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The Daily Whim

The Daily Whim

Sun. Jan 09, 2005

Pay the Gray Lady

Business Week has a long and detailed article on “The Future Of The New York Times.” It covers quite a bit of ground (the recent past, as well as the future), but there’s one aspect of the article that has the web a’bubblin’. It seems the New York Times is considering moving to an entirely subscription-based model, with no free access to their site. And there are those who think if that happened (and other newspapers followed their lead) “there are very few bloggers who would have anything left to say.”

The article starts out with what I read as a rather hopeful statement by Arthur Ochs Sulzberger Jr., the current “proprietor” of the Times: “‘Within our lifetimes, the distribution of news and information is going to shift to broadband,’ Sulzberger says. ‘We must enter the broadband world having mastered the three key skill sets — print, Internet, and video — because that’s what’s going to ensure the future of this news organization in the years ahead.’

Though that sounds like a rather optimistic forwarding-looking statement, later in the article we find there are many at the Times who haven’t a clue about how best to “master” the Internet. Of course, we must first accept that this is not a public service, this is a business, and there’s a bottom line that takes priority over “being a good Netizen.”

Just the same, the bottom line doesn’t exactly weigh in on the side to the Dead Tree People.

In 2004, the paper posted an infinitesimal 0.2% increase in the circulation of both the daily edition, which now stands at about 1.1 million, and the Sunday paper, which is just under 1.7 million. Since the national expansion began in 1998, the Times has added 150,000 daily subscribers outside New York but is thought to have lost about 96,000 subscribers in its home market. The net increase of 54,000 represents a 5.1% uptick, which compares with the 3.5% decline in U.S. daily newspaper circulation over this period. What’s more, the Times posted its gains despite boosting the price of a subscription by more than 25% on average.

Online, the Times already is making serious money. New York Times Digital (which includes Boston.com as well as NYTimes.com) netted an enviable $17.3 million on revenues of $53.1 million during the first half of 2004, the last period for which its financials have been disclosed. All indications are that the digital unit is continuing to grow at 30% to 40% a year, making it NYT Co.’s fastest-revving growth engine.

Advertising accounts for almost all of the digital operation’s revenues, but disagreement rages within the company over whether NYTimes.com should emulate The Wall Street Journal and begin charging a subscription fee. Undoubtedly, many of the site’s 18 million unique monthly visitors would flee if hit with a $39.95 or even a $9.95 monthly charge. One camp within the NYT Co. argues that such a massive loss of Web traffic would cost the Times dearly in the long run, both by shrinking the audience for its journalism and by depriving it of untold millions in ad revenue. The counterargument is that the Times would more than make up for lost ad dollars by boosting circulation revenue — both from online fees and new print subscriptions paid for by people who now read for free on the Web.

Sulzberger declines to take a side in this debate, but sounds as if he is leaning toward a pay site. “It gets to the issue of how comfortable are we training a generation of readers to get quality information for free,” he says. “That is troubling.”

The Future Of The New York Times

So many troubling assumptions in so few paragraphs.

If you look at the charts, Circulation By The Numbers and A Halting Recovery, the picture seems fairly clear. Daily hard copy sales (~1.17 million) are increasing barely enough to be called an increase, and even that is being fueled by people outside the New York area. Meanwhile, over 15 times as many people view the New York Times on the web each day (over 18 million).

While it appears the online division is the fastest growing in the company, they are so far producing only 10% of the total company profit. Now, if you wanted to increase that percentage, and if “advertising accounts for almost all of the digital operation’s revenues,” how would you do that? You can’t really increase the number of ads on the current edition pages without adverse effects. You need more pages on which to place ads.

You’ve already got them. Probably numbering in the millions. They are called “archives.” The average person would have no idea they exist, because onlyArticles from the last 7 days are free, as are all reviews back to 1996. Articles in the Article Archive: 1996-Present ($) may be purchased for a small fee.” After 7 days, new content at the New York Times becomes locked content, costing you $2.95 a pop (unless you know the super secret RSS decoder ring URL for articles after May 5, 2003). If you can find it. Because, well, it sure isn’t in Google. To Google, the New York Times hardly existed prior to the past year.

The New York Times has the option of putting nearly a decade of archives online, with tens of thousands of words on thousands of topics, and have it available to anyone who searches about any news event of the past decade (or travel, or automotive topics, or NY real estate, etc.). Right now, though they won seven Pulitzers for their coverage of 9/11, you’d be hard pressed to see exactly why. Without paying.

