The Greatest Trick The NYTimes Ever Pulled Was Convincing The World Its Paywall Exists

from the paywallonomics dept

It’s no surprise that we’ve been pretty big critics of the NYTimes’ paywall strategy — not because we don’t want the NYT to make money, but because we don’t think it’s a particularly good strategy. However, people are now claiming that it’s undeniable that the NYT’s paywall has been a huge money-making success. And looking at the numbers, I’ll admit that they’re way more impressive than I expected — by a lot:

The Times introduced digital subscription packages on and across other digital platforms in Canada in mid-March and globally at the beginning of the second quarter. Paid digital subscribers to the digital subscription packages totaled approximately 224,000 as of the end of the second quarter. In addition, paid digital subscribers to e-readers and replica editions totaled approximately 57,000, for a total paid digital subscribers of 281,000 as of the end of the second quarter.

In addition to these paid digital subscribers, as of the end of the second quarter of 2011, The Times had approximately 100,000 highly engaged users sponsored by Ford Motor Company’s luxury brand, Lincoln, who have free access to and smartphone apps until the end of the year, and approximately 756,000 home-delivery subscribers with linked digital accounts, who receive free digital access.

This is definitely more than I expected, and it does show a much faster trajectory to get to those results than its last paywall. The Forbes account of this notes that, as a conservative estimate, this could mean an additional $40 million per year for the NYT’s topline. Separately, it also points that the loss of traffic from the paywall might not even be noticeable, claiming that it received 33 million unique visitors per month which was “in line with its average for the preceding 11 months.”

That’s all impressive. And once again, I’ll say that it’s much better than expected and, perhaps, I misjudged the potential for the paywall. That said… digging into the numbers, I’m still skeptical for a variety of reasons. First up, this is a drop in the bucket. Even if the company earns an extra $10 million per quarter from this, the paper also lost $114 million. But, that’s a little misleading on its own, as it includes a giant writedown.

But, the real question is what could the NYT be doing instead. It made $84.6 million in the quarter from digital advertising alone, way more than it made from subscription fees. But the growth there was tiny — only 2.6% at a time when I know companies are looking to do really interesting digital promotions and will pay for them. And while the company says that its unique visitors were “inline” with previous 11 months, what you want to hear is that the traffic is growing. The use of unique visitors is interesting, since most ad campaigns work on a CPM basis, where views are what counts — and other estimates suggest that pageviews have dropped noticeably. This would make sense, actually. Since the “paywall” still lets people view up to 20 pages before it sorta stops you from seeing any more, you could see how the same number of people would go there, but actual pageviews would decrease.

But what if, instead of focusing on the paywall, the NYT had focused its efforts on adding more direct value to the site itself, to (a) get more visitors to the site and (b) to keep them there longer, viewing more pages and doing more? At the same time, if they started looking at more creative, premium sponsorship/ad campaigns, I could see how they could have spent the same resources in a much more scalable growing arena, rather than having it go into a more limited paywall. That is, if they’d focused on continuing to grow traffic and creative ad campaigns, that’s something that will continue to grow. How many more subscribes will they get with the paywall? If people haven’t subscribed yet, how much more will it take to get them to subscribe, when it’s pretty clear that anyone can get around it. I have to admit I’ve never even noticed the paywall at all in all my surfing.

Early on, I called the NYT paywall the Emperor’s New Paywall, but perhaps a more interesting point is that, as with the Emperor, the NYT’s has done an amazing job convincing lots of people that the paywall is really there and that they have to pay to view articles on the site. It’s a great trick. But can it last? People, who aren’t paying now, don’t have much reason to start paying, so I’d expect that the subscribers will plateau at some point relatively soon. I’d imagine that the younger generation is barely paying at all. The strategy brings in some money now, but it seems like a pretty small amount for selling out future growth opportunities.

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Comments on “The Greatest Trick The NYTimes Ever Pulled Was Convincing The World Its Paywall Exists”

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Donnicton says:

Re: I Dont Get it

When you’re the type of reader that actually reads the New York Times(and likes to), you’re not the type of person to think with a brain, so much as using emotion and impulse control(lack thereof).

It’s really not something that you can understand by such logical devices as thought.

Anonymous Coward says:

People actually pay to read that rag?

That’s the surprising part to me.

Especially since I read somewhere theres a simple js exploit to get around the paywall.

My high school contemporary history teacher would print out articles for us to read every day, and would get really mad when a group of us would point out the obvious political biases, logical fallacies, and blatent lies.

No real point to that story, just expressing my distain for the NYT.

