Good Question: How The Hell Did The NYT Spend $40 Million On That Paywall?

from the please-help-explain dept

We’ve already expressed our bewilderment at the NY Times’ new paywall and the fact that it cost the company $40 million and took 14 months to build. Some are now reasonably asking what about the paywall could have possibly cost $40 million?

The New York Times already had a credit card processing system for selling home delivery. It already had a database management system for keeping track of Web site registrants. What did they spend the $40-50 million on? A monster database server to keep track of which readers downloaded how many articles? They should already have been tracking some of that for ad targeting. In any case, a rack of database servers shouldn?t cost $40 million.

I’m guessing that some of it involved user testing. The NY Times keeps trying to claim that it was its own users who told them this was the paywall they “wanted.” But, still, between a ton of research, a bunch of programmers, some equipment… I’m having trouble figuring out how $40 million could have been wasted on this. Any help?

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Comments on “Good Question: How The Hell Did The NYT Spend $40 Million On That Paywall?”

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63 Comments
Lisa Westveld (profile) says:

Technical advisors...

I think the NYT just hired some outside technicians for their “valuable” input on how to build the paywall. I can’t imagine that it’s a complete in-house project so they just paid a bunch of advisors who all gave bad advise and then demanded to be paid for this too.
It wouldn’t surprise me if the code behind the paywall would be an enormous hit on TheDailyWTF site…

velox says:

Re: Re: Easy...

When companies release public figures on development costs, those figures are quite often opaque and meaningless. Take Microsoft’s claim that they spent 6 Billion dollars developing Vista.
Really??? (For something that was essentially a downgrade from XP?)
You can bet that a whole lot of extraneous stuff is rolled into the total figure. For MS, how about the cost of all that free soda in all those coolers scattered throughout the MS campus during the Vista development period.

Of course for the NYT, maybe instead of free soda it was some expensive Kool-aid

Christopher Gizzi (profile) says:

Re: Re: Easy...

That’s what I thought. I thought they could be taking a “one time charge” to hide their real troubles. I don’t know if that easy when you start comparing last year’s debt to this year’s debt unless it grew by that exact $40m.

I also wonder if they’re just taking previous investments in their systems and totaling it up to $40m because, somehow, a $40m investment is now a marketing tool and promotes how “valuable” it is.

Or, perhaps, they had to re-engineer the whole thing not because of what the current system could do but what they want to do in two, three five years down the road?? I doubt they have that foresight, though.

Anonymous Coward says:

Re: Are you kidding?

Funny that you would mention “consultants”.

Once upon a time, in the middle of the dot-com boom, I was doing some network plumbing for a trendy little startup. They were all about content, content, content and fortunately for them, they had a boy genius who was barely old enough to shave but an absolute whiz at Perl and had crafted what was pretty much the perfect content management system for them.

It just worked.

However…one day the CEO had a conversation with some consultants from one of the Big Firms and they convinced him that this simply would not do — that a “real” CMS was necessary. “Use Vignette”, they said, “it’s professional!”.

Now, it was true then, and remains true now, that Vignette is an absolutely worthless piece of crap used only by morons who are FAR too stupid to know any better.

But this did not deter them. Not only did they spend a fortune on the software, not only did they endure massive loss of revenue due to frequent downtime, errors, debugging, etc., but they spent MILLIONS on consultants from Vignette and Big Firm trying to make this work.

I recite this tale of woe simply to point out that one bad decision on an IT project like the NYT paywall could easily cost $10 million before anyone had a chance to blink.

cjstg (profile) says:

Re: Re: Are you kidding?

back when accenture was anderson (and a competitor of ours) we had a saying: “anderson consultants are like roaches. if you see one at a company there are dozens.” we were working at an oil refiner and retailer and that was certainly true in that case. in addition to the hallmark project that they were working on. we kept turning up pockets of them working small side projects. they racked up $150 million on one project before it ever hit the stores. they were charging $125/hr for fresh-outs that we had to train. this created some interesting situations where the students were being billed out for an entire week at $125 and the instructor was being billed out for $100.

KB says:

Re: Are you kidding?

If someone else hadn’t mentioned Accenture first, I would have, Cpnsulting companies don’t live to work as efficiently as possible in order to make sure you get the most bang for your buck. They will pad and pad and get as many superfluous contractors on to your project as possible because that’s how they make their money.

I’m not surprised it cost $40 million. I’ve worked in IT for years and seen upper management lose any and all sense to get that high profile project done.

proximity1 says:

value for money--New York / Washington / & Iraq style...

Who knows except all those extraordinarily brilliant people managing the Times operations?

Maybe 40m USD is the price of a package done by people who were’nt “in house” employees including

consultation for design, set-up, installation and implementation/operation of the paywall operation for a year, two, three?–could that be it?

oh, and lunches, lots of lunch meetings with food, drink, cab fare.

Some quantity in the billions (that’s Billion with a “B”) in U.S. cash went missing in Iraq during the days of L. Paul Bremer’s “Coalition Provisional Authority” in the U.S.-created chaos of Iraq.

