Why The NY Times Paywall Business Model Is Doomed to Fail (Numbers)

from the dude-where's-my-math dept

Not considering technical details (every wall can be brought down), even by its own business model the New York Times' paywall is doomed to fail.

Last Friday's Financial Times had some interesting numbers.

  • Fact 1: According to analysts, the New York Times only needs to convert 1 to 10 per cent of the online visitors in order for the model to pay off.
  • Fact 2: NY Times chief executive Janet Robinson has stated that they only expect about 15 per cent of visitors to encounter the paywall, since visitors can read 20 articles per month for free.
  • Fact 3: Full website access and the mobile app are bundled for $15 per month. For the iPad app + web you pay $20 per month. $35 for all three.
  • Fact 4: One analyst argues that the NY Times could earn $66m per year if it converted just 1 per cent of the visitors. This would mean they go from paying nothing, to paying (at least) $195 a year.

There is no way these numbers add up. Consider fact 1 and fact 2. First of all only 1 per cent might actually not be all that easy, let alone 10 per cent. Secondly, the 1 per cent is misleading, as they'll actually have to convert 1 to 10 out of every 15 visitors to encounter the paywall. So they actually have to convert 6 to 66 (!) per cent.

Next, the pricing might be too high. $15 per month is a lot for consumers who are not used to pay for news online, especially since there's no additional value as Mike commented last week. I'm not saying nobody will pay, but dragging in the 6 to 66 per cent of the visitors will be challenging, to say the least.

I cannot imagine this paywall to be successful. They can probably kiss the $40m investment in the development goodbye.

Filed Under: math, paywalls, predictions, subscriptions
Companies: ny times

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  1. identicon
    Anonymous Coward, 22 Mar 2011 @ 6:09am

    Re: Way too simple an analysis

    "It seems ludicrous that people will go from $0 to $195, yes, but what evidence do we have that generally doesn't work? There are lots of things that are generally accepted that aren't true when you dig (pirated copy = lost sale anyone?)."

    I can't tell if you're answering your own question there or trying to make some counter point. Yes, piracy is the evidence that people are not willing to pay for content they previously had access to for free.

    Much like before the digital age, if you wanted a song you had a friend make you a tape of it, or a mix tape of a bunch of songs you liked - or just borrowed their tape(s) (similar to VHS). Now that the physical attribute of storage has been converted to a much more easily sharable form it's only natural it be adopted.

    The problem is this company was based off a subscription service and they wish to continue this avenue for social media. They fail to realize that people are no longer willing to pay for social media because mostly if one person has it, a million others will as well. It's just the way the world works these days.

    Folks used to go to the barber-shop and read its copy of the newspaper and never bought one of their own, today people would argue that's piracy, lost sales, and the shop owner is violating half a dozen IP laws and needs to be sued sued sued.

    So, unless you really really really like one particular journalists style of writing and are willing to pay $200/yr for it then you might have a feasible business model - best of luck.

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