Anonymous Coward says:

Mike, you may want to mea culpa a little more directly, because I think you have to admit you missed this one entirely.

Their digital advertising didn’t drop (up 2.5%), they netted an extra 10 million they wouldn’t have otherwise (which is the same as netting 12% more digital advertising), and all that with what you considered a horrible system with too many ways to bypass it.

Further, they have been able to associate themselves with a high end brand (Lincoln), which in turn leads credibility to their product.

I would say that it appears that the NTT has a pretty big win on their hands, certainly much better than the incredible doom and gloom you forecast for them when this was rolled out.

I would say that perhaps there is more to this online thing than just giving everything away.

Anonymous Coward says:

Re: Re:

It seems that it’s success is primarily due to the relative ineffectiveness of the paywall, unlike the UK Times Paywall, the NYT hasn’t disappeared from the internet for all but subscribers and non subscribers can still click on links and read articles without having to stump up money.
If the paywall was completely pretend as in some shareware and freeware reminders, this would be an excellent result on the face of it.
Given that the NYT paywall apparently cost $40 million to design and implement, it is not exactly a win.
Not being as big a failure as Murdoch’s Times paywall strategy and not shedding/shredding or destroying the unique visitors, while at the same time reducing pageviews and stalling growth isn’t really a matter for celebration, more a sigh of relief that they haven’t yet destroyed their business.

Anonymous Coward says:

Re: Re: Re:

You are correct, but you have to consider the entirely dire picture that Mike painted of any attempt to create a “walled garden”. For that matter, Nina Paley in her infinite wisdom even put one of those ignorant toons the other day about it.

Even using the term “paywall” is a fairly insulting way to refer to the classical subscription model. While I don’t find it surprising to see Mike trying very hard to cover up and make excuses, the reality is that this one appears to be working well enough to not only not be hurting the business significantly, but also helping it to move forward with the start of potential model that works.

if this was some indie movie guy doing it and turning 10 million in income in a short period of time, you know this would be a “case study”. With a model that Mike doesn’t agree with, it’s the “emperor’s new paywall”. That pretty much sums it up.

Moral: Techdirt is still a box you need to think out of. It’s a fancy box that appeals to the pirate in all of you, but in the end, it’s a box, and a very, very small one at that.

DannyB (profile) says:

Re: Re: Re: Re:

> You are correct, but you have to consider the entirely
> dire picture that Mike painted of any attempt to create
> a “walled garden”.

If they had actually created a real paywall, and thus walled garden, then Mike might and probably would have been correct.

They didn’t create a real paywall. So you have no basis to say he was wrong.

Think of it like this:

Mike: if the NYT turns off this light switch, we will be in the dark.
You: Ah ha! Mike you were wrong! We’re still in the light!

Me: The NYT never turned off the switch.

Anonymous Coward says:

Re: Re: Re:2 Re:

You don’t get it at all.

The NYT did turn off the switch. But they didn’t turn out the porch lights. For the casual user, the effect is that nothing at all has happened.

Mike’s big deal was that nobody would pay for the content, that news is some sort of infinite good, and that people aren’t going to get tricked into it. 10 million dollars later, it’s perhaps time for a home made crow dinner.

This story pokes so many holes in the Techdirt theories of online business that it’s shocking to me that Mike even posted it up. I think it’s only because he is trying so hard to deny it’s true implications at this point.

Ninja (profile) says:

Re: Re: Re:3 Re:

I’m a casual user, I go for NYT once or twice a week and read quite a few of their articles. Since I don’t read it everyday I get to feel the rage of the ‘paywall’.

There are no holes in the business theory because there’s no theory. He said he was surprised. And he’s explained his concerns. And they are very real and possible. Next time you post, if the NYT actually succeeds and blows Mike’s writings then you can say “AHAHAHA SEE, I TOLD YOU!” that if Mike doesn’t post an article with a sane analysis of the thing and expresses his honest surprise. Of course you’ll ignore the fact as you did now.

Ninja (profile) says:

Re: Re:

He never said anything contrary to your comment except for your view of successful.

Taking me as an example, I read several newspapers around the world – Al Jazeera, El Pa?s, El Clar?n, Le Monde (ok, I still have issues to read French stuff), Estado de S?o Paulo, CNN, BBC, The Guardian and others. I like to see different views on world and local events and I also add my own criticism to the articles presented. But I’m drifting away from my point.

