NYT’s Good Timing on Pay Launch, Amid News Chaos

Timing may not be everything, but it’s a lot in life, and the New York Times could have not have picked a better time — soon – to launch both its new paid plans and new tablet product.

Why? Well, the world’s conspired to wait, along with the rest of us, for the Times’ 14-month gestation period to conclude, since it announced a new pay plan, way back in January, 2010, seemingly another age. Let’s just tick off the can-you-believe-this context for the Times’ imminent launch:

• iPad2 are backordered everywhere, and as hungry customers unfold those neat new covers, they want something to test and read — and their wallets are open. The Daily may be so iPad1, while the new Times’ tablet product launches with the pay system. Times’ good timing: One million iPad2 sold so far, with 300 million more tablets projected to be sold over the next four years worldwide.
• Big news is breaking at ahead-of-normal rates, and these — North African revolutions, Japanese earthquake tragedies, state/labor showdowns — are big, brawny, visual ongoing stories. Times’ good timing: Big news makes people hungry for well-branded news.
• Much of the Times’ US newspaper brethren are reeling, still down in ad revenue this year, 2011 compared to 2010, which is down from the awful 2009. The Times’ national/global and even fledgling (Bay Area, Texas, Chicago) regional coverage stands taller as its former peers get shorter. Times’ good timing: The Last Man Standing argument says, “I’ll keep the Times, even if I drop the local paper.”
• Largely behind the scenes, the U.S. newspaper industry is in the midst of roll-up. Who could invent the scenario playing out in southern California right now? Freedom Communications, based in Orange County and owner of the Register there, put its post-bankruptcy assets up for bid, with a deadline of last Thursday. The potential bidders that we know of: mainly other post-bankruptcy newspaper companies, and those largely controlled by new private equity owners. One is the Tribune, which itself hasn’t yet exited bankruptcy (after 27 months!), and is waiting for a judge to decide exactly who owns it. Only in America could we have bankrupt and post-bankrupt companies moving in for the “buy at the bottom” kill of post-bankrupt Freedom. Times’ good timing: As news of the roll-up of “community dailies” by hedge fund owners seeps into the culture, the New York Times can better play its legacy “trust us” card, with some effect.
• NPR’s executive woes and Tea Party pummeling have raised uneasy questions, for the moment at least, about public media’s ability to assume a bigger digital news role. Times’ good timing: Many Times’ readers have NPR affinities, and recent events have reminded them how tenuous good news sources are.

I’ll be looking into the Newsonomics of the NYT pay fence — it’s climbable and purposely porous, so “paywall” doesn’t apply well — later this week at the Nieman Journalism Lab, but let’s look now at the broader context into which the fence is being erected.

The newspaper industry is trying to awaken from a stupor, a Google-fed addiction of more is more. The main metrics everyone’s used for success have been unique visitors and page views. That’s mass, like newspaper copies. But mass has gotten the newspaper industry only a little way on the web. The mass game has been won by Google  overall, with other search-aggregators taking place and show. Those search-aggregators, of course, do lots of things, including the aggregation of news, and that’s why they are the new mass media and have gotten the majority of that $25 billion-plus in annual (U.S.-only) ad revenue. (Yes, news publishers are wrong when they say there’s not enough ad money on the web — they’re just not getting much of it. In fact, they are getting a little more than 10% of it and in the old-pre-digital world, they got 20% of the overall national ad pie.)

How silly has the “unique visitors” focus been?

It’s like standing on a Midtown Manhattan street corner, as a gust picks up, snagging a page of flying paper and being counted as a “reader.” The flying paper caught is like 95%+ of the links sent by the search engines to news sites, a miscellaneous page uplifted by digital distribution and landing almost haphazardly, not sought by brand.

Page views, of course, are good, but more isn’t necessarily great. News sites still tell me their sell-through is around 50% being; half their ad “inventory” isn’t sold. Picture an airliner getting aloft with half its seat empty, and that’s how publishers have seen inventory over the years. That, though, is our old picture of scarcity. Airline seats are finite. The web, however, we’re all still learning, is effectively infinite (“Counting to Infinity: Why Media Need More Analytics“, Ad Age). So we’re into the age of two kinds of customers — and that informs all the pay experiments from Augusta’s to Dallas‘ to the Times.

There are core customers and there are others. The “others” aren’t without value, but they are of lesser value, useful for some ad revenue and a small percentage will be sifted through the funnel and become heavier users and paying customers.

Now, it is the core customers who are the focus on the intense push to get digital reader revenue this year — and who hold the key to the biggest digital ad payoffs for years to come, the second fact often overlooked in the blunt-edged “should they charge or not” debates.

The core customers are those who come to you because you are you. They identify news with the Times, the Morning News or the Chronicle.  Most of them, we think, are print readers, in the transitional phase to digital. So you see lots of companies (the Times, the Morning News) telling these print readers that, overnight (“The Newsonomics of Overnight Customers”) they are now digital customers, no extra charge, while other companies (Morris sites) are saying to their core print customers, just send us another $3 a buck, and you’ve got digital, too.

