Lost Revenue Opportunities and the New York Times
by Patrick Lefler
The New York Times will soon introduce a paywall to its very popular website in order to turn online visitors into paying customers. It’s part of their latest drive to reignite revenue growth in the face of an industry decline that has seen Times revenue drop 27% over the past five years.
And while the concept of requiring customers to pay for content certainly makes financial sense for a news organization struggling to raise revenue, getting people to pay for content that they have been previously receiving for free will be a huge challenge. And the Times hasn’t helped itself because along with charging for contents, it has also introduced a relatively complex pricing model.
According to Bloomberg BusinessWeek:
“Under the new, paid model, Times Co. will on Mar. 28 begin charging readers who don’t subscribe to The Times for content on the publication’s website. Times Co. will charge $15 every four weeks for unlimited access to the site from a computer or mobile phone. A package for access online and through the paper’s tablet-computer application will run $20 every four weeks. Access from any device will cost $35.
Nonsubscribers will be allowed to read 20 stories free each month and can access the NYTimes.com’s home page and section fronts. Subscribers to the newspaper’s print editions, whether they subscribe daily or only on weekends, will be able to register for full, free access to the website. Readers who click on links to stories from certain search engines and blogs will also be able to read those stories for free, even if they’ve already hit their monthly ceiling.”
While there will be lots of current users who choose not to pay, the Times is banking that enough of their ‘avid, loyal, online readers’ will become digital subscribers. One of the keys for success is for the Times to think about their current readers as two separate markets: those who will most likely never pay (no matter how low the price) for content; and those who will. Forget about the readers who won’t pay–their marginal price point is way too low to matter–and focus only on the readers who will. Then create a price point for this second group that maximizes revenue. In doing so, it will also allow the Times to also reduce the complexity of the pricing model.
Here’s the takeaway: Getting readers to pay for something they are used to receiving for free won’t be easy. In the case of the New York Times, forget about the readers who will never pay and focus your pricing model only on those who you think will.
Patrick Lefler is the founder of The Spruance Group – a management consultancy that helps growing companies grow faster. He is a former Marine Corps officer; a graduate of both Annapolis and The Wharton School, and has over twenty years of industry expertise.