Waxman Probes Iraq Contracting, Missing $12 Billion (Update1)

By Jay Newton-Small – February 6, 2007 11:33 EST

Feb. 6 (Bloomberg) — Representative Henry Waxman, kicking off hearings on government contracting, questioned former Ambassador L. Paul Bremer today on what happened to as much as $12 billion in unaccounted-for cash spent when he was in charge of rebuilding Iraq.

A report from Waxman’s House Oversight and Government Reform Committee said the money represented more than half of Bremer’s budget from May 2003 to June 2004. The report described contractors being told to bring big bags to collect shrink- wrapped bundles of money and one episode where a Bremer staff member was allegedly told to spend $6.75 million in a week.

“We have no way of knowing if the cash that was shipped into the green zone ended up in enemy hands,” Waxman, a California Democrat, said at today’s hearing. “We owe it to the American people to do everything we can to find out where the $12 billion went.”

maybe the Times hired Bremer to manage its project?

Does anyone here remember and care about the public money wasted in Iraq?

Stuart says:

Re: value for money--New York / Washington / & Iraq style...

Public money wasted in Iraq.
Public money wasted on Medicare.
Public money wasted on Medicade.
Public money wasted on farm subsidies.
Public money wasted on Freddie Mac.
Public money wasted on Fannie Mae.
Public money wasted on the Department of Education.
Public money wasted on the Department of Energy.
Public money wasted on the EPA.
Public trust wasted on government.

12B is the least of our worries.

Not saying it isn’t $12Bn wasted just saying we have a lot bigger things on our plate to choke down right now.

crade (profile) says:

Re: Re: Re:2 Re:

You can usually only fix the leeches requirements so far without them noticing and making your life miserable, and the payers always follow the leeches instructions over the doers, so you will often end up with only a semi working product (and get blamed for the problems of course ๐Ÿ™‚ Plus you have to be somewhat invested to care enough to fix the requirements to even a semi workable state. What person who actually gets things done would give 2 shits about building a paywall? ๐Ÿ™‚

Man I’m getting bitter hehe

Don (profile) says:

Runaway project

It seems to me that if they really did spend $40-50 million dollars, that it was on a runaway project with no initial requirements, proper assessment or idea what the heck the goal was. While they were figuring this out over weeks of coffee, some cowboy front-end developer implemented the paywall and the big suits were pleased.

Mind you none of the suits have a clue about security or the experience the front-end guy had, It just did what they wanted to do.

Michael (profile) says:

Re: Runaway project

The complexity and craziness of the holes through the paywall suggest to me that a great deal of upfront thought and design went into the paywall from inside executive conference rooms.

I know it probably sounds like I am joking, but over-complex, poorly functioning systems like this one are rarely designed by some lone individual or even a small group of programmers. I seriously doubt any small group of programmers would have selected JavaScript for the development platform – that decision stinks of executive decree. I am sure they did not hire a 22 year old kid right out of school to develop this. They do have good hiring practices and have the money to pay good programmers and consultants. On the developer end, there had to be at least a few people looking at the specifications wondering if they should follow instructions or risk their job trying to explain the problems.

I am sure much of the money spent on this paywall went to executive travel and meeting expenses for several months at the beginning of the project and then again at points throughout it.

Anonymous Coward says:

You can spend 40 million fairly easily without effort on a project like this, it all depends on how you count the money.

Obviously, this isn’t one guy in a room knocking out code. It starts with probably a specially appointed VP, who is in charge of the whole process. He then gets a department of people, from graphic designers to coders, etc. They will probably go at it for at least 18-24 months. You have to build out a call center / customer support area for your new “member”.

40 million isn’t hard to spend if it is over a period of time. We don’t have that information (and even the original Bloomberg report doesn’t seem to indicate it) so we have no idea how long this has taken and will take. We also don’t know, example, if those costs reflect internal costs (like leasehold for the space that this department is in, cubicals, phones, computers for staff, etc). It seriously is not hard to spend that type of money.

Cowardly Anon says:

Really want to know? I can hazard a guess.

First you have to have a committee for this sort of thing. A large committee too. This committee needs to meet, and as there are probably some bigwigs on said committee, they must fly first class and stay at fancy hotels. Also, food would be ‘free’ as it’s a committee meeting….all business you know.

Next, you need consultants. For something this big and important you need the best consultants! You’ll need someone to PM this project and a whole bunch of top notch developers. Probably none of them were local, so they had to be flown in and given per diem and living expenses. Not to mention a very good wage for doing this task. You have to pay good money for the best!

And because they are the best consultants, they will work over time to get that work done. So hard working. I’m sure it had nothing to do with the extra money that needs to be paid for over time work.

Then you need the testers to test it all, and a few more meetings to review progress…..

Let’s just put it this way, if a budget isn’t set at the beginning and no one is told they have to keep to that budget the price tag for such an endeavor will balloon rather quickly.