We already know “advertising accounts for almost all of the digital operation’s revenues,” so I don’t think their $2.95 a pop archives are doing big business. So why not sell ads on those millions of pages, and put them out there for the world to see? At my measly site with less than 10,000 archive pages, Google searches represents 20-25% of my traffic. Theoretically, the Times could increase their daily visitor numbers from 18 million to 22 million or more, creating more than 8 million new eyeballs to market their ads to each and every day.

Instead, they talk of even closing their front door, the one that’s only open now for seven days. In effect, this will completely remove them from the web. Because, like it or not, if you don’t exist in Google, you might as well not exist on the web. Not if you want to be a Big Boy. If you can’t be easily linked, you’re not on the web. If you close your doors to all but subscribers, you’re not just killing trees any more, you’re killing electrons.

And, frankly, no one will care. Not in numbers that will make any difference in your bottom line.

Newspapers no doubt face some serious concerns. I’m not blind to that. I can use myself as an example. Ten years ago, I bought the Atlanta Constitution every morning. If I was in town, I bought the paper. 50 cents per day, and $2.00 on Sunday. $260 per year.

Today, I still read the Atlanta paper every morning. But I do it online. I still buy the Sunday paper in dead tree form, so they now get $104 from me per year. They’ve got to find a way to make up that $156 difference via online revenue.

The obvious answer is ads, but Unfogged notes: “I’m sympathetic to the news providers, because, honestly, do you even see the ads anymore? My eyes look right past them; I can’t name a single ad I’ve seen online this week.” Well, I read the Sunday paper in dead tree form last weekend. I couldn’t tell you a single ad that was in the Sports section (though I did dig for specific sales catalogs I know to be in the Sunday paper). I drive by uncountable billboards during the week. I never “see” a single one, at least, not the message on them. I tune them out, as we all do the various forms of advertising that inundate our daily lives.

Does that stop them from trying? Do they give up on billboards, or when they find people skipping commercials on TV, do they stop buying them? No, they have accepted that they must expend certain sums to get their name/product/service into the public consciousness. We just have to wait for them to be fully convinced the web is another one of those important places they simply must spend money.

Because suddenly moving available content behind a paid firewall won’t work. Trust me. If you read this site very often, you know I’m a big Atlanta Falcons fan, but when the AJC moved 75% of their Falcons coverage behind a paid firewall … I balked. I was their prime target audience, and all they got out of me was one extra buck. I bought two Monday papers this fall to get the post-game coverage they didn’t have online for free. Out of 16 games.

If I wasn’t willing to pay my hometown paper a monthly fee for online Falcons coverage, what are the odds I’ll pay a monthly fee to view the New York Times? Or the Washington Post? Or any newspaper?

Mr. Sulzberger worries about “the issue of how comfortable are we training a generation of readers to get quality information for free” ... as if there’s still a choice. It’s too late, sir. There’s an ocean of free content on the web, and if the Times bucks that trend, they will be seen as the oddity, the exception, the People Who Don’t Get It. There will be no more training. Not on the user side of the equation.

It’s on the other side. And this article is evidence of the flailing about there. First of all, it’s only “free” in your head. There’s an exchange going on here, just not the one you’re used to, a couple of quarters for a chunk of wood pulp and ink. I’ve given the Times, the Washington Post, and the Atlanta Constitution my demographic information in order to create a log-in and use their site. They, in turn, use this demographic information (and my trackable progress through their sites) to sell ads on web pages that contain the same content they had already produced to sell dead trees.

NYTimes.com can either become a corporate vending machine parked next to a bunch of free racks, or it can become a full-fledged part of the web. Up until now, they’ve just had their toe in the water … and it’s bringing them $35 million a year in profit. Want more? Stick in the whole foot.

Of course, when the Gray Lady shifts about so, sideline observers assume others will soon fall in place.

Newspaper industry consultant John Morton, who heads Morton Research Inc., said he thinks many newspapers want to wean readers off free online content and transform their Web sites into paid-only publications.

Free editions of newspapers on the Web are “quickly falling out of favor,” he said. “I think you will see newspapers selling electronic subscriptions or print subscriptions, or a combination of both, which is what the Wall Street Journal does, and has been very successful at.”

