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.
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Filed Under: math, paywalls, predictions, subscriptions
Companies: ny times
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Too expensive?
Astraweb: $11/month
Megaupload: 10 euro/month
Giganews: $5-25/month ($5 is very limited.)
Supernews: $10/month
Sounds like the NYT is in the same basic range as these services. Of course you get a completely different collection of bits but the real difference is that the NYT actually pays the writers and editors unlike the mooching scum at the USENET services.
Hey Mike, here are two article topics for you:
* The USENET services "don't get it". They're trying to put up a paywall and it will fail because the only thing that's cool on the Net are free things that Google can sell ads against.
* The USENET services are promising "unlimited" without actually delivering because nothing is unlimited. They're just like everyone selling bandwidth and not delivering it. It's so uncool how they meter and throttle the free pipes just to get us to pay for what we should get for free.
So get to work.
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Re: Too expensive?
when paying for usenet you're paying for access not content.
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FT paywall
Do you have another link?
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Re: FT paywall
Anyway, I'm not sure if it's a paywall or just a 'login wall'. Annoying and ironic.
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I'm still waiting for the subliminal messages in the background images to be found: "submit and subscribe, you must pay"....
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Re:
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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?).
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Re: Way too simple an analysis
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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Re: Re: Way too simple an analysis
Fact 4, seems to undermine his point--if they can be profitable with just 1% (which he concludes is 6%), then that doesn't seem to be such a leap--something Bas didn't address.
The piracy thing was only an example of something that lots of people seem to blindly accept without scrutiny.
Just like, hey, no one will pay $200 per year for something. Great opinion, and I feel like that is true, but I see a number of people on various sites saying that the NYT is important to them and they'll pony up. It remains to be seen if those positive remarks convert to cash.
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Re: Re: Re: Way too simple an analysis
Turning a click into a sale is called the conversion rate, and there are many details here that I could go into, but suffice it to say that a conversion rate of 1% is considered excellent. A conversion rate of 10% would be mind-blowing. Unheard of. Never before done.
Moreover, conversion rates only apply to those given the opportunity to convert, meaning the aforementioned 15%. Conversion rates of 6-66% are impossible. It will never happen.
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Re: Re: Re: Re: Way too simple an analysis
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Re:
I saw maybe two episodes and in both there was at least one person who said "if just 1% of people ...". The response from the investor panel was always the same, something like 1% of people are not going to buy something that 0% of people want.
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Times to change paper subscription pricing
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Re: Times to change paper subscription pricing
Loved it! :)
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Re: Times to change paper subscription pricing
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Re:
Anyway, I figured the 6 to 66% margin left enough room to factor that in. I don't expect GBC to be high when no extra value is offered. People simply don't get offered a 'reason to buy'.
My main point was just in showing that they really didn't think this paywall through very well and unless they get lucky, they'll have a lot of trouble making it work.
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Re: Re:Ny times
I considered paying but it costs too much and they need to remove the ads
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Different perspective...
If they can actually convert 6% of those visitors to paying customers then they project they can make a profit ( or call it a success). Regardless of whether they hit their goal or not, the site is still bringing in ad revenue and they are only taking the risk of offending a small percentage of their traffic with the pay wall.
Allowing free views from sites that link to their articles may dilute the traffic to the site to some degree, but it will remain to be seen if that loss of views is enough to seriously harm the business model. Based solely on FACT 2, it appears that they are just phishing for money from a small percentage of their visitors and have a decent chance of making their numbers.
Saying that the business model is doomed may be correct in the long term, but in the short term it looks like it could work until enough of their legacy customers realize that they are being taken for a ride.
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Re: Different perspective...
I realize you're just looking at fact 2 and I love your analysis, but if you're going to talk conversion rates, you need to take the projection from fact 1 into consideration. :)
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Re: Different perspective...
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Dont count the NYTs out
Just the fact that it's the Times (and not some third rate paper) that's doing this means its got a chance.
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Re: Dont count the NYTs out
Also, you mention older people will pay but what happens in 10 or 20 years when the young people who won't pay are now the old people and the old people that were paying are dead?
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Re: Re: Dont count the NYTs out
Not only for young people. The Internet has been free since its beginning. And the Internet itself is also very young (if you count only the World Wide Web, which is what most people mean by "Internet").
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Re: Re: Dont count the NYTs out
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people won't read electively, that's what...
