The New York Times may have it right

Its paywall strategy could provide the right transition

Lessons learned from entrepreneur by Larry Kramer
June 20, 2011
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A few weeks ago I learned that the cheapest way to sign up and pay for the New York Times digital products was in fact to order the weekend delivery (Fri-Sun) of the printed New York Times to our apartment in New York City. If you are a print subscriber to the Times, even just a weekend one, you get free access to the digital versions. The cost of the weekend-delivered-Times ($15.20 every four weeks) was already less than half the cost of buying the printed paper from the newsstands, so when you added in the fact that it was ALSO LESS than half of a full 24/7 subscription to all digital platforms ($35 every four weeks), this deal looked too good to be true.

And some criticized the Times for “paying people to take the print paper” and accused them of undercutting their stated goal of getting people to pay for content, while others speculated they might not have even realized they were undercutting themselves.

But I have a different take. I think it’s a brilliant strategy to deal with the biggest problem the Times and other traditional news media businesses face: the painful transition to business models that will work on digital platforms. These companies need to maintain the print revenues AT LEAST long enough for Digital Advertising to become big enough and effective enough to attract substantially more ad revenues. That means preserving as many users and page views as possible in spite of the pay wall – enough to ultimately attract advertisers – while still charging the heaviest digital user customers, and at the same time keeping as many people as possible reading the print editions.

One of the biggest problems newspapers face is the erosion of advertising to digital platforms. But while it is obvious that categories like auto and home classified advertising are much more efficiently done on digital platforms — and have moved on — many display advertisers have not yet figured out how to use the web or even mobile or tablet devices, more efficiently than print. Those display advertisers feel comfortable in print, and still get enough results from print, to be hesitant to shift larger dollar commitments to digital platforms.

So the print media companies have had to deal with the fact that while readers have switched to the web and mobile in huge numbers, the advertisers haven’t moved nearly as quickly. That means that readers of the print product are still worth a lot more than readers of the web product in terms of how much revenue each reader generates. A print reader can be worth as much at 200 times more than a digital one in terms of advertising dollars generated.

So newspaper publishers are trying to keep as many people reading the print products as possible, at least until the ad dollars flow to digital as broadly as the readers have. They need to financial the transition period. But many of these newspapers have used absolutely the wrong incentives. The San Francisco Chronicle, for example, runs much of their best content in the print product only, boldly proclaiming “Print Edition Only” atop those articles in the paper. But rather than convince the reader to change their habits to suit the newspapers business model, this method only serves as a reminder that the newspaper’s web site is lacking and, in effect, tells the reader who prefers digital to go elsewhere because the paper’s best content won’t be on the digital platform. Duh.

Newspapers must respect their reader’s habits, even when they change, and they ARE changing rapidly. The papers must stop trying to get readers to help the papers out of their jam. Rather than trying to slow down change by forcing readers to do something they don’t want to do, newspapers should concentrate on beefing up the news output on the digital platforms and helping advertisers to find their “web” legs.

The Times has taken a much better approach. It is effectively inducing the reader to read the print product by “paying” that reader to do so. It is “rebating” some of the cost of reading the Digital Times, which the reader wants to get, by asking the reader to take three days of the Times in print and allowing the Times to make more money from those print advertisers for now. It’s actually not all that different from the strategies in happier newspaper times. When papers charged 25 cents, that cost didn’t cover the newsprint and the ink on that newspapers. So the paper was effectively subsidizing the rest of the cost of that newspaper being delivered to that home because the advertiser would pay plenty to be carried into that home on the back of the paper.

There is absolutely no reason consumers shouldn’t be paid to hear messages from advertisers. It’s a fair trade. The advertiser wants the exposure and the reader’s time has value. As long as that print edition is worth more to some advertisers, then it behooves the NY Times TOO give their readers a financial incentive to stay with print as long as possible. That will provide the continuing revenue necessary to support the paper until technology is sophisticated enough to give the advertisers the kind of true advantages in targeting and multi-platform selling that will drive significant increases in digital advertising revenue. In fact, it is quite likely that both digital AND print subscription fees will support a more realistic organization

There is also something else about this experiment that could yield very interesting information about changing reader habits. It is quite possible that the future of print newspapers may be on weekends or at least weekly. With information moving so quickly now, one conceivable scenario could be that newspapers put their breaking news on efficient digital platforms 24/7 but on weekends use print products to give context to the week’s news and to look ahead. Essentially, the print editions of newspapers become what the News Magazines were when newspapers ruled the real-time news world. These new weekend (or at least weekly) publications may even look more like the news magazines, with longer and more reflective or investigative pieces appearing well-displayed in a print product. Oddly enough, it might look like The Daily Beast and it’s new family member, Newsweek.

What’s really interesting is that the combined revenue streams from all these directions could begin to support the significantly-sized newsroom at the center of it all.

As a weekend reader of the print edition of the New York Times, and a religious reader of its website and mobile platforms, I feel like I might already be looking at the first version of what the newspaper of the future will look like, and I like it.

(For more from Larry, visit his blog. To purchase his book C-Scape, click here.)
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