MSNBC: “N.Y. Times considers charging Web readers”

First of all, I think the Wall Street Journal is a false comparison, as it offers some very unique financial information in addition to news and opinion. But let’s assume the worst, that NYTimes.com goes pay only, and washingtonpost.com and the other major players quickly follow suit.

What would that mean? Kevin Drum saysFor all the big talk in the blogosphere, if this happened it would pretty much spell the end of political blogging. Without a copious supply of online newspapers and magazines providing the raw material, there are very few bloggers who would have anything left to say.

Really? Because they can’t link to the raw material? When have George Will or Maureen Dowd linked anything in their columns? In fact, didn’t they have columns before there was a World Wide Web? How the hell did they do that? When has their column been anything more than 800 words that constitute their personal political ideas … punditry!

This appears to be part of the elbowing for position in the web space that is going on in some quadrants of both the blogosphere and the mainstream media. Many talk as if this was a zero sum game, where either the media or the bloggers will prevail (the “bloggers will replace the media” crowd). Kevin talks as though it’s some kind of parasitic relationship, and if we lose our free “hosts,” “very few bloggers who would have anything left to say.”

The “host” is the web, and the relationships are all symbiotic. Some in the media may snort that they don’t need bloggers at all, but they need the web. They need the ad revenue from it. They need the eyeballs. To maximize that, they need to be indexed in search engine databases, and they need people to link them when they find something interesting. Or maddening. Sounds like bloggers to me. Because for the media online, the bottom line is More Eyeballs.

That seems to be the biggest message the online media misses, in both an internal and external sense: Links not Evil; Links Good. Make Linky Love.

And if you are a blogger who really thinks that the loss of free online news sources would leave you with very little to say … stop now.

You’re already done. You just don’t know it yet.

Months Later (5-19-05): Pay the Gray Lady, Part Two


Peanut Gallery

1  pm wrote:

It’s almost inconceivable that the Times would be actively seeking ways to restrict its content – a tacit admission that it can’t compete in the 21st century.

Let’s face it, TV challenged newspapers for 50 years; sight, sound, color and motion trumps just sight (and only recently color) every time – and now the internet, with its immediacy and feedback, threatens both newspapers and TV. Despite those challenges, the Times made money by responding to advertiser needs and increasing its reach. Do they believe the path to success in the future is exclusivity and limitation? All The News That’s Fit To Print (But Only Behind This Wall)?

I just can’t help thinking this is like railroads boosting fares to compete with automobiles in the 20’s. Nice try, but pointless.

Comment by pm · 01/09/2005 07:59 AM
2  orangeguru wrote:

The redistribution of markets ain’t a new thing. Radios and movie theatres had to cope with the invasion of television. Did they disappear – no – they adjusted. Every medium has it’s market – UNLESS – it truly gets supplanted by better technology: vinyl records were killed by cds.

The one thing you have only touched – but is in my humble opinion the biggest bang is the change in the advertising market.

Before online advertising it was almost impossible to measure the success of compaigns and ads. But with banners and popups you can exactly log who has seen which ad in which city at which time etc. – that is something agencies like doubleclick have perfected. They not only know their audience, they also track them and cross reference their behaviour. Something you could and will never achive with analog TV and radio.

Around 2000-2001 the advertising market crashed badly, budgets vaporized and all publications had a hard time recovering from that.

Now on to online publications. During the big bang of the webuniverse publishers thought that advertising could easily finance their sites – and make a nice profit on the side from recycling their print or tv stuff on the web. It was extra money easily made. But like I said before the ad market crashed, banners suddenly were no longer paid by simply showing to the readers but by actual click thru rates – a much better and honest way to charge your clients.

Instead of getting loads of money for simply adding a banner to your site, you actually had to make sure your advertising space was directed to the right audience to generate income. And the income was only generated if the bloody reader would acutally click or buy something. This changed the whole dynamic of the advertising market. Suddenly the provider of the advertising space was much more involved in making a campaign successful instead of just providing the eyes balls.

There is another aspect of online publishing that still confuses most publishers and editors: the readers. In normal print or tv the news flows only in one direction. The editor publishers, the reader reads … and maybe writes a letter once every ten years. There was no real contact between newsmakers and newsconsumers. I don’t need to explain how the web changed that – but still most journalists dislike the extra work and effort to talk and stay in touch with their audience.