The fact is that I simply CAN’T pay what the NYT asks for its digital access even though I WOULD pay a sane amount. Their subscription is too damn expensive and that leaded me to read less of the NYT (till I reach the paywall) and more of others. Let’s say they charge $2-4 instead of what they charge today. Per month. And other newspapers I read do the same. I can probably go for 7-8 of them instead of only one. And I’ll be happy to give a helping hand. And they’ll win by showing some ads while I”m at it (I don’t block text ads from Google because they are not annoying and they offer some useful stuff at some point so they can do the same, show me ads without annoying me).

I’m sure that Mike would agree that a better approach would be to have part of the content made ‘premium’ (ie: full articles, podcasts and videos) and the rest free. As Mike noted, younger guys like me will not pay what they are asking. Or even won’t pay at all. They might have scored some success now but what about the future? Have they thought that ppl nowadays read several sources?

Anonymous Coward says:

Re: Re: Re:

Ninja, the point is that “younger guys” like you quickly become “older guys” who will pay for the content. For you younger guys, there are 20 free stories a month (one per business day, if you want to look at it that way). If you are using the NYT so much more than that, then you must at some point value their content.

Here’s the business issue: If you are charging $10 for something, less admit and everything, say you net $7.50. If you cut the price in half (down to 5) you now net $2.50. So you don’t have to double the readership to make it break even, you have to triple it. The further you do down that road, the bigger the problem becomes. This is the reason why most micropayments systems don’t work out, because the overhead to make them happen is way too high compared to the amounts collected.

The NYT can certainly play with their price point, but I think that the biggest hurdle in any subscription model is getting people to pay at all, and not the actual price (unless it is truly out of the range, say $100 a week). Bringing the price way down may change some of that, but would it really change enough to make it an economically better business model? From what I have seen, the answer generally is no.

Oh, btw, what would you do for news if suddenly all of those sources put up the same sort of subscription model?

Anonymous Coward says:

Re: Re: Re: Re:

I would read news on the site that didn’t put up a paywall.

There exists no reality in which ALL news sources expect direct payment from readers.

I’m assuming you are one of the regular Anon. Cowards on this site as I recognize your writing style. This seems to be a part of your M.O. Mike predicts that some action taken by a business will not pan out economically. The company takes the action and things go O.K. You declare success and start basking in the reflected glow of your own predicted future in which EVERY company operates this way.

No one knows if the NYT’s paywall is successful yet; it is simply far to early to tell if this strategy will pay off. Also, no one knows how much money this made. They have released some figures about subscription levels but you can get the first 4 weeks for 99 cents right now … so? How many people included in the subscription count are in their first 4 weeks? How many people have renewed?

If they are going strong with a subscription model in a year, congratulations to them, hopefully Mike will be writing about that in a positive way; but at this point you look like George W. Bush standing on the deck of the USS Abraham Lincoln. Maybe it is a little early to declare Mission Accomplished?

Anonymous Coward says:

Re: Re: Re:2 Re:

You said: “There exists no reality in which ALL news sources expect direct payment from readers.”

Me: Why not? You have to remember that many of the online “news sources” are just copying from the major players. If the major players shut the doors to random drive by bots taking stories, your news sources will dry up faster than a Republican fund raiser on a Sunday. You have to remember who is actually reporting the news, and who is just looking over the reporter’s shoulder.

You said: “This seems to be a part of your M.O. Mike predicts that some action taken by a business will not pan out economically. The company takes the action and things go O.K. You declare success and start basking in the reflected glow of your own predicted future in which EVERY company operates this way.”

Me: This is a very particular case where Mike pretty much declared the NYT dead online, suggested they would become irrelevant, and would likely get similar results to other “paywall” systems that had garnered only a handful of members. It’s one of the key components of his world view of infinite distribution. In this case at least, that vision has clearly failed. There are more than enough people willing to pay, and their subscription model is already a 10 million dollar business and possibly more.

There is no claiming “Mission Accomplished” here, far from it. It would just be nice for Mike to acknowledge that the world as he sees it just isn’t jiving with reality here, which suggests that some of his assumptions about people, about the value and market price of “common information” is such that you can in fact “sell the infinite” without having to whore out your time or your artificially limited t-shirt collection.

Anonymous Coward says:

Re: Re: Re:3 Re:

You seem to be factually challenged.

There are over 1500 independently operated newspapers in the United States alone. I understand that someone who reads the NYT might think that the only news sources are the AP and Reuters but … they’re not.

The NYT paywall did not make 10 million dollars. It didn’t even make close to 10 million dollars. The author of that forbes article used some very broad assumptions and then tried to estimate how much the NYT could make a year. But that includes the bulk subscriptions purchased by Lincoln (which are certainly not $15 per person per month) and anyone who took advantage of the 99 cent promotion. It also assumes that all of those people signed up on day 1, stayed subscribed, and will continue their subscriptions.

