Pay Walls Crumble
The New York Times effort presents a half measure
The New York Times is ignoring the deep flaws in its online business model, say industry observers, blowing a
chance to transform online publishing by instead opting to earn a few quick bucks.
Based on the details that have emerged, the Time’s meek metered approach will result in just 15 percent of readers
paying for content access—a figure unlikely to start a revolution.
And even though the company announced its plans a year ago, few publishers have joined the cause, outside of
several U.K.-based papers and Long Island’s Newsday—neither of which have generated meaningful numbers of
paying subscribers. It was quite a different story a year or so ago when getting paid for content was increasingly
seen as essential to the industry’s survival, given the overabundance of online ad inventory and the subsequently
low CPMs.
Yet industry observers say that the appetite for pay walls has diminished significantly as the economy has improved
and social media has become increasingly crucial in spreading Web content. “The thinking is you need to be part of
the online conversation,” said Benedict Evans, an analyst at the U.K.-based Enders Analysis. “You can’t give
readers a taste of content with a pay wall.”
Plus, a consensus seems to have emerged that most online readers just won’t pay. “It’s tough to add a pay wall.
The market is so competitive,” said Peer Schneider, svp of content publishing at News Corp.’s IGN Entertainment,
which began charging for access during the dot-com collapse, only to see traffic suffer. “There are very few sites
that do something that’s special enough to pay for. And if you charge for some content, you create the perception
that the site isn’t open to everyone.”
Thus companies like the Times and News Corp. have shifted their focus to the iPad—where the belief is consumers
are more open to paying for apps. Meanwhile on the Web, the hope is to pull in secondary revenue from high
consumption readers. “That’s smart,” said Jim Spanfeller, CEO of the Spanfeller Group. “The problem is you
penalize your biggest users.”
Echoing Spanfeller, Vivek Shah, CEO at Ziff Davis, said that publishers that get a few paying customers will only still
earn pennies on the majority of users. “Even in the offline world, revenue from consumers was never that material,”
he said. “This is still an advertising problem.” It’s one that the Times essentially is ignoring. “Print guys are trying to
take their circulation revenue and migrate it online,” said Matt Shanahan, svp, strategy, Scout Analytics. “The
challenge is they’ve got to fix their online advertising model, and the quality of online advertising is just not that
great.”
To change that equation, Joe Marchese, president of SocialVibe, which has executed several ad campaigns with
Zynga, is talking with several major newspaper and magazine companies about employing an ad credit system for
content—similar to the model for casual games. “When you set a price for content, and then advertisers provide it
free, it becomes much more palatable,” he said.
Others would argue that micropayments, rather than subscriptions, are still the way to go. WPP’s The Content
Project is said to be developing an electronic wallet that would allow users to access content on numerous sites in
small bites.
Some have even suggested that Facebook would be the ideal partner for the online news industry, given its ubiquity
and its increasingly popular Credits currency. “The question is, do you want to give them even more power?” asked
one publisher. - AdWeek
New York Times Fixes Paywall Flaws to Balance Free Versus Paid on the Web
New York Times Co. has been working to fix about 200 glitches in the technology for charging online readers of its
namesake newspaper, just weeks before the project is scheduled to debut, said a person familiar with the matter.
The company has already repaired more than 500 of the 700 glitches uncovered during tests of the paywall system,
said the person, who couldn’t be identified because the testing isn’t public. Among the issues still being addressed
are how the system will determine who is required to pay and the point at which various visitors hit the paywall.
Times Co.’s effort to turn online readers into paying subscribers is being watched by other newspaper companies
struggling with a decline in traditional print advertising. The New York-based company is spending $40 million to
$50 million on the project and has said it plans to debut it by March.
Developing the technology for paywalls is challenging because publishers are trying to strike the most profitable
balance between charging some online readers and letting others in free to generate advertising and attention.
Though Times Co. has said it will charge visitors after they’ve read a certain number of stories, for example, the
company plans to let people coming to the website from social networks such as Facebook Inc. view an unlimited
number of those stories for free.
