The Wall Street Journal has long had a successful online paywall. The Financial Times has one, too. We can confidently say now that The New York Times will be the third major newspaper success.
The Times Company as a whole had poor second-quarter earnings yesterday, with print ads continuing to decline and digital ads weighed down by a terrible performance at its About.com content farm.
But at The New York Times itself, revenue actually increased by 0.3 percent from a year ago. Compare that to the previous quarter, when the paper’s revenue slid 2 percent. Year-over-year revenue had been negative for eleven of the previous twelve quarters.
What happened this time? The Times put up a paywall on its website and asked readers to pay for its expensive-to-produce news.
And they did, in large numbers. Digital subscriptions to nytimes.com went from zero to 224,000 in three months. Add in the 57,000 tablet subscribers on Kindles and iPads and the paper already has 281,000 new paying customers.
The new online subs helped push up the paper’s circulation revenues by 1.6 percent, where they had fallen 2.9 percent in the first quarter.
The Times’s PR chief Bob Christie says on Twitter that its Lincoln promo adds another 100,000 subscribers, and 750,000 print subscribers (who don’t have to pay online) have signed up.
But this news is even bigger than that. It proves that, contra the naysayers, readers will pay good money for quality news.
The biggest problem facing the newspaper industry has been how to make the transition from print to all-digital. An all-digital newspaper would shed something like 60 percent of its costs. The problem has been, of course, that they’ve been shedding 90 percent of their advertising revenue when going from print to online.
A paywall adds a potentially lucrative stream of digital revenue to the ad side, and smart paywalls, like the Times’s allow casual readers in without charging them. That lets the paper collect subscription and ad revenue from its core users, while keeping the ad revenue that comes from its non-core users, who represent the vast majority of the unique visitors who come to the Times site, but account for disproportionately few of its overall pageviews.
The anti-paywall folks said paywalls would kill traffic and slash digital ad revenues.
The NYT is showing that idea was wrong. In the second quarter, digital advertising in the news media division, which also includes the Boston Globe and smaller papers, but which is dominated by the NYT, grew 16 percent in the first quarter of the paywall. Some of that may be because of Lincoln’s promotional deal, which had the car company buy ads in exchange for offering readers free subscriptions. Still, it’s an excellent performance.
What kind of money is the Times making off these subscribers? It costs a minimum $195 a year to subscribe to the Times online or on the iPad. That would bring revenue to $55 million a year, at a minimum, and assuming that subscribers stay subscribed for a year. That seems high. Is the Times discounting some online subscriptions? I haven’t heard of it. The FT sure doesn’t seem to.
Media analyst Ken Doctor backs into a less eye-popping $34 million number this way:
At the pre-pay-plan trajectory, the New York Times had been losing (over the three previous quarters) at about a 3.3% rate in circulation revenue. If it can hold that 1.6% increase, that would be a 4.9% differential. Let’s call it 5%.
In 2010, the New York Times took in $683 million in circulation revenue. So a 5% change in that number is about $34 million annually. That’s our key number of the moment. A trajectory to add $34 million to Times revenue, without negatively affecting print or digital ad revenues. It’s not the only number that matters — stabilizing the print numbers, which we think we’ll see reflected in fall print circulation reports — should marginally help print ad revenues and better digital ad targeting of new Times core customers should help on that line as well.
It’s important to remember that even $55 million a year, while good money, is just 3.5 percent of the paper’s $1.55 billion in 2010 revenue. But the former number will continue to grow, and someday, the cost number will fall precipitously
Where does the NYT go from here?
The hardest-core Times readers online have probably already subscribed, and the growth rate has already started to slow. So don’t expect to see a half a million subscribers number in the third-quarter results. But subscriptions will continue to grow for a couple of years at least, and again, all this is gravy, because the Times is maintaining all of its digital ad revenue while adding the new stream (paywall critics usually failed to account for the fact that most newspapers don’t sell out their online ad inventory anyway).
I’ve long bought into Arkansas newspaper publisher Walter Hussman’s argument that adding a paywall online slows the decline of print circulation. It’s just common sense. So I’m going to guess that NYT print circulation declines will slow, particularly compared to non-paywall papers, and the next ABC report will show a huge spike for the Times as digital subscribers are added into overall circulation. The paper still has about a million paying print readers, and it will be adding roughly 300,000 digital ones, almost of all of whom, I’d suspect were not print subscribers or frequent purchasers.
As long as the Times still has a print edition, it’s going to put something of a ceiling on its potential digital subscriber base. But presumably, when the paper decides or is forced to go all-digital some day not too far away, most of those print readers will sign up for digital subscriptions.
Readers will pay good money for quality news, and the Times is off to a great start.
— Further reading:
Felix Salmon: The New York Times Paywall Is Working.
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Page One: Documentary on The New York Times rubs insiders the wrong way JOHN BARBER
From Thursday's Globe and Mail
Thursday, Jul. 14, 2011 12:00AM EDT
The documentary is a good reason to like the staff at The NYT. The firewall at the NYT is so soft that it is no real barrier, unlike some of the News Corp. arrangements.
However, The NYT, WSJ, LA Times, and Washington Post are not competitive with any of Guardian, Telegraph, or London Sunday Times. (The NYT could possibly have bought Twitter by now if it had concentrated its powers on it). The Guardian and Telegraph have mastered the format of live news blogs. The strength of which is coming out in the Murdoch Meltdown.