We already have a good idea of what happens then: it's what has been happening already as these people die off---people (in particular, the English-speaking world, because and only because they are such a large part of the highest of "high tech" societies), read less and less or, to put it more bluntly, they read practically nothing which is elective reading. Today and for some time, even college graduates don't read even a single elective book per year. I've forgotten the proportion just off hand but it's stunning--or, it used to be seen that way.
The really significant issue goes beyond the matter of 'youth' wondering why they should pay for access to the New York Times (or any other daily newspaper) to the matter of youth wondering why they should bother to read anything which they aren't required to read.
And, then, of course, "reading a book" for many people comes to mean nothing more demanding than reading Stephenie Myer, Stephen King, Robert Ludlum, J.K. Rowling, and on and on. Internet culture which asks the least possible from its habituants, encourages an ever-declining definition of "effort".
In such circumstances, how does anyone expect people to retain any sense of proportion or discrimination in their critical faculties? Today, we have Barack Obama, the "thinking-person's" George W. Bush, as president. And our "choices" were, at length, between Mrs. Clinton, Mr. Obama, and, on the other hand, John McCain and Sarah Palin, or, in other words, really no choice at all, just the illusion of choice between what's really awful and what's simply unthinkable.
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Re: people won't read electively, that's what...
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Re: Re: people won't read electively, that's what...
And, alas, as wonderful as they *might* be, my posts by themselves, and even all of the posts at this "wonderful" site of insightful discussion, taken together aren't enough.
The internet offers crumbs (which lie around for the picking-up, practically effortlessly). If you want more than that, you have to invest some effort. And maybe you do, in which case, good for you. Again, how many are there like that?
In other words, your example, being anecdotal, does not belie the larger general statistically-demonstrated trends of little or no elective reading. After all, I didn't claim that no one ever reads anything electively any more. I contend, instead, that the differences between today's elective reading, in both quantity and quality (both being very important) and what used to be common only sixty years ago, are immense and a damning indictment of what passes for intelligent reading today.
Thank you, though, for reading and replying, Liz.
Remember what (a perhaps apocryphal story has Adlai Stevenson replying to the supportive voter who is said to have exclaimed, during his 1956 presidential campaign,
"Senator, you have the vote of every thinking person!"
"That's not enough, madam, we need a majority!
In that election, the thinking people proved to be outnumbered by roughly 1.366 voters to 1.
http://en.wikipedia.org/wiki/United_States_presidential_election,_1956
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Re: Re: Re: people won't read electively, that's what...
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Re: Re: Re: Re: people won't read electively, that's what...
But since that's the case, the answer is likely "neither one nor the other." And I don't understand why you should need to know this in order to read my comment.
Maybe 'Team Edward' is a reference to the primary campaign of John Edwards; if so, i grant that there are some things about his public policy statements which lead me to think he'd be marginally better in certain respects than I expected either Obama or H. Clinton to be---and better than they've proven to be. In preferring Obama over H. Clinton, we wound up getting Mrs. Clinton for many practical purposes. Too bad that Obama didn't explain the liklihood of that possibility to voters before the primaries had determined him the candidate.
But John Edwards, in my opinion, is only very slightly preferable to either Obama or H. Clinton. He claims to defend a stronger populist set of principles but whether he would in fact do that if elected to the White House is the all-important question for me. Obama has now proven that much of his marvelous rhetoric was that and nothing more.
That the electoral system we have (and have had for many many generations) gave us such candidates as those is ample proof that our real troubles are very deep and systematic and that Teams Edwards, Jacob, Clinton, Obama, McCain or Palin, etc. are distinctions with too little difference. We're offered phony choices by a system which is by design rendering electoral politics empty and useless as a means to reliably and meaningfully translate popular opinion and desires into effective public policy.
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Re: Re: Re: Re: Re: people won't read electively, that's what...
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Re: Re: Dont count the NYTs out
The put $40m into this. In 10 years, if they invested the money and got 1 5% return, they would have $65m, in 20 years - $106m. Now, if you consider that they will have to re-invest in their capital expenditures AT LEAST every 5-7 years, they probably have to make about $50m in every 5 year period to break even.
It's probably unlikely to pay off, but it is expenditures like this that caused their problems in the first place...