Either way, these are All-Access plays, the big, broad business model that is becoming the U.S. standard and starting to make inroads in Europe (Times of London, Telegraph in the fall, some Axel Springer newspapers) as well.

Here is the growing epiphany about these core readers: Not only do they pay you, they use lots more pages than the fly-by people, the non-core sent by Google, Facebook, Twitter and all manner of other referrals. More than 50% of the Financial Times traffic comes from about 10% of its unique visitors, largely the paying ones, who just got a fee increase this year and paid up. The Wall Street Journal has seen similar disproportionate usage.

The virtuous circle gets wider. Not only do you get more usage from this paying core group, but those readers also become better and better advertising targets each day. You, the publisher, already have their declared registration/buying information (demographics) and now you have a 24/7 clickstream of their digital reading, researching and shopping behavior. Match the two, and modern ad targeting can increase yields as you sell them — and actually present offers that might interest them.

Win, win, win, if the stars align perfectly, which they won’t, because it’s an imperfect, and still aligning, planet. (And, of course, that’s a center piece of the Apple policy struggle. If you can’t align your customer knowledge with customer knowledge Apple gains as it sells your product to its customers, the alignment — and better targeting — goes awry.)

So, the pay question becomes far more nuanced and far more impactful — on ad targeting and rates, on print churn, on new and younger reader engagement through digital and on tablet news adoption — than the simple point of whether and how much to charge.

Charging for digital news is no panacea. It’s a platform for a growth, and the beginning of a new business model. Most newspaper company CEOs have done the math, and with the current trajectory of print ad decline, modest digital ad growth and no digital circulation money, they have no hope of sustaining their businesses into 2015. That’s a bleak, but fair, conclusion.

So, as we approach the proliferation of pay models, consider the Times’ and other moves as getting up on a bicycle and learning to ride it. For 15 years, newspaper companies have been careening around on unicycles, trying to make digital ad revenue, in and of itself and with too little attention to core readers, work. Now, they are trading in those unicycles for bicycles. 2011 is the year of training wheels, before the tough road work — tablet-focused product renewal — consumes their attention.

More related paywall/revenue posts from Newsonomics:

The Newsonomics of Overnight Customers

The Newsonomics of Do-Over

The Newsonomics of the Third Leg

1. 

   Bryan Murley says:

   March 15, 2011 at 8:49 am

   The Times needs to get more of their interactive graphics into HTML5 if they want to wow the iPad crowd. I can’t even view some of their Japan Earthquake/Tsunami/Nuclear graphics because it’s all in Flash Sucks.

   As well, the BBC is still free (for the moment) and providing up-to-the-minute coverage. Why would a discriminating news consumer jump the pay wall when they can get (arguably) better coverage for free?
2. 

   Chris Tompkins says:

   March 15, 2011 at 12:17 pm

   This post is idiotic wishful thinknig. The iPad 2 selling well has nothing to do with demand for new. There are litterally dozens of news apps which are better aggregated, edited, and produced than the NYTimes pitiful presentation. A paywall may work for them… but they need to make something worth paying for.
3. 

   Anjanette Delgado says:

   March 15, 2011 at 6:12 pm

   The paragraph about customer knowledge (fourth from the end) should be carried into all news organizations’ future business decisions. We’re too easily letting Facebook, Twitter, Apple and others keep that knowledge for us — and from us? — right now.
4. 

   Phillip Smith says:

   March 16, 2011 at 8:46 am

   Thoroughly engaging and well-conceived piece. Many thanks! (I may be sitting on the “information wants to be free” side of the fence, but I do like a compelling argument for how publisher can effectively charge for content online without losing their audience.)

   Phillip.
5. 

   anon says:

   March 20, 2011 at 5:12 pm

   Let’s face it, if affluent douchbags buying iPad2′s and with money to burn on apps which effectively regurgitate stories available elsewhere for free sounds like a sustainable revenue strategy, NYT are on to a winner..

   Unfortunately, they’re not. There’s too much redundance in online news anyway. Outlets must reinvent or close. Sadly, I think the old guard will continue as long as possible before pleading for a bailout.
6. 

   robin says:

   March 20, 2011 at 6:04 pm

   i am in the sweetspot you described for whom the times is the news. 15yr subscription, then 15 yrs as my homepage.

   guess what, your “analysis” is from wonderland: there is nothing of value to me being added to their contribution to the infinite supply of news that makes it worth my money (for instance, i pay for tracks from itunes because of the value they offer in their competition with free and infinite).

   furthermore, with javascript blocking and cookie purging, they’ll never be able to keep track of me anyway………

   so it seems their target audience for digital subscription purchases is the clueless and company accounts.

   what a community-affirming decision……..