.3 percent, to $25.8 billion, compared with 2009, which had been the worst year on record as measured by the Newspaper Association of America. In contrast, according to Kantar Media, which tracks marketing activity in major media, overall ad spending in the United States last year increased 6.5 percent from 2009. Television media gained 10.3 percent and magazine media ticked up 2.9 percent.

At The New York Times Media Group, which includes The International Herald Tribune, ad revenue declined 2.1 percent in 2010, to $780.4 million.

Other newspapers, most of them small local papers, have adopted a metered or “freemium” system similar to the one The Times will be using.

Some, like The Commercial Dispatch in Mississippi and The York Daily Record in Pennsylvania, are using an approach created by Journalism Online, which is working with a variety of models that set the number of free articles readers can view from five to 20 each month. Papers have charged monthly subscription fees of around $3.95 to $10.95.

The Dallas Morning News started putting much of its content behind a less porous pay wall last week, an approach similar to The Wall Street Journal’s site, where selected content is free but everything else is available only to subscribers.

The Financial Times, based in Britain, uses an approach similar to what The Times is adopting. It sells online-only subscriptions starting at $19.96 a month. Rob Grimshaw, managing director of, said the Web site has 210,000 digital subscribers — more than half the 400,000 who subscribe to the print edition.

With passions running high, the question of whether readers will pay never fails to spark spirited discussion online.

The Times’s announcement prompted more than 2,500 comments to its Web site.

A reader in Los Angeles wrote, “The price is too high. I just cannot afford it. I will go to or Sorry, NYT, you picked the wealthy again.”

That comment prompted Lori K from Boston to respond, “The ‘wealthy?’ It’s two lunches at McDonalds. For a month of reporting. I’m happy to support the NYT for such a low price.”

This article has been revised to reflect the following correction:

Correction: March 17, 2011

And from Wired...

"Commentary: The New York Times Paywall Is … Weird"


Felix Salmon

March 17th, 2011


The NYT paywall has arrived: it’s going up in Canada today, and then worldwide on March 28. The most comprehensive source for the gritty details is this FAQ, which does things like explain the difference between an item and a pageview. (A slideshow or a multi-page article is one “item,” no matter how many slides it contains.)

The NYT has decided not to make the paywall very cheap and porous in the first instance as people get used to it. $15 for four weeks might be cheap compared to the cost of a print subscription, but $195 per year is still enough money to give readers pause and to drive them elsewhere. And similarly, 20 articles per month is lower than I would have expected at launch.

Rather than take full advantage of their ability to change the numbers over time, the NYT seems to have decided they’re going to launch at the kind of levels they want to see over the long term. Which is a bit weird. Instead, the NYT has sent out an email to its “loyal readers” that they’ll get “a special offer to save on our new digital subscriptions” come March 28. This seems upside-down to me: it’s the loyal readers who are most likely to pay premium rates for digital subscriptions, while everybody else is going to need a special offer to chivvy them along.

This paywall is anything but simple, with dozens of different variables for consumers to try to understand. Start with the price: the website is free, so long as you read fewer than 20 items per month, and so are the apps, so long as you confine yourself to the “Top News” section. You can also read articles for free by going in through a side door. Following links from Twitter or Facebook or should never be a problem, unless and until you try to navigate away from the item that was linked to.

Beyond that, $15 per four-week period gives you access to the website and also its smartphone app, while $20 gives you access to the website also its iPad app. But if you want to read the NYT on both your smartphone and your iPad, you’ll need to buy both digital subscriptions separately, and pay an eye-popping $35 every four weeks. That’s $455 a year.

The message being sent here is weird: that access to the website is worth nothing. Mathematically, if A+B=$15, A+C=$20, and A+B+C=$35, then A=$0.

Meanwhile, at least where I live in New York, a print subscription which gets you the newspaper only on Sundays costs $19.60 every four weeks — and it comes with free access to the web and tablet versions of the newspaper. Which creates the slightly odd proposition that if you want to use the NYT’s iPad app, you’re marginally better off subscribing to the print newspaper on Sundays and throwing it away unread than you are just subscribing to the app on its own.

The pricing structure is also a strong disincentive to use the iPad app at all, of course. If you’re already paying $15 every four weeks to have full access to the website, why on earth would you pay extra just to be able to read the paper on its own dedicated app rather than in Safari? I, for one, prefer the experience of reading on the web on my iPad, rather than reading an iPad app which has no search, no links, no archives, no social recommendations, etc etc. If the NYT wanted to kill any incentive to read and develop its iPad app, it’s going about it the right way.

What does all this mean for the New York Times Company? I can’t see how it’s good.

The paywall is certainly being set high enough that a lot of regular readers will not subscribe. These are readers who would normally link to the NYT from their blogs, who would tweet NYT articles, who would post those articles on Facebook, and so on. As a result, not only will traffic from these readers decline, but so will all their referral traffic, too. The NYT makes more than $300 million a year in digital ad revenue, so even a modest decline in pageviews, relative to what the site could have generated sans paywall, can mean many millions of dollars foregone. On top of that, the paywall itself cost somewhere over $40 million to develop.

Against all that, how much revenue will the paywall bring in? A very large number of the paper’s most loyal readers are already print subscribers, and get access to the website at no extra cost. So the new revenues from the paywall will only come from people who read the website a lot but who don’t subscribe in print.

How many of those people are there? Emily Bell reckons that the number of people who’ll even hit the paywall in the first place is only about 5% of the NYT’s 33 million or so unique visitors. That’s 1.6 million people — compare the 1.3 million people who already subscribe to the paper on Sundays. The former is not a perfect superset of the latter, of course, but there’s a big overlap; let’s say that realistically the NYT is going after a universe of no more than 800,000 people that it’s going to ask to subscribe. And let’s be generous and say that 15% of them do so, paying an average of $200 per year apiece. That’s extra revenues of $24 million per year.

$24 million is a minuscule amount for the New York Times company as a whole; it’s dwarfed not only by total revenues but even by those total digital advertising revenues of more than $300 million a year. This is what counts as a major strategic move within the NYT?

As Ken Doctor notes, the Times Select fiasco, which was unceremoniously killed in 2007 to no one’s regret, was bringing in a good $10 million per year. This new paywall is much more elaborate and expensive, and it’s being introduced into a website which is currently something of a cash cow as regards ad revenues.

So by my back-of-the-envelope math, the paywall won’t even cover its own development costs for a good two years, and beyond that will never generate enough money to really make a difference to NYTCo revenues. Maybe that might change if the NYT breaks its promise to offer full website access for free to all print subscribers. But that decision would be fraught in all manner of other ways.

For the time being, though, I just can’t see how this move makes any kind of financial sense for the NYT. The upside is limited; the downside is that it ceases to be the paper of record for the world. Who would take that bet?

Update: Turning upside-down the conventional wisdom that consumers will only pay for financial information and porn, the NYT has decided that Dealbook will remain completely free, outside the paywall, at least for the time being. Which I guess explains why the Business and Dealbook sections are so clearly separated from each other online.

An earlier version of this article misstated the price of a subscription as $15 a month. That is the price for four weeks of full access to the Web site and a mobile phone app.

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