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 @ 11:47am

    Re: who will defend this crumby paper?

    Your reasoning is flawed.

    the price being asked of them is far below what even a fifth-rate newspaper typically charges for its daily printed edition

    See those bolded words - that's where you (and the NYT management) are wrong. You're comparing a stream of ones and zeroes (something intangible that costs effectively nothing to reproduce) to a printed newspaper (something tangible that has a definite reproduction cost.)

    If you're going to compare the cost with something competitive, you have to choose something that's actually competitive - in this case, other newspapers digital editions.

    Which don't cost anything.

    So, (as others have pointed out) in order to get people to pay something, they need to offer something that they can't get for free... which they aren't.

    People who really find an advantage in having access on their stupid i-Pad device will pay the extra without begrudging it; after all, they’ve paid through the nose for the “privilege” of being Apple © customers [...] it makes sense to think that there are also a certain number of readers, the “BMW”, “Mercedes Benz” class, who won’t bat an eye at paying $ 35 USD per month

    Here I agree with you - a fool and his money are some party, and as Armin Heinrich discovered, there are at least 6 people on the planet who will pay $1000 for a blinking light.

    The problem with this is sustainability, at least for the ipad crowd. If this is for apple people, they're going to be among your "occasional readers", and once the novelty wears off, will they continue to pay?

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