The NYT’s subscription strategy

November 11, 2010

If a gaffe is when somebody accidentally tells the truth, then Gerry Marzorati’s latest comments probably count:

During a panel discussion at the Digital Hollywood New York conference, Gerald Marzorati, the Times’s assistant managing editor for new media and strategic initiatives, explained why the paper’s print business is still robust. “We have north of 800,000 subscribers paying north of $700 a year for home delivery,” Marzorati said. “Of course, they don’t seem to know that.”

Marzorati went on to become positively disingenuous:

“I think a lot of it has to do with the fact that they’re literally not understanding what they’re paying,” he said. “That’s the beauty of the credit card.”

Well, no. When I pay for most things by credit card, I know exactly what I’m paying. But the NYT deliberately makes it impossible to work out what the cost of a subscription is — and even if you look at your monthly credit card bill for a clue you’re likely to underestimate the true cost, since the charges come not every month but rather every four weeks.

Nothing has changed since I first wrote about this four years ago: even when you’re a subscriber, there’s nowhere on the website telling you what your subscription rate is*. There’s a FAQ, but the most obvious question of all — “how much does home delivery cost?” — isn’t on it.

Once upon a time, the NYT would actually publish its home delivery rates: in 1989 they rose from $4.25 a week to $4.50 a week, for instance, and in 2001 they rose from $7.20 to $8 for subscribers in New York, with rates as high as $10.25 elsewhere.

Today, I can tell you — but the NYT nowhere reports — that home delivery costs $11.70 per week in New York, and $14.80 per week nationally.

In other words, the price of home delivery has been rising faster than inflation for at least 20 years, and for most of that time the NYT has done its darnedest to make sure that as many subscribers are possible are ignorant of how much they’re paying. After all, it stands to reason that many subscribers would be shocked and upset to learn that they are paying $769.60 per year for their subscription. And the NYT doesn’t want to shock or upset its subscribers.

Still, the fact is that they’re not shocked or upset. Jeff Bercovici writes:

Stealthily hiking rates on the assumption that customers are too dim to catch on and/or too lazy to do anything about it is the kind of thing that gives banks, credit card companies and cell phone providers such a bad reputation.

That’s true — but the NYT has been stealthily hiking rates for decades now, and has signally failed to get a bad reputation for doing so. Clearly, it’s going to continue doing this: it’s one of the few successful business strategies in the newspaper publishing industry, so it’s obvious that the NYT should adopt it.

The downside to the strategy, insofar as there is one, is that the higher the delivery price, the harder it becomes to attract new subscribers under the age of, say, 30. But it’s always going to be hard to persuade those people to read the newspaper in print, no matter how low the price. It makes sense, in that situation, to take advantage instead of the price inelasticity of the present subscriber base.

I suspect that the NYT might attempt a similar strategy with its online paywall. If I was charged with maximizing paywall revenue, I’d start with a very low fee indeed — maybe just a buck or two a month, to attract as many subscribers as possible and to get them used to the idea of paying for content online. Once the subscriber base hit a critical mass, then I’d start raising the rate, as quietly as possible. (Much as they’ve started doing with the Kindle subscription.) It would take a few years, but the end result would be many more people paying for their online subcription than if you started off with a rate remotely comparable to the price of the print subscription.

*Update: Thanks to john_456 in the comments, there is actually somewhere on the site showing your own personal weekly delivery rate: it’s on the “My Account” page which you may or may not be able to find here.


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