As for your last paragraph, that is really the most telling. You have an even more obvious and biased agenda on this site than Mike does. The goal of this blog and most of the people who read it is to discuss innovative ways to sell the infinite, often by attaching it to something scarce. Anyone who uses the phrase “whore out your time or your artificially limited t-shirt collection” has an obvious learning disability. It takes less than 10 minutes of reading to understand the purpose of this site, unfortunately it can be difficult to understand that purpose if you are an industry shill or you are so married to the idea of “selling art” that you can’t take 5 minutes to consider alternatives.

dwg says:

Re: Re: Re: Re:

I’m becoming an older guy, and I get my news from a variety of sources, none of which cost me a thing except when I choose to pay–like NPR, for example. When I know I’m helping keep the lights on for an organization that I care about, I pony up despite not being required to–see how that works?

Let the liberal-bashing begin.

Aaron Martin-Colby (profile) says:

Re: Re:

I never got the “doom and gloom” thing from the Techdirt posts. I got a sort of entertained derision. That, basically, the Times was stupid to try this at all for reasons x, y, and z. And when the first numbers came out that showed a relatively small drop in user numbers, that Techdirt’s narrative of stupidity remained the same.

Also, Lincoln? High end? You don’t read auto websites very frequently, do you? They’re the laughing stock of the car industry, right now. I say this more to make fun of Lincoln than deride the NY Times’ effort.

Anonymous Coward says:

Re: Re:

Not at all. But I do find it incredibly funny that Mike comments and defends himself all of the place, but has pretty much ignored this discussion (as have many of the faithful). It’s like heresy against doctrine (thanks to the star trek writers for that one). We can continue to deny reality, because we say so!

Anonymous Coward says:

Re: Your title is blatantly wrong.

you sir are annoyingly wrong. every word out of your mouth(keyboard) vacilates between venemous and clueless. its the title of a blog post, WTH are you trying to prove when the only comment you have is that the title, a device designed to draw readers in with an interesting short string of words, is slightly sensationalist? go find another blog to shit on, i like reading this blog and the comments.

Anonymous Coward says:

Re: Re: Re: Your title is blatantly wrong.

Masnick changes up his sock puppets pretty regularly here.

His latest one is pretty easy to spot though.

oh, and now cue Masnick saying that he “always signs in and never posts under any name but” his own.

We’re supposed to believe that, you see, cuz y’know, Mike Masnick is such a straight shooter and beacon of truth, after all… LOL

Anonymous Coward says:

Re: Your title is blatantly wrong.

The NYT wasn’t exactly unique in the firmament of the media in not calling out the US admin for obvious and blatant lies from the beginning of that whole business.

Anyone and any organisation that supported or helped to support the campaign to break international law and invade another country without justification should be deeply ashamed of themselves but the NYT were hardly the prime movers there, with their net curtain of a paywall they are and they deserve some credit for getting people to pay for something that they could have for free with no real effort at all. It seems that they have proven is that if you are going to try a paywall strategy, the most effective one is when there isn’t actually a paywall.

Rabbit80 says:

Are the numbers real?

“Paid digital subscribers to the digital subscription packages totaled approximately 224,000 as of the end of the second quarter. In addition, paid digital subscribers to e-readers and replica editions totaled approximately 57,000, for a total paid digital subscribers of 281,000 as of the end of the second quarter.”

Since the subscribers of the print version of the paper get free digital access I suspect that the 224,000 figure includes those (and the International Herald Tribune subscribers). The 57,000 paid subscribers for the e-readers and replica editions seems to be the real number here – as all digital subscribers get access to those. Unless I am reading things wrong of course?

“Print subscribers to The New York Times get a free All Digital Access subscription. This package includes free, unlimited access to on any device, plus the full range of NYTimes apps for your smartphone (iPhone, Windows Phone, Android-powered phones, BlackBerry), your tablet (iPad) and your computer (Times Reader 2.0 and the NYTimes App for the Chrome Web Store). Print subscribers also have the ability to share All Digital Access with a family member.”

“Free, unlimited access is provided to all print subscribers, no matter what type of subscription you have (daily, weekday, Weekender, etc.). You’ll also qualify for free digital access if your home delivery is provided by a third party (rather than by The New York Times directly).”

“Digital subscription benefits for print subscribers also include the Replica Edition. Please note that e-reader editions (Kindle, Nook, Sony Reader, Kobo Reader) are not free to print subscribers.”

