The NYT paywall is working

By Felix Salmon
July 26, 2011
a bet with John Gapper.

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Back in April, I was very skeptical that the NYT would achieve its leaked goal of getting 300,000 paying digital subscribers, and I put my money where my mouth was, entering into a bet with John Gapper. John wouldn’t bet me that the NYT would get to 300,000 within a year, so we pushed it out to two years instead. But he needn’t have worried, as Seth Mnookin explains:

It will take years for the ultimate wisdom of the Times’ strategy to be apparent, but the company’s second-quarter-earnings report proves that its digital-subscription plan has thus far been an enormous success. The internal projections have been closely held, but several people have confirmed that the goal was to amass 300,000 online subscribers within a year of launch. On Thursday, the company announced that after just four months, 224,000 users were paying for access to the paper’s website. Combined with the 57,000 Kindle and Nook readers who were paying for subscriptions and the roughly 100,000 users whose digital access was sponsored by Ford’s Lincoln division, that meant the paper had monetized close to 400,000 online users. (Another 756,000 print subscribers have registered their accounts on the Times’ website.)

There seems little doubt that, barring something enormous and unexpected, I’m going to lose my bet; the only question is by how much. Total digital subscription revenues are still going to be a drop in the bucket — if the NYT gets 500,000 digital subscribers at say $200 a year each, that’s $100 million a year, which is a lot of money in absolute terms but still just a fraction of the more than $2 billion that the NYT sees in total annual revenues. Digital advertising revenues alone are running at about $700 $350 million a year. The subscription revenue is nice, but it’s not in and of itself going to allow the Sulzbergers to start paying themselves a dividend again.

Those paying digital subscribers, however, are much more valuable than their subscription streams alone would suggest. They’re hugely loyal, they read loads of stories, they’re well-heeled, and advertisers will pay a premium to reach them. Judging by the second-quarter results, which is admittedly early days, it seems as though total digital ad revenues are going up, not down, as subscriptions get introduced: the holy grail of paywalls.

Mnookin concludes:

As a profession, journalism of the kind the Times practices can be dangerous. And as a business, in a metaphorical sense, more so. You’re depending for your living on the seriousness and high purpose of a substantial segment of the American public. In that sense, the Sulzbergers have always been involved in a fool’s game. The current Sulzberger’s bets have at times seemed the most outlandish, as if he’s willfully refused to read the writing on the wall. But for the Sulzbergers, whatever their faults, even when the paper was making money, it has always been a calling rather than a business. Insisting that people would pay for their content when a consensus of media savants said that they would hemorrhage readership was the work of an eccentric family. Which the Sulzbergers are and always have been. And for now, cross your fingers, it seems to be working.

My fingers are crossed: I was very much a skeptic with regard to the paywall experiment, but I’m extremely happy that it’s working, I’m a big fan of the NYT, and I sincerely hope it has found a predictable and dependable new revenue stream in the volatile and treacherous media business.

I’m particularly glad that the NYT has proven that a very porous paywall can work — one in which just about anybody online can read just about any NYT article for free very easily. The media business has never been about denying access to people who want to read your publication, but the paywalls at News Corp, as well as the one at the FT, are based around that model. The NYT, by contrast, has proven that people will pay even if the paywall is extremely porous.

And in today’s fractured online media environment, the tougher your paywall, the more annoying it is. The NYT paywall is done pretty well, and I still find myself being asked for a username and password on a distressingly regular basis when I’m reading it on the iPad, often when articles come up in an app like Twitter or Flipboard, and I try to use the embedded sharing tools. More distressingly still, entering the password doesn’t always work.

But compared to the FT, the NYT paywall is a dream: not only do I run into the paywall pretty much every time I try to read an FT article on my iPad, I even run into it pretty regularly when I’m on my desktop computer. I’m a paying subscriber, but a very unhappy one: repeatedly typing in a username and password on a touch-screen device is decidedly unpleasant. Overall the user experience at the FT in general seems to be taken straight from the TSA: the general principle seems to be that no amount of customer inconvenience is too much if it makes sure that no unauthorized person will ever be allowed through.

