Massive Disconnect: Paywall Analysis Claims It's Reasonable To Expect 66% Of Readers To Pay

from the good-luck-with-that dept

And we were amazed by reports that Stephen Brill actually expected 10% to 15% of newspaper readers to pay up for the paywall he's building for various newspapers (still none confirmed, as far as we know). A reporter over at Slate seems to have taken things to a new level. John points us to the back of the envelope analysis/calculation of the NY Times' decision to put up a paywall that appears to have some highly questionable assumptions. The biggest one is that 66% of readers will pay. Yes, 66%. Oddly, this statement comes right after the reporter's claim that, "a large percentage" of readers probably wouldn't pay -- but he seems to assume that "large percentage" is just 33%:
First of all, a large percentage of these readers land on these sites though search engines, and therefore are not likely to consume a lot of pages. Such visitors, about a third of the total audience, must be removed from the pool of readers likely to pay for content.

How much would people pay? According to a Boston Consulting Group survey, readers would agree to pay $3 per month on average. Interestingly enough, the BCG found the upper limit to be $6 for the "heavy print consumers" category.

Coming back to the Washington Post, using the remaining 66 percent of total users likely to pay for content (7.34 million unique views/month), the expected revenue could be considerable.
I'd argue that getting even 5% to pay, as one recent study suggested, may be wildly optimistic. 66% is downright delusional. While the pricing is clearly much higher, you would think that the recent example of Newsday getting a grand total of 35 subscribers to its paywall would be telling. So, it's difficult to take the rest of the analysis seriously, when it kicks off with such a bizarre assumption.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
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    IrishDaze (profile), Feb 2nd, 2010 @ 9:55am

    Eventually the paywall newspapers are going to realize that the only reasons to "pay" for news is to have access to:

    (1) local news
    (2) in-depth and investigational work
    (3) an expanded-content CwF+RtB benefit to print subscribers
    (4) have a hard copy to carry around

    If someone is internet-connected, at the very least he's going to have free access to:

    (1) local news (via local television news websites)
    (2) in-depth and investigational work at the Newsweek and Time magazine websites
    (3) inter/national news (via the big three cable news network websites)

    Tell me: How much is a hard copy to carry around (only on the days you need it) actually going to be worth? I'd wager: Not much.

    There's just not much reason for people outside of the New York Metro area to pay the NYT for online access except possible CwF+RtB content that is, by itself , unlikely to induce non-regional readers to purchase online subscriptions unless said CwF+RtB content is hands-down better than the Newsweek and Time magazine websites.

    At most, I see the NYT getting a few more non-regional print subscribers out of this experiment.

     

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  2.  
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    Jon Renaut (profile), Feb 2nd, 2010 @ 10:09am

    Not a good reason to pay - bad writing

    He's saying 33% will definitely not pay, then calling the rest "likely" payers. I think he really meant "possible" payers.

    And I suspect that 33% coming from searches is a low estimate.

     

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  3.  
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    Brendan (profile), Feb 2nd, 2010 @ 10:25am

    Re: Not a good reason to pay - bad writing

    It's more believable if it means strictly links from search results.

    I think the "likely to _consider_ paying" group should be measured from a smaller subset of readers: those who manually visit nytimes directly.

    I'd bet that even more than the users coming from search engines are using coming from links on blogs, aggregators etc. Those users have no reason to pay. At all. Those links will simply dry up and point elsewhere. People won't submit NYTimes links to Digg, Reddit, Slashdot, BB etc once they know most readers won't be able to follow them, and if there aren't links, why would those readers pay for access they won't use.

    The pool of direct readers should be the starting point for these calculations. I have no idea how big (small?) that is, but even smaller still is the portion of those readers who will pay.

    If they have a HUGE direct readership of %50, and get a MASSIVE conversion rate of %10 of those to paid users, that's only 5% of the users overall.

    Good luck expecting *MOST* users to consider paying.

     

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  4.  
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    Ima Fish (profile), Feb 2nd, 2010 @ 10:43am

    There was a good article about Google (which I cannot find). Google ran the numbers and noticed that people were only reading Google News while at work. The numbers dropped significantly after work, during lunch, and during the weekends.