Columbia Journalism should center its programs this September in mastering this format. It seems that the psychology is to teach this skill as an add on. (The Sunday Times of London is just a beautiful paper, design-wise. There is no match for it in paper and layout.)
My complaint about NYT is that far too much of the paper is shallow. There is no comparison between the Book Review and Murdoch's TLS. In "Page One," despite the offhand mention of education, it all remains vague. At least The Australian has a formal Higher Education section, even if it is inconclusive.
#1 Posted by Clayton Burns on Fri 22 Jul 2011 at 11:42 PM
Can you really type with a straight face that The NYT Paywall Is Out of the Gate Fast?
Of the more than 45 million unique monthly users of the Times' website (according to its media kit: http://tinyurl.com/453hujb), 281,000 have agreed to pay. A whopping 0.62 percent. of the site's total usership.
The average size daily newspaper in the U.S. is approximately 30,000 circulation. Only 0.6 percent of that would be a mere 187 people.
Do you really think that this low number of the sites' users show after more than three months of use that people "will pay good money" for the Times' news online? Or, the broader wishful thinking, that when the Times is forced to stop printing, a sufficient number will pay?
Even if you were to inflate these number by adding the 750,000 print subscribers who've signed up but have free access online, plus add the 100,000 people who've gained online free access from Lincoln's underwriting, the aggregate total would be 1,131.000 users: just 2.5 percent of the site's users.
Call me a naysayer if you must, but the 281,000 number means -- mathematically prove -- that 99.4 percent haven't agreed to pay.
Who knows? Perhaps the percentage of users who've signed up will continue to grow' at the current rate? I doubt that. Even if it were to happen, it's highly unlikely to be nor would really indicate what your wishful thinking hopes true.
Nor do these numbers have anything to do with the facts (as Nielsen and ComScore each can confirm) that the average of the 45 million users of this daily newspaper's site visits only 4 to 6 times all month, reading reads less than 30 webpages during all those visits. The WSJ's and FT's figures aren't much different.
#2 Posted by Vin Crosbie on Sat 23 Jul 2011 at 12:18 AM
Vin Crosbie makes some interesting points.
What I dispute is that there are overpowering content incentives to MAKE me sign up.
1. would be if NYT bought the motherlode itself, Twitter, and maximized it.
2.would be if NYT out-telegraphed the Telegraph and out-guardianed the Guardian with even better live news blogs.
3.would be if NYT brought a hard-news focus to its all-too-soft book and education reporting.
(The mysterious magazine contortions do not motivate me to sign up).
#3 Posted by Clayton Burns on Sat 23 Jul 2011 at 12:32 AM
I wouldn't pay 10cents to read any news content online... Those papers aren't as clever-clever as they think. Internet is supposed to be free. Besides there are many avenues which allow someone to read the Times of WSJ for free without hacking or doing anything illegal or criminal. And worse case scenario, if i was completely prevented from reading online for free, i'd simply walk into my local library and read the papers there.
#4 Posted by Tyler on Sun 24 Jul 2011 at 02:59 AM
I don't see any great success here.
Less than quarter of a million subscribers worldwide? Sounds pitiful to me. I bet it's lower than the NYT projected it would be.
My guess is that the majority of these new subscriptions are from businesses or institutions. Your average reader isn't going to shell out that kind of money from his own pocket to read the news online.
However, the paywall does seem to be making a little money without killing ad revenue, at least for the time being. It will be interesting to see if succeeds.
#5 Posted by padikiller on Sun 24 Jul 2011 at 10:46 AM
It is well known that there were heavy discounts to get people to sign up, which is likely why revenues didn't edge up much. We'll have to wait and see how many of these discounted users stick around after the intro period is up. However, the anti-paywall folks are idiots, if anything, the NYT wasn't aggressive enough. If the average casual user is only reading 30 articles/month, they should have made the paywall kick in at 5 or 10 articles and put in low-priced plans of say $30/year, which comes with access to 30 articles/month.
Paid sites, even the WSJ, are limiting themselves by only offering their current more expensive plans for unlimited access. It would be as though your cellular phone carrier only offered unlimited minutes plans, forcing everyone to pay $100/month as opposed to what they do now, offering various tiers of minute bundles at different price points. The fact that the media companies are too dumb to understand this is why they will all be bankrupt in a decade.
#6 Posted by Ajay on Sun 24 Jul 2011 at 02:08 PM
This is a positive turnabout! So far, fewer than 300,000 people are willing to pay for such "quality news"! Gee. I wonder how many 10s of 1000s of those "quality news" subscribers are your typical journalists, professors, politicians, peer-reviewers, and other statist-apologists. Surely, they number no more than 200,000.
#7 Posted by Dan A. on Sun 24 Jul 2011 at 11:55 PM
For this being the first go-around for digital and also being summer time when fewer people read news since they are on vacation or doing things that don't allow for time to read, NYT did all right for themselves. Time will tell when the seasons change and more people do more reading and often there are more things to read about--here and globally. Also many of those trying to keep it within 20 articles will most likely get frustrated with the blocking and just go on subscription--digital or full-paper--to" have it all--so to speak." As one mentioned--those that want good articles to read will pay for it.
#8 Posted by trish on Mon 25 Jul 2011 at 04:46 PM