DV Henkel-Wallace (profile) says:

The NYT has the perfect opportunity to experiment

But what if, instead of focusing on the paywall, the NYT had focused its efforts on adding more direct value to the site itself

Interestingly, the Times has the chance to experiment with this, as it also owns the Boston Globe, which has a respectable following of its own. It could leave the paywall up on the NYT site but experiment on the Globe’s site, and see which does better.

radiorico (profile) says:

Paywall Madness

If the New York Times is so bad why do folks even care if there’s a paywall? You could be reading HuffPost instead. Otherwise, in a part of the world where there’s no newsstand availability, I read my 20 ‘freebies’ a month, usually in two or three days. Then I select everything after the question mark, hit delete and return, and read another hundred or so articles, sometimes even clicking on the ads. I can’t resist those New York City stories.

Aaron Martin-Colby (profile) says:

Page Views showed a pretty significant hit to page view numbers and that has persisted. It also appears to be trending slightly downward, not a good sign.

The biggest change came in the Times’s cross-country competitor, the other Times in Los Angeles.

Alexa shows a significant boost to the LA Time’s readers post NY Times paywall. This includes a large boost in overall pageviews, though not per-user pageviews.

Anonymous Coward says:

Re: Page Views

That is all nice – but one is making an extra 10 million (with no loss of ad revenue, plus lower delivery costs by not feeding the free hunters), and the other one is doing, well, the opposite. They are taking in all the free readers, but I am not seeing any great reports of massive increases in online ad sales.

Just getting the crowd isn’t enough to make money. Sound business decisions are made on the bottom line, not on Alexa stats.

Anonymous Coward says:

Re: Re: Page Views

“That is all nice – but one is making an extra 10 million (with no loss of ad revenue, plus lower delivery costs by not feeding the free hunters)”

That said Bloomberg reported this paywall cost $40 million dollars to design and implement (somehow) which means they aren’t in a position of having gained extra money but at least now they have only $30 million less than they would have had otherwise.

Anonymous Coward says:

Re: Re: Page Views

That is all nice – but one is making an extra 10 million

You keep throwing that 10 million dollar number out. The NYT didn’t make 10 million dollars yet. I posted an explanation above.

Also “no loss of ad revenue” isn’t necessarily true. Their digital ad revenue may have increased 2.6% but if it would have increased say 4% without the paywall then that is a factor to consider. A 1% change in ad revenue is worth around 800,000 dollars for the NTY.

I like the aside about “lower deliver costs”, did you actually look at the financials? I didn’t think so, you just think you know everything about how the world works so how could you be wrong? The overall operating expenses where down, but the financial report specifically notes that they didn’t go down as much as expected because of the cost of “promoting” the digital sales. “Higher promotion costs were due to the launch of digital subscription packages at The Times”.

Finally, “Sound business decisions are made on the bottom line, not on Alexa stats.” The original poster was pointing out the decreased page views of the NYT. You may not agree that Alexa is the best source for such data but decreased page views will lead to decreased advertising revenue. If the NYT has a typical advertising deal they will not really start to feel the difference until next quarter when advertisers see that the amount they are paying per click has increased.

Paul Keating (profile) says:

NYT Paywall

I think the entire thing is bogus. I have been using their APP on my IPAD for almost a year now. I gave them my email address (required). They keep sending me emails saying that the content is currently free but that they would be charging for it “soon” (some actually gave dates by way of “June” or “early 2011”.

I think they are counting everyone who ever signed up and they know that they do not charge but dont say that.

Ben Cooley says:

Pay will find a way

Hi Mike,

I think I recall posting a few months ago that media sources would eventually find a way to return to pay-for-content. The iOS payment ecosystem now seems to be working, the NY times pay ecosystem seems to be at least partially working. In short, the argument that paywalls will absolutely not work seems to be a lot less compelling than it used to be.

I think there are a couple of forces at work here -> content producers have crunched the numbers and discovered that the difference between the best case ad supported and worst the case paywall scenario is negligible, internet users have become increasingly accustomed to paying for content either through app stores, micropayments, etc., content providers are providing increasingly compelling added value in their internet content, and users are becoming increasingly aware of the difference in quality between free and paid content.

Anonymous Coward says:

Re: Pay will find a way

Another person declaring Mission Accomplished from the deck of the USS Abraham Lincoln.

Maybe you should wait until the dust settles, seeing as most of the numbers in the forbes article are assumptions that lean heavily in favor of everyone paying $15 per month when that is clearly not the case. Between the bulk Lincoln subscriptions and the 99 cent promotion I’ll be curious to see what level of subscriptions they can actually maintain.

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