There is also another thing: you can measure success with readers – something that was hard to do before the online world: you would simply broadcast or print something. If you were lucky you would either get bad press from colleagues or a publitzer prize if you were very good. Sure you could loads of letters or calls if you fucked up seriously, but nobody knew exactly how many people read or saw a piece. Thanks to onlinetracking and statistic online magazies exactly know which stories have an impact and which not.

That puts pressure on journalists they didn’t like before and they didn’t like in that detailed and realtime way either.

Overall I think that traditional print publications have been under pressure to change and adopt to a faster and ever smaller globe of news. So far they could evade the pressure from real time news by tv and radio by having longer and better analysis and comments. But the online world has taken that nich away. Time to wake up …

3  Harvey wrote:

I’m just amused by the presence of 3 Google ads for the New York Times at the bottom of this post.

I think your point is thus proved.

4  JD wrote:

This could be another reason that the WSJ comparison is bogus. Don’t a ton of the WSJ subscriptions get expensed by business people as part of their job since they need to read the WSJ to stay on top of things?

Comment by JD · 01/11/2005 04:33 AM
5  carol o wrote:

Just one quick remark, NYT Digital appears to get a nice chunk of their income from existing agreements with subscription-based database vendors.. See this Wired piece: "Searching For the New York Times"
Not knowing the NYT balance sheet off the top of my head, I have no idea how that $20 million through Lexis-Nexis alone compares with their income from advertising, or with their income from other vendors.

The interesting thing is that a lot of libraries do already subscribe to these databases on behalf of their patrons. Chances are, if you’re paying for something from the NYT Archives, you’re paying for the convenience and not because that’s the only way you can get the material. If the New York Times goes behind a paid wall, the appropriately-savvy bloggers might still have their source material. The linking issue noted in the Wired piece will, however, still be a problem.

6  Scott Chaffin wrote:

As an “appropriately-savvy” taxpayer, I’m kind of ticked about this library database business. I reckon I should be getting a userid/password combo in my annual statement.

I must admit I love this line from the Wired article: see which Times predictions were right and wrong.

7  Reid wrote:

Orangeguru: “The one thing you have only touched – but is in my humble opinion the biggest bang is the change in the advertising market.

You are correct, the move to a click-through payout has changed the online ad industry, not only in terms of trackable results that ad agenices love, but in lowering payout to content providers running the ads. However, in some ways, in some cases, I think that puts the cart in front of the horse.

An example (maybe a bad one): the MiniMac and iPod Shuffle. Like any advertiser, Apple’s goal is to get the ad viewer to make a purchase, but that is a path with more than one step. And their first step is simple awareness … “hey, Apple’s got some new stuff.” That can be gained by an ad on a page that no one ever clicks. It’s not quite subliminal advertising, but it’s a more detailed form of branding via advertising … “hey, Apple’s got some new cheaper stuff I should consider the next time I’ve got some free cash … which isn’t now, or in the next month.”

Part of the change in the ad market has to come on those less targeted terms. Online ads have to become a part of the standard “campaign package” for a new product/service, just like billboards or point-of-purchase displays. X% for reaching the vast online audience, who, more and more, may be more likely to see your ad there than on a billboard or in the local Monday newspaper.

It’s glacial, but it’s inevitable. 10 years ago, there was no online ad budget. In 10 more years, it will be the most cost effective way to reach the most people.

Publications like the New York Times need to be looking to the future, not the past.

Harvey: “I’m just amused by the presence of 3 Google ads for the New York Times at the bottom of this post.

Case in point. In more ways than one. I didn’t even notice those ads, until you pointed it out. Oh, the irony of the irony!

And Carol, your point about Lexis-Nexis is a good one (though I wonder why Business Week would have left that out, I do remember the Wired article you linked from last year). Opening up their archives to the public could lower the value of such subscriptions, and thus, could lower the digital division’s bottom line. I don’t know enough about Lexis-Nexis to know if they are also paying for the right to reproduce the content, or merely link it behind NYT’s firewall. One has more value than the other.

But the big non-business reality the NYT has to face is that when people want specific information on a subject, they turn to the web. And though the NYT may have the very best info on that specific topic … it’s unfound. And the big business reality is that while subscription based income is flat to barely growing, the web continues to boom with new users. And it hasn’t even gotten above 65% penetration in the US. Yet.

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