The NYT’s bizarre iPad paywall

By Felix Salmon
January 24, 2011
Russell Adams has some inside dope on the price the NYT is intending to charge with its paywall:

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Russell Adams has some inside dope on the price the NYT is intending to charge with its paywall:

Under the new system, expected to be rolled out next month, the Times will sell an Internet-only subscription for unlimited access to the Times site, as well as a broader digital package that bundles the Times online with its application on the iPad…

The person familiar with the matter said the Times has considered charging around $20 a month for the digital bundle and less than half that for the Web-only offering…

Times Co. executives have said that only about 15% of the paper’s online readers are “heavy users,” meaning the vast majority probably won’t trigger a payment requirement.

This strikes me as peculiar. The idea seems to be that if you want to use the NYT iPad app at all, that’ll cost you a hefty $240 per year, over and above the cost of the iPad itself. But if you want to read the nytimes.com website on your iPad, that’s probably free — and even if you’re in the minority of power users, it’ll still be less than half the price of the app. Essentially, the NYT is doing everything it can to drive its iPad-owning readers away from the app and towards the built-in browser.

A handful of people might conceivably still choose to buy the bundle under these conditions — commuters, perhaps, who have a wifi-only iPad and want to read the NYT offline. But the fact is that the nytimes.com website is a vastly richer and more sophisticated offering than its iPad app, which doesn’t even have search or embedded hyperlinks, let alone archives.

It seems clear to me that if the NYT insists on charging significantly more for its iPad app than for full access to its website (which looks so great on the iPad that Apple uses it in its ads), then it’s essentially sounding the death knell for the chances of any further serious development work on the app. The number of people using the app will be tiny and that in turn will be used as an excuse to underfund it.

A much smarter approach, I think, would be to make the iPad app cheaper than a website subscription. The problem with website readers, from the NYT’s point of view, is that they generate a tiny fraction of the ad revenue generated by their print-edition-reading counterparts. That’s why the NYT wants to charge them a subscription fee: the old model of giving away the news and then selling the readers to advertisers no longer works.

But the iPad has the potential to change all that, with bright and glossy rich-media ads which are much more attractive to brand advertisers than a grubby picture in black and white on newsprint. The NYT should try to build up a large audience of rich early adopters who are using its iPad app and then sell that highly-desirable demographic at a premium to advertisers. Instead, it seems to be trying to keep its app readership as small as possible. Has it given up on in-app advertising before it even really started trying?

8 comments

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Charge $1 a year. People will buy what seems like a bargain.

Posted by RZ0 | Report as abusive

My understanding is that Apple blocked a plan to give free access to print subscribers because Apple gets a cut of iPad app subscription fees. It’s possible Apple is somehow involved in this. It’s also possible that this just an attempt at price discrimination, with the expectation that a lot of people would rather buy the web subscription but that the price-insensitive customers will make this worth while. Or that the Times is comparing this in some way to the current price of a print subscription, which is well over $20 a month, while they compare web access to the current price of web access, which is free. I don’t know whether customers would buy that framing.

BTW, I’m not endorsing any of this, so much as just brainstorming.

Posted by dWj | Report as abusive

More analysis here:
Apple’s upcoming subscription plan is making large publishing companies hysterical. Rightfully so. Some of them built a complete business model for the iPad based on a commercial agreement that is now being revoked. Apple is not only changing the rules, but it does so in the worst possible way — in their usual cold My Way Or The Highway manner. But one of the most interesting aspects of the maddening change is the strategic thought behind Apple’s move.

http://www.mondaynote.com/2011/01/23/app les-bet-on-publishing/

Posted by polit2k | Report as abusive

There are ways to work around the Apple rules, although everyone is right and Apple is wrong on this. A publisher could offer a free app that reads a digital magazine format (epub + video + audio), which does not have to necessarily be sold through the app store. A European company, Woodwing, actually offers a service to do just this, although you will be trading Apple’s mobster cut for theirs (I don’t know how much they charge). The publisher could sell the subscriptions on their website, and Apple couldn’t tell whether the files that are downloaded onto the ipad were purchased or obtained for free.

This should eventually be a moot issue, because I don’t expect the competing tablet OS vendors to be as aggressive with their subscription systems. Once Amazon started selling DRM-free MP3 songs, Apple did the same on itunes, and I expect that once Android and WebOS (and possibly even Blackberry) tablets are available, Apple will have to match their terns. As an Apple shareholder, I’m disappointed they would resort to such a greedy and short-sighted tactic. They have an opportunity to establish the iPad as the defacto electronic magazine platform, but their tactics are making the publishers delay their implementations, which gives Apple’s competitors a chance to make up for their inexcusable delay in offering their own tablets.

Posted by KenG_CA | Report as abusive

Everyone else has ganged up and noted that some of the blame lies with AAPL here. So let’s look at the Rest of the Story:

Is AAPL really taking half the revenues? The highest estimate I saw–haven’t looked too hard–is 30%. That would be about $14.50 a month, give or take. The extra $5.50 is pure NYT profit for providing an inferior service.

Which brings us to the second part: if the iPad app is worse than reading the NYT online, why would people choose to read through the App in the first place? You’ve already got a large supply of people who opt for an inferior delivery mechanism; that may of them can’t count either seems a reasonable bet.

So the NYT is looking at free money from an impaired-mentally-but-not-credit-constra ined portion of the population. As we say every year, “Ma nishta…?”

(As an aside: Yes, Felix, there are a sizable number of people who commute with iPads. And the NYT does itself no favors in making the print edition more expensive to have it delivered than to buy at the newsstand.)

Posted by klhoughton | Report as abusive

I think you are overlooking something: websites can tell if you are using an iPad (and probably other devices) or not. So NYT could simply shunt IPad users to a web page saying “use the app to gain full access”, in effect turning off browser access. I’ve seen other sites that do this. Not widespread yet, but why assume they would not try this? Sure, it will royally torc people off, perhaps spawn a big backlash, and hacks will appear, but I’d bet this is what’s going to happen.

Posted by trb456 | Report as abusive

The USC Annenberg School for Communication & Journalism hosted media analyst Ken Doctor for a talk yesterday, and he touched on some of these points, specifically with the NYT’s pay-for-access plans and Apple’s changing apps policy.

Video clips are here: http://www.youtube.com/watch?v=RWfXxhXoE m8, and the relevant portion starts around 3:30.

More coverage here (and there’s a transcript pending!): http://annenberg.usc.edu/News%20and%20Ev ents/News/110125M2eDoctor.aspx

Posted by boekelheide | Report as abusive

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