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?
Filed Under: expense, journalism, paywall
Companies: ny times
Comments on “Good Question: How The Hell Did The NYT Spend $40 Million On That Paywall?”
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…
About $500k per line of JavaScript, apparently…
Easy...
Easy...
That’s easy. $1 million was for the hardware, software, and the team to implement the project. The remaining $39 million was the bonus the CEO/President received as a ‘patting himself on the back for a job well done’ bonus.
Re: Easy...
You’re being sarcastic, but I wonder if somebody at the NYT is donig some kind of creative accounting? I’m no accountant, but isn’t hiding costs in legitimate endeavors a way to hide debt/liability?
Re: Re: Easy...
You’re right, DH, but doesn’t the NY Times have enough losses already? Are they doing so well that they have to invent ways to lose money, Catch-22 style?
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
Re: Re: Re: Easy...
Another example is the claims that pharmaceutical corporations spend all this money on R&D when the government funds much of it.
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.
The ROI was there..
According to their overly optimistic calculations, the ROI was there so they opened up the check book and started writing.
Re: The ROI was there..
That would be ironic, since that’s how they got into such a financial mess to begin with. They’re still paying off the loans it took to buy them.
Re: The ROI was there..
“According to their overly optimistic calculations, the ROI was there so they opened up the check book and started writing.”
It probably cost them 40 million to have an accountant write all the zeros…
Are you kidding?
This has “consultants” written all over it.
Methinks some NYT executive got entranced by those insipid Accenture ads you see at the airport and thought “Hell ya, who says you can’t be big AND nimble”…
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.
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.
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.
I don’t know what the $40 million went to, but clearly that amount of investment warrants government protection and I hope to see DHS crack down on the scofflaws who are telling pirates how to steal NYT’s intellectual property, including those working at the NYT!
/sarcasm
Re: Re:
You have a good point here. Anyone caught climbing over the paywall should be charged with felony interference with an endangered business model. The thought of messing with an endangered species should get the juries blood boiling.
Re: Re: Re:
Actually, I think whoever approved the paywall should be charged with felony ignorance with intent to distribute.
Lawyers.
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.
maybe the Times hired Bremer to manage its project?
Does anyone here remember and care about the public money wasted in Iraq?
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.
Re: Re: value for money--New York / Washington / & Iraq style...
Public trust wasted on government…. priceless
Why does everyone assume this figure, Which seems to be sourced from a single Bloomberg piece and not corroborated by the Times, is correct?
Has anyone in the entirety of the blogosphere done anything resembling actual journalism to verify it?
Re: NYT's PayWall
“…. corroborated by the Times..” and “journalism”? Am I suppose to believe the Times even if they confirmed $40M?
Re: Re:
Well, I would corroborate it with the Times, but the article is blocked…
People think “development” means that developers are there hacking out the code on servers etc. But, there’s more to it than that. You have to hire a bunch of “Visioneers” from your top name consulting companies to come and visionate. It’s an expensive process.
Re: Re:
Exactly, It’s to pay a room full of consultants who pretend they are important and do nothing and probably 30K to pay the one guy / girl who has to actually do everything.
Re: Re: Re:
And on top of developing, you have the added job of figuring out how to fix the requirements that they came up with so they aren’t retarded / impossible while fooling them into thinking you haven’t redone their requirements.
Re: Re: Re: Re:
From reading about the paywall, I think they skipped the “figure out how to fix the requirements so they aren’t retarded” step
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 🙂 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? 🙂
Man I’m getting bitter hehe
Clients..
The only thing the NY Times illustrates by spending 40 million on a paywall is that they have no idea what they’re doing.
Otherwise known as the perfect client.
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.
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.
That is what you pay when you use WinServers.
Winning!
LoL
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.
I’m guessing that some of it involved user testing.
and none of those users discovered that going to the url address bar, removing the &gwh=[long-alphanumeric-code] from the address and hitting enter would bypass the pay wall?
Re: Re:
must not have been in the test case. Nobody went the extra step, or someone did but it never was recorded.
40 million buys alot of pennies in alot of wishing wells.
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.
Easy answer.
Paywall Project Cost Breakdown:
Line 1= 2 presidents, 5 Vice Presidents, 8 Committee members, over the course of X months:= 39.5 million.Line 2= Programmer to code the wall 100K. Line 3= Catered lunches for everyone in Line 1:=350K.Line 4= Consultations with Hooters girls :=50K
I think I just figured out a way to make money in the newspaper Industry.
They probably bought a bunch of patents
Re: Re:
you mean licensed them right?
http://edition.cnn.com/2011/BUSINESS/03/27/google.youtube.hollywood.ft/index.html?hpt=C2
Quote:
I guess the tech industry just got tired of the old execs from the entertainment industry.
Booze
Lots and lots of booze
What you have here is Holltwoodland arithmetic, just like when the studio pays it’s self to promote and produce the damn thing.
As the NYT is a publicly traded company what they spent can be found.
But this is made up magic numbers all the same.
opportunity cost
maybe they included the lost advertising revenue.
3 reasons I can think of,
Utter incompetence
Totally ripped off (see above)
OR.. $40 million tax break?
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.
$40,00,000!
Damn! I wish I had been on that project!
Hookers and blow…
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!
Murdoch probably hired one of his kids to do the work and overpaid them so as to fill the pockets of his family at the expense of shareholders. I hope someone asks this question at the next AGM.
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.
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.
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.
Re: 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.”
I tend to agree with you, but the execs probably thought the amount would show their “seriousness” about it or something like that.
Scope Creep.
Re: Re:
Scope tsunami is more like it.
$1099.00 per year for full website access and computer tablet?
Hello, is anyone home there with an idea of what people really make in today’s wages?
Pardon me, I still gotta case of giggles to stifle.
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.
Hookers and blow.