Such visitors translate into ad revenue for Times Co. and allow the newspaper’s stories to remain central to the
global conversation, according to John Morton, a Silver Spring, Maryland-based newspaper consultant and analyst.
“The Times’ website gets a lot of visitors and they don’t want to drive those people away,” said Morton. “Everybody
is watching them to see how they do it.”
50 Million Visitors
Any problems with the paid website are “routine” for such projects and will be fixed in time for the introduction, said
Robert Christie, a Times Co. spokesman. “This is a massive, massive technical undertaking,” Christie said.
Times Co. is trying to extract more from its website as slumping print advertising and circulation revenue cut into
sales. The company’s revenue probably dropped to $2.4 billion last year for the fourth straight annual decline,
according to the average analyst estimate in a Bloomberg survey.
About 45 million unique visitors worldwide access the newspaper’s website each month, according to comScore
Inc., on computers, handheld devices and tablets such as Apple Inc.’s iPad. The company will charge readers less
than $20 a month for full access to the newspaper’s content on the Web, a person familiar with the matter told
Bloomberg last week. “We believe that enough people will pay, but we will not cut ourselves off from the rest,”
Arthur Sulzberger Jr., Times Co.’s chairman, said at a conference in Munich last week.
Multiple Options
The company’s paywall effort is particularly complex because it’s aimed at segmenting readers in several different
ways and charging them differently. There will be multiple payment tiers and options, said the person familiar with
the plans. The site’s technology will have to keep track of how many stories a visitor reads and then ask for payment
at some point.
The site will also have to let people who find story links on Facebook or Twitter read for free, which lifts the
newspaper’s profile if it helps a story on unemployment or child-rearing go viral. Times Co. will also give readers free
access to stories they find through search engines such as Google Inc., a practice that helps their draw in search
results.
Times Co.’s engineers are also trying to make sure the online technology automatically recognizes print subscribers,
who will get full access to the site at no additional charge.
“They should never, ever, see the paywall,” said Christie.
Philly.com
The effort is aimed at generating money from the paper’s most active online readers who aren’t print subscribers,
while keeping as large an audience as possible for digital advertising. “The Times has a large devoted readership, so
they are likely to do better with this than other newspapers,” Morton said.
Times Co. fell 28 cents, or 2.6 percent, to $10.53 at 4 p.m. in New York Stock Exchange composite trading. The
stock declined 21 percent last year.
Many newspapers are trying to strike the right balance between paid and free, according to Greg Osberg, chief
executive of Philadelphia Media Network, publisher of The Philadelphia Inquirer and The Philadelphia Daily News.
Challenging Proposition
Beginning next week, Philadelphia Media Network’s two newspapers will begin charging for access to their
respective websites. Content on Philly.com, a website also owned by Philadelphia Media, will remain free and
function as the main portal to the newspapers. When a visitor clicks a tab inside Philly.com to access either of the
company’s newspapers, the visitor will be required to pay. Asking for money for something that has been free is
challenging, Osberg said in an interview, because total visitor numbers to the websites could drop initially. “We may
have a short-term setback,” Osberg said. “It’s sort of a step back, to make a leap forward.”
Gannett Co., publisher of USA Today, has begun testing paid content at three of its 82 newspapers, according to
Bob Dickey, Gannett’s head of U.S. Community Publishing. At Gannett’s newspaper in Greenville, South Carolina,
readers have started paying $7.95 a year to access content devoted to Clemson University sports. Those
subscribers view 40 to 70 pages per visit, compared with 6 to 8 pages on Gannett’s free websites, according to a
presentation that Gannett’s Dickey made to investors in December.
Successful Models
Washington Post Co. is tracking the paywall experiments, though it has no plans to charge for its website at this
point. “We’re not going to be pioneers,” Donald Graham, the company’s chief executive officer, said in an interview
last month. “But we’ll be watching every one and if somebody knows a better way to operate a newspaper
business, we’ll be interested.”
Among those that have successfully implemented pay models are News Corp.’s The Wall Street Journal and Cooks
Illustrated, published by Boston-based America’s Test Kitchen, said Dominic Venuto, global managing director of
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