    In other words, people read online news as a little break from work. Something to fill in a downtime. And as evidence has shown, people are not willing to pay for that.

    The guy from Google specualted that the reason we bought newspapers (although we only paid a nominal amount and the real profits came from advertising) was for the experience of reading a newspaper.

    Cuddling up on the couch with a cup of coffee, slowing reading through the news, doing the crossword, laughing at the comics, seeing what new movies were out, checking out the scores, etc. We were willing to pay for that because we enjoyed doing it.

    For what ever reason, maybe we're too busy... whatever, we simply no longer enjoy that experience. So we no longer pay for it. And regardless, we certainly do not enjoy it while sitting at the computer.

     

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  5.  
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    Ima Fish (profile), Feb 2nd, 2010 @ 10:44am

    Re: Not a good reason to pay - bad writing

    "I think he really meant "possible" payers."

    There is a world of difference between what is "possible" and what is "probable."

     

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  6.  
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    Spaceman Spiff (profile), Feb 2nd, 2010 @ 10:44am

    Not a chance!

    I read the NYT online daily. If they implement this paywall, they will lose me totally! Someone else will have my eyeballs for their advertisers!

     

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  7.  
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    Jon Renaut (profile), Feb 2nd, 2010 @ 10:52am

    Re: Re: Not a good reason to pay - bad writing

    Totally agree, my point was that I think the guy just wasn't being clear. He wasn't being as ridiculous as Mike suggested.

    Still ridiculous, though.

     

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  8.  
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    Designerfx (profile), Feb 2nd, 2010 @ 10:58am

    so 35 people = 66 percent?

    wow. I need to take a math class from the paywall analysts.

     

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  9.  
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    Mongoose, Feb 2nd, 2010 @ 11:20am

    Re: Re: Re: Not a good reason to pay - bad writing

    the expected revenue could be considerable.

    I think this is where he becomes ridiculous to me. Factor in lost advertising, and I think the expected revenue is negative.

     

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  10.  
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    Michael, Feb 2nd, 2010 @ 11:20am

    His assumptions are not quite that bad

    He is assuming 66% are likely to pay $6 per month and then goes on to say that they would be doing great if they got even 10% of that (6% of their current user base). He is still crazy, but much closer to reality than 66%.

    He gets back into crazyland at the conclusion where he says a paywall must NOT:
    - "block access for the general audience" - how do you do that?
    - "discourage linking from other sites" - isn't this the behavior all the newspaper executives are complaining about?

    and it finally must target "only the heaviest users, those willing to pay $6 rather than $2 per month, and those ready to be charged for ad-free content on mobile. Or on a tablet". but for this last one, a big section of the article talks about the paywall adding value for advertisers because ads within the paid section have an increased value (which makes sense), but if your customers are paying for ad-free content, how did you increase the value of the ads?

    Yeah, the article seems to be self-contradicting in a lot of ways. Aren't newspapers supposed to have some kind of editing process to weed out some of the crazy?

     

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  11.  
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    Anonymous Coward, Feb 2nd, 2010 @ 11:28am

    a large percentage of these readers land on these sites though search engines, and therefore are not likely to consume a lot of pages. Such visitors, about a third of the total audience Only a third of the readers are from search engines? If that is indeed the case, why are the news papers complaining of search engines "stealing" their content?

     

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  12.  
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    Jimr (profile), Feb 2nd, 2010 @ 11:30am

    I given thought to paying for news. The only way I would do it is if the content was delivered wireless (via my local internet connection & Wifi OR some 3g data push) to a Amazon kindle type reader. My ultimate wish would be for the newspapers to offer a 10 inch screen e-reader for fee with a signed 3 year subscription. Add in the ability to add ebooks with a small kick back to the newspapers and would be sold on a subscription.

    Ah the dream of waking up every money with the newspaper automatically pushed unto my newspaper provided e-reader. Much like what Amazon's Kindle offers right now with the only exception cost associated with the device.

     

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  13.  
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    Designerfx (profile), Feb 2nd, 2010 @ 11:31am

    Re: His assumptions are not quite that bad

    66% of nothing that you can say with certainty is still 0% of reality.