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Re: Dont count the NYTs out
We "super-young" do not demand everything for free, we acknowledge the reality that the exact same service the New York Times is providing can be found already for free provided by hundreds of news outlets elsewhere who're more than happy to do so. They also acknowledge the reality that charging customers for the same product they can get for free in this day in age is a failing way to conduct a business.
Provide the news for free and in as many user friendly ways as possible, then make your profits off advertising is the way to go. Like it or not the consumers dictate how to be successful and imposing paywall's will only serve to hurt your chance of success in the long run.
Regardless, it still boils down to a matter of competition. The New York Times once upon a time established itself as a leader in journalism, when there were very few widely distributed publications that could compete at the same level. Thanks to the digital age running printing presses and requiring distribution logistics is no longer needed. Nor is it required that as a journalist you have to work for a major publication - just because you don't work for doesn't mean your ability to do just as good of work reporting facts is somehow sub-par or less credible.
Plenty of other businesses realize this truth and are taking the available means to capitalize on the situation to make it profitable to them. Charging the consumer for news is no longer the way to go, and never was for the airwaves, it's just finally hit home for print editions.
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Re: Re: Dont count the NYTs out
This is the crux of the problem for the RIAA, MPAA, book publishers, newspapers, etc. They, hopefully, know this but are fighting it tooth and nail. That can only lead to failure. The business model couldn't be simpler:
Step 1: Give the consumers what they want
Step 2: Profit
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Re: Re: Re: Dont count the NYTs out
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Re: Dont count the NYTs out
Oxymoron alert! NYtimes is a joke homeboy. its the WSJ of the left. i stopped reading it when I got to college and realized its just a corporate/government mouthpiece. It is a Grade A propaganda machine, i'll give it that. As far as a journalistic source of truth goes... 3rd rate would be a bit to generous of a discription.
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Sigh...
What are these customers paying for from the NYT that they can't get legitimately elsewhere?
Because I think the only correct answer is a big fat nothing, which makes all of this an excersize in silliness....
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Re: Sigh...
That being said, it's pretty doubtful that the strength of the brand alone is enough to sustain this indefinitely or to make it any sort of smashing success. It seems likely that this will end up a notch on a balance sheet, dwarfed by advertising revenue. And it also seems like they know that: they've made the paywall so porous that, if it isn't working out, they can just kind of forget about it, instead of needing to go through the embarrassing process of admitting their mistake.
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Re: Re: Sigh...
I agree, this is the answer they would give and it shows an astounding level of arrogance considering the sheer quantity of AP and Reuters stories that are re-printed on the NYT's website.
I also agree that the NYT was able to build a lot of brand loyalty when they were breaking major stories and really pushing the boundaries on reporting. How will they get credit for breaking stories if they're behind a paywall? Or, a better question, when was the last time the NYT broke a major story? I can't think of the last time a newspaper had an "exclusive" story. They may be the first "real" newspaper to publish something but most of the time the story was broken by a blogger, independent journalist, or foreign paper.
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Re: Re: Re: Sigh...
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who will defend this crumby paper?
I think the management reasons soundly when fixing the entry barrier at 20 “items” per month without charge. That’s an average of one article every day and a half -- light use of their paper, it bespeaks a reader who is not very likely to be willing to pay anything significant per month to read more. So those readers, who, with continued access might one day decide to become paying readers, “get in free”—if one doesn’t count the obnoxious assaults of the invasive advertising.
For those who require more, the price being asked of them is far below what even a fifth-rate newspaper typically charges for its daily printed edition. At fifty cents a day, you aren’t going to find a daily worth picking up anyway. So, while in my view, it’s a crappy paper to begin with, at least it becomes a cheap crappy paper at fifty cents per day.
Similarly, the management figures rightly, I think, when they conclude that offering access to users of additional “platforms”—mobile applications—means they giving those readers “added value” and so, the extra charge isn’t out of line. The offer will likely bring sufficient takers to have been a sound decision. 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. By the same reasoning, 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 for the web + mobile + i-Pad—and even, why not?—the printed paper on their doorstep or office desk. Those readers, who surely wouldn’t have felt guilty about reading the web version even if they hadn’t been paying the NY Times in one way or another, are the ones who don’t have to think twice about such an expense any more than they have to hesitate about spending over a hundred dollars on a bottle of wine at a restaurant.