Anonymous Coward says:

http://edition.cnn.com/2011/BUSINESS/03/27/google.youtube.hollywood.ft/index.html?hpt=C2

Quote:

Google’s push into original content comes as Netflix recently struck a $100m deal to stream a new US version of House of Cards, starring Kevin Spacey — before it airs on television.

Facebook, meanwhile, is also eyeing the online video space and recently agreed a deal with Warner Brothers to make The Dark Knight available to rent online.

I guess the tech industry just got tired of the old execs from the entertainment industry.

vastrightwing (profile) says:

Consulting contract

There’s a famous three letter computer company that got a contract from a firm I worked for that created this monster of a project. It failed and yet cost my ex-firm who paid for it, millions of dollars. I blame it on the management who bought a bill of goods and paid for it. A fool and their money are soon departed. What I’m saying is, I think the NYT got shafted big time.

MAC says:

NYT...

Circa 3001…

Hey, here’s an idea.

Let?s buy some printing presses, ink, paper, pressmen, reporters, editors, etc…

Print an up to the date newspaper and charge a few hundred bucks (bucks ain’t worth what that used to be) for it.

Sell it in every grocery stored and convenience market in the solar system.

Charge our advertisers up the yingyang.

Get positive press about this revolutionary new media (paper) that is durable, does not require electricity and is permanent storage.

Then, sell it as a ‘novel’, ‘antique’ and ‘in’ way to view information.

What a marvelous idea!

keith (profile) says:

Headcount.

One full-time exempt headcount making ~80k a year will cost a company between $150-200k a year including additional taxes and depending on benefits, medical plans, required computer hardware/software licenses, office space, overhead.

So – think about a ‘team’ assembled to go make this happen.

1 “Director” w/ base annual compensation ~200k (costing the company up to 400k per year)
4-5 Senior level reports to the director each making 100-150k per year in base salary (finance, purchasing, marketing, legal, product) $250-$350k per year each.
400k+(300k x 5) = 1.9M
15-25 full time employees reporting to the senior level. They make anywhere from 35k -> 100k themselves depending on job function. Company cost between $60-250k per person.
1.9M + (20x150k) = 4.9M

Who knows how big the team was that was assigned to ‘go figure this out’ but it looks like they staffed up around 40-50 full time employees to make it happen.

In a company with a 1.5B market cap and over 7,500 employees world wide … $40M isn’t that surprising for a corporate entity.

PrometheeFeu (profile) says:

Re: Re:

OK, but then again, they most definitively did not need 40-50 people for 14 months to develop that. And you are forgetting we are talking about a single project within a company. They don’t need finance, marketing, legal etc. At most they need a little bit of support from those departments, but that’s it. All they need is a dozen or so devs and qa engineers, a pair of managers, 2 product/design people, a project manager, and then the equivalent of 2 or 3 other people borrowed from the organization to write the legalese and purchase the equipment. 40 million is overkill.

Now it may not be surprising, but it’s still a bit waste of resources.

Danny (profile) says:

A better question

First, it was dumb of the nytimes to make a dollar figure public. They should have recognized it would open them to ridicule.

Second, while they said it was $40 million for a pay wall, it probably was $40 million for a whole new content management system, including a pay wall. Forty million is high for an enterprise CMS, even one as strategically critical as it would be at the nytimes, but a figure that isn’t quite as out of line as the cost for just a pay wall would be.

Third, a better question to be asking is this. If is was late 2009, you are sitting on top of the brand, the marketshare, and the operational infrastructure of the nytimes, and you had $40 million to spend in order to ensure your enterprise remained at the forefront of American journalism for the next generation, how would you spend that money?

I am guessing no reader of this blog would spend it wholly on a pay wall. I am guessing that if the Times had turned to Tom Friedman (who is not an expert on online media, but is a very creative thinker) and asked him to take two months to research a solution, he would have recommended something very different from a pay wall.

I think the interesting though exercise is: how would we recommend they have spent that $40 million.

jim moore says:

40 million could have bought this

You could send your subscribers a copy of the New York Times from the day of their birth (adds and all). Then you offer to print a copy of any New York Times newspaper (from 1851 on) and send to someone for 5 dollars.

I would be kind of cool to be able to get the Sunday New York Times from 1968, or 1942 or the year of your preference delivered to your house each week for a year. (kind of like the way back machine, Mr Peabody) You know how the big stories are going to turn out but not the little ones.

And why can’t I find the New York Times Gift Shop when I look at the home page? I mean give me an opportunity to buy some stuff, like hats, tee shirts, books, cds. Or potentially combine investigative reporting with a catalogue of products and services. The Times would rate the producers on a range of qualities: cost, quality, sustainability, does the company treat its employees fairly?

New York Times + Consumer Reports + Sears Catalogue = a way for liberals to responsibly direct their buying power, collectively fighting back against the oligarchs and earth killers! There are 70 million liberals in this county and the New York Times was really fighting for us we could direct a whole lot of cash through their website.

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