    "we think 2/3rds of people won't have an issue with $6...and that 10% of those might actually do it" means the numbers are still ridiculously optimistic.

    All you have to do is the fix the decimal. Assume that they are saying that 2/3rds (.66) of 1 percent are likely to pay $6 per month (with 10% of that actually subscribing) and suddenly it seems much more like the other paywall experiment. Even at 100 thousand people that's 6600 subscribing for $6/mo. I guess 40 grand a month is significant for a paywall?

    /I'm not sure if I got my math right either, though.

     

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  14.  
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    Vastrightwing, Feb 2nd, 2010 @ 11:43am

    The empires add no value

    I suggest that people have never paid for news at all. They do pay for the convenience of having news delivered to their door. Consumers no longer need a paper. The value was getting a paper delivered. Now consumers have smart phones, Palms, iPads, notebook computers, laptops, etc. Getting news no longer requires paper stock, printing presses, trucks, administration, reporting, management or any administrative overhead. All news needs now is anyone willing to report using a device of their choice: no management, no direct costs and virtually no overhead. The writer can get paid directly through advertising, subscriptions, if he even cares about money or however he wants. It simply does not require Hurst or any other big publisher to make this happen. And this is the problem. These large publishing empires are desperately trying to save their empire without adding any value. This will not happen.

     

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  15.  
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    Trails, Feb 2nd, 2010 @ 11:45am

    Get on with it already

    I wish this yo yos would put up the paywall, so it can fail and we can all get on with our lives. It's like a bunch of kids trying to muster the courage to shoplift a candy bar.

     

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  16.  
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    lavi d (profile), Feb 2nd, 2010 @ 11:59am

    Making Connections

    I'll bet a great deal of the delusion on the part of print media is the mistaken assumption that being online is analogous to having a broadcast station.

    I can just imagine them believing that they can lock up their content like a cable television signal and charge for access.

    What they are failing to realize is that, unlike cable TV, there are numerous alternatives.

     

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  17.  
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    Marcus Carab (profile), Feb 2nd, 2010 @ 12:03pm

    Re: Get on with it already

    It's like a bunch of kids trying to muster the courage to shoplift a candy bar.

    That's a quote for the books.

     

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  18.  
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    Joshy, Feb 2nd, 2010 @ 12:19pm

    Wow... seven out of ten people will reach into their pocket to pay for something there used to getting free. Someone is using the wrong polling firm.

     

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  19.  
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    Trerro, Feb 2nd, 2010 @ 12:29pm

    When did we ever pay for newspapers?

    Serious question.

    When you subscribe to a print newspaper, the amount your paying amounts purely to paying the cost of delivering it to your door. When you buy it at a store, you pay a small fee - just enough that the store will be willing to carry it. The paper doesn't profit from either of those, all of the profits come from the advertising that's in the paper. Indeed, in citys where they can set up newspaper dispensers, there's often a "free - take one" sign, because the cost of distribution for those is negligable.

    When you have an online newspaper "delivered" to you, that costs such a tiny fraction of a cent that the paper company can safely call it 0 and not have their profits be significantly impacted. The money, as it always has, comes from running ads.

    I don't understand why companies suddenly feel they need to change this, when giving away their ad-supported paper for free goes back literally centuries.

     

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  20.  
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    notgreedy.com, Feb 2nd, 2010 @ 12:46pm

    murphy's law

    so when they ALL lock it up and force you to pay what happens?

    A guy like me will give you freely that same news locally free
    put ads on his pages and deduce that thats fair enough revenue as long as cost plus a little is met.

     

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  21.  
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    Anonymous Coward, Feb 2nd, 2010 @ 2:05pm

    Don't worry NYTimes, I'm sure you can get at least twice as many subscribers as Newsday.

     

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  22.  
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    SteveIowa, Feb 2nd, 2010 @ 2:58pm

    Paywall

    Simply not linking the concept of a paywall doesn't mean it is a bad idea. Sure, no one will pay much for the Des Moines Register but I think a lot of people would pay for the NYT.