I think regular reading of the NY Times is positively harmful and people would be doing themselves a favour by skipping it altogether—just like they would by skipping the television but that’s another, and much more important, issue than the matter of how much to pay for access to the crappy New York Times.
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Re: who will defend this crumby paper?
There is an app for that. It is called Google Reader. I can use Reader in a desktop browser or use the Reader app on my Android phone. So what added value does NYT provide exactly, besides cutting you off from your RSS?
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Re: Re: who will defend this crumby paper?
You say you have it on your Android phone (with access to the NY Times included for free, I suppose), but, is this Reader APP also on (or available on) just any mobile phone device?
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Re: Re: Re: who will defend this crumby paper?
But based on your reference to "stupid" iPads, and your bias against Google, I think it is clear that you don't know a damn thing about modern media consumption habits and trends, so I'm not sure why you are addressing this topic at all. If you're going to scoff at two of the largest and most influential companies in the world, and mock those who use their products instead of actually understanding why they do, then you aren't going to have a very useful perspective on anything.
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Re: Re: Re: who will defend this crumby paper?
If the Google Reader app isn't available on other smartphones, and I suspect that it is, I am sure there are other RSS readers available.
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Re: who will defend this crumby paper?
Ah, but now you've just highlighted another problem. If you subscribe to the print paper the "digital paper" is included. There is no extra revenue in that model.
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Re: who will defend this crumby paper?
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.
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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Too high?
Astraweb: $11/month
Megaupload: 10 euro/month
Giganews: $5-25/month ($5 is very limited.)
Supernews: $10/month
Sounds like the NYT is in the same basic range as these services. Of course you get a completely different collection of bits but the real difference is that the NYT actually pays the writers and editors unlike the mooching scum at the USENET services.
Hey Mike, here are two article topics for you:
* The USENET services "don't get it". They're trying to put up a paywall and it will fail because the only thing that's cool on the Net are free things that Google can sell ads against.
* The USENET services are promising "unlimited" without actually delivering because nothing is unlimited. They're just like everyone selling bandwidth and not delivering it. It's so uncool how they meter and throttle the free pipes just to get us to pay for what we should get for free.
So get to work.
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Re: Too high?
Bob, once again, is confused about what a paywall means. That's your problem. The Usenet providers are getting people to pay for a *service*. Not for content.
Understand the different and you'll be on your first step towards understanding everything else you're confused about.
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Just Another Brick From The Wall.
https://twitter.com/timeswiretap
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As Dylan once said...
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confused
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Previous Paywall
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NY Times Paywall
Long term I think this diminishes the paper. It breaks the 'habit' in us older folks, prevents it from ever developing in the young. The NYT has always aspired to be a powerful voice, an opinion shaper and it can't be this is hardly anyone reads it. Which also brings up the problem noted on Techdirt with Murdoch's efforts and his writers jumping ship. Journalists want their stories to be read, to matter, to shape events and they can't do this behind a moat.
I think that the pricing is all wrong and that they should have been more democratic in their advertising which I imagine would involve rate changes as well. They went with closing the door when they should have opened it wider.
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besides, generally, the more $$$ earned, the more reading is done...
"There is an app for that. It is called Google Reader. I can use Reader in a desktop browser or use the Reader app on my Android phone. So what added value does NYT provide exactly, besides cutting you off from your RSS?"
[ Not everyone has or wants "Reader", esp when they have a different device already. The point is the "offers" cover the range of what people could have and use. ]
"Ah, but now you've just highlighted another problem. If you subscribe to the print paper the "digital paper" is included. There is no extra revenue in that model."
To both, my intended point precisely concerning this elite set of readers is that, indeed, while they aren't counted in the millions, there are these people--more apt, it seems to me, by the way, to read newspapers in the first place than the average person--who don't think about this cost. It's too far below the sums they consider important enough to worry over. Hence, I placed it alongside the $100+ wine. And, yes, they do get something: the Times, which counts for them, is readily accessible on all their little high-tech toys(--which, again, don't necessarily include "Reader"). That's what they want, and the additional cost doesn't phase them. (They're wealthy.)
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Re: besides, generally, the more $$$ earned, the more reading is done...
The point is, that the NYT already had most of the offerings available for free and now want to lock them up. Their competitors also have all of these offerings and they are still free. So the big point is, locking their paper up behind a pay wall provides no new value. It removes value.
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Re: Re: besides, generally, the more $$$ earned, the more reading is done...
Still, you're taking two different aspects and placing them under one and the same set of critical analysis.
It's one thing to point out that what will be charged for is going to be "free" elsewhere and something else to complain that what used to be available for free will now cost its users something to access it.
In other words, the paywall per se is one issue, and how it's implemented is another, different, issue. My comments concern how it's implemented, not its existence per se. So, we've been discussing how people, who are apparently supposedly going to have to pay something for what previously they'd had free(er) or less restricted access to may or might choose to respond to this change of circumstances. My comments are intended to point out that, under the given that certain things are no longer offered or in fact accessible (when that's the actual case) free of charge, there are people who'll find the added value in their ability to get this now-charged-for material here, there and everywhere on their high-tech devices. Even when that might mean paying a marginally greater price to add one more device to the mix. Where they can actually get the same access included i.e. at no extra charge, then, like you and most, I agree that they won't adopt that option, but would indeed adopt it where it isn't also included.
So, a "paper" newspaper subscriber, for example, could rationally decide under the new scheme that, in addition to the paper paper and what it includes, he also wants access via devices not already included for free. And, in their configuration, the people devising this new scheme haven't left what I consider the realm of reasonableness in deciding that there could be packages (here described as A (basic access), B (additional APPs) + C (yet other unincluded APPS of a different sort) with a graduated price from A to C.
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Re: Re: Re: besides, generally, the more $$$ earned, the more reading is done...
A - $15 - web and smartphone access
B - $20 - web and ipad access (smart phone TAKEN AWAY for more money)
C - $35 - all three
So the packages aren't really 'tiered' - they are quite bizarre, in fact, as mathematically they imply web access is worth $0.
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Re: Re: Re: Re: besides, generally, the more $$$ earned, the more reading is done...
"A - $15 - web and smartphone access
"B - $20 - web and ipad access (smart phone TAKEN AWAY for more money)
"C - $35 - all three"
Yes, I see that. I also used to discover that, as often as not, when I browsed over the vinyl 33 rpm albums of my favorite rock 'n roll groups, somehow they (or, more likely the recording companies' marketing departments) had discerned with a devilish cleverness how to put just one of my favorites of their hits on an album, another favorite of mine on a different album, and so on, such that, in order to get all my favorite hit songs, I had to practically buy every album, rather than one which conveniently contained all the hit songs I wanted.
I believe this is called "marketing."
And, if you resent it I not only entirely understand, but I also agree—up to a point. I find something just a little peculiar about people who apparently readily submit to being fleeced by wily merchandisers in some regards while, in other cases, they resent it strongly.
The machiavellian business/marketing management (not exactly a new thing) at the Times marketing department seems to have noticed that since i-Pad ® users are by definition able and willing to pay more than the bottom-rung of the market for their digital toys, it’s eminently reasonable that they’d be susceptible to be charged more for the service which is adapted to those more expensive toys. As the character “George Costanza” would ask, “Is that wrong (of them)? Should they not have done that?”
Or, in short, it may not be, indeed, perrhaps isn't at all, a "fair" strategy, but it is hard to argue that it isn't "reasonable" one.
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Conversion rates
If they are expecting conversion rates of over 6%, they are living in a dream world.
If they are expecting conversion rates of over 10%, they don't understand how the world works.
If they are expecting conversion rates of 66%, they should be committed.
Conversion rates of over 1% were commonplace back in the late 90's and early 2000's. They no longer are. Today, conversion rates of 1% are excellent. A good target for any business.
Conversion rates of 10% are impossible. The best, most highly-focused marketing campaign on earth, where your links are only sent to fanatical customers loyal to your brand will not see conversion rates of 10%.
The NY Times is out of its mind to expect numbers like this.
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"dots " left unconnected... 'It's the TECHNOLOGY, stupid!' ...
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In other words, in general, the public is a long way (and a long time?) from grasping the intimate, all-important relationship between the general decline as they see it in "the state of the nation" and the continuing march of high-technology. And this "disconnect," this failure to grasp the relationship portends more of the decline that supposedly worries so many.
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Plus, Why pay for neocon propaganda?
That they want to charge me for the privilege of reading their swill just makes it easier to ignore them.
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Mike, why don't you introduce your posters more fully? I think it would help to set up their credibility a bit more.
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Re:
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It can be circumvented
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Feeling pretty stupid?
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