     

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  23.  
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    Anonymous Coward, Feb 2nd, 2010 @ 3:22pm

    Re: Paywall

    You're right. It's a bad idea because...it's a bad idea for a multitude of reasons.

     

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  24.  
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    bluebearr, Feb 2nd, 2010 @ 4:17pm

    Actually...

    I don't think that Filloux's math is as bad as you make it out to be.

    I think what he is trying to say is that the 33% of readers that arrive at the site through search engines won't ever be willing to pay, so he immediately excludes them. Then he says that of the 66% of readers remaining - which he unfortunately terms "likely to pay," even though I think he means "might possibly pay" - he then spins the wonder of getting 25% or 10% of them to actually pay. So his numbers are more like:

    High end: 66% x 25% = 16.5% of readers will pay
    Low end: 66% x 10% = 6.6% of readers will pay

    So his low end number is closer to the 5% referred to in the study you cited. But they are still hand-waving numbers with no evidence to back them up.

     

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  25.  
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    Dave, Feb 2nd, 2010 @ 4:36pm

    Reasonable... hmmmm

    Ha ha!
    Define reasonable. I think what they mean is that the papers deserve that much because of the value of what they do, and how much it costs to produce, thus, that is a "reasonable" amount to ask.

    It reminds me of when a young person was up for a job and came to me to find out how much pay to ask for. I did a pseudo-analysis based on how much people were getting paid for that job at the places where I had worked. However, this was just before the big dot-bomb crash, so I was way off base when the economy tanked.

    That's just how off-base these guys are when they say 66%, and sadly, they will get slammed with reality very soon. There's a lot of hand-wringing at newspapers, but little contact with reality. It's human nature - we all think we're valuable. It's the same thing that causes union members to demand too much, and then they're all let go.

     

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  26.  
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    Hephaestus (profile), Feb 2nd, 2010 @ 6:59pm

    Re: Re: Paywall

    I hate to play devils advocate on this subject. I think online Pay newspapers will fail miserably. The guys numbers are so out of line with reality. "66%" The probable reason why NYT is waiting is to let all the other newspapers make the mistakes so they can learn and do it right. "A year to build a digital subscription system sounds like quite a long time."

    I will do the pretender thang now, and brain storm as to how this could actually be made to work ...

    Lets go back to scarce goods. In this day and age the only scarce news is new news. 15 minutes after its published its known world wide. Articles and good reporting are scarce goods. What if the new york times were to set up a system using smart phones, iPads, kindle, etc as a delivery system that goes live after one year of iPad type sales. Thats an estimated 10 million iPad type devices after one year.

    How would one set up the site?

    All of the following would come off the same URL it would just expand sections based on time passed and interest in the story. No interest it expands quickly, some interest slower, Frak me I need to read this now... way slower.

    1) New news is sent to the iPad, etc.
    2) after a delay it gets posted as a headline to the web site with a blurb.
    3) after another delay it gets posted to the web site as a summary.
    4) after another delay it gets posted as the full article and remains there for anyone to use in its entirety. With a simple blurb "This article is copyrighted by the new york times. All online and offline usage must contain this URL ... http etc"

    They would have to have an open blog for each article that doesnt censor. The blog would have to have an instant sign up feature requiring the following, Username, displayname, Password, email address, type this word to verify, and nothing else. The instant signup would have to be with in the page and be an expandable web 2.0 app so you never leave the page. Verification would have to be one click in the e-mail. A "click here to open a new browser and sign into your web mail button" would be appreciated but might cause paranoia.

    Maintaining everything behind the paywall and removing articles will be the death of any of these newspapers. Old news should not be paid for on any news site it gets people pissed and loses non paying individuals.

    I just came up with a rule. The rule is called the "one bite at the Apple rule" also know as the "one window rule". The rule can be summarized in one sentence ...

    In the media distribution business you now only get one window (chance) to make a profit.

     

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  27.  
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    Spaceman Spiff (profile), Sep 16th, 2012 @ 2:19pm

    Re: Not a chance!

    Well, it is 2+ years later. Guess who is no longer reading the New York Times? :-)

     

    reply to this | link to this | view in thread ]


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