Oh, and one other thing: when I signed up I selected the $4.99 per week option, and the FT helpfully told me that over the course of a year, the total annual payment charged to my credit card would be $259.48. What they didn’t tell me was that I’d have to pay that all at once — and then some: they actually charged me $282.52, after slapping on 8.9% sales tax. (The NYT, by contrast, doesn’t do that: if they do charge sales tax, they don’t break it out, and instead bundle it into the total subscription charge.)

I’ve been getting the physical NYT delivered to my home for well over a decade, which means I pay a lot more for the NYT than for the FT. But I don’t do it in one huge annual chunk, and I don’t feel like I’ve been tricked when I see my credit card bill. As a result, I don’t begrudge the NYT the money I pay them, but I feel much less well-disposed towards the user-hostile FT. And I frankly don’t read the FT all that much, either. I get my news socially, and people simply don’t share FT stories in the way that they do with the NYT. The FT annoys its readers into taking out a subscription; the NYT, by contrast, has persuaded hundreds of thousands of people — it’s overtaken the FT already — to pay for digital-only subscriptions even when they don’t really need to. That’s a much more positive model.

Update: The sales tax question might have been answered! Ryan Chittum points me to the New York State sales tax rules:

If you sell publications that qualify as newspapers or periodicals for sales tax purposes, you don’t need to charge sales tax because they’re exempt. The exemption also applies to charges for electronic versions of newspapers or periodicals if you sell a hard-copy version, and both versions contain the exact same information (except for advertising).

The question here is what is meant by the phrase “if you sell a hard-copy version”. Clearly my subscription to the NYT is exempt from sales tax, because I’m subscribing to the paper version. But what about my digital-only subscription to the FT? The FT does sell a hard-copy version which contains the exact same information — but it just isn’t selling that hard-copy version to me. Is that why they feel they have to charge sales tax?

13 comments

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After seeing this video I wouldn’t be so sure
http://www.youtube.com/watch?v=N5R4CgDwF XQ
As was written on Techdirt, the “The Greatest Trick The NYTimes Ever Pulled Was Convincing The World Its Paywall Exists”. I think the fact people pay speaks more to an advertising that promotes the existence of a paywall and people’s average techno-illiteracy/laziness about how to change a link address in their browser than anything else.

Posted by newsjunkie247 | Report as abusive

The people who they aren’t getting to pay are young people, and tech savvy people who know how to get around a paywall. But shouldn’t these be the people advertisers should pay a premium to reach, rather than older, less techsavvy people who are paying money even though they really don’t have to?

Posted by newsjunkie247 | Report as abusive

I would argue that the most loyal NYT readers, the ones who really want to read the paper, are the ones who will put in the effort to get around the paywall, rather than those who just see a pop-up window and lazily think they have to pay. I’ve read close to 3000 articles online the past month, but all I pay are the occasional $2 to read print edition on the subway.

Posted by newsjunkie247 | Report as abusive

My subscription was sponsored by Lincoln, and I’ve had no annoying access/password problems like you describe. It’s pretty clear that the Lincoln subscribers are regular users who make well above the national median (or at least did before they got laid off).
Newsjunkie, NYT is far more interested in wealthy older readers who will pay rather than figure out how to wriggle through the paywall. Advertisers prefer the latter as well.
I still believe the Times would maximize revenues by charging $5 or $10 a year for a hard paywall, because I think they would get far more than 2.5 million subscribers worldwide. However, the current setup fulfills an agenda-setting function that the Times sees as part of its mission.

Posted by RZ0 | Report as abusive

BTW, Felix, if you call them up (hat tip, Tim Noahn at Slate) and threaten to cancel, or go to just Sundays, they’ll halve the dead tree rate.

Also been a dead tree subscriber for a very long time.

Posted by jayackroyd | Report as abusive

Add ?ref=fb to the base link of any NYT article and the paywall drops, and Felix thinks this is “working”? Huh?

Posted by JPDoc | Report as abusive

Set your sights low enough and you can accomplish anything ..

Posted by Woltmann | Report as abusive

Describing the paywall as ‘porous’ is putting it mildly. To view articles unobstructed, all you have to do is stop loading the page on your browser before the page is done loading. Then you can stare at an article for as long as you want.

Maybe you won’t lose your bet after all?

Posted by DanPorter | Report as abusive

Seriously, after seeing how many ways you can get by the pay “wall” I would say it isn’t working at all. You should have considered that journalists/businesses requiring news sources might easily make that 300k, but beyond that those who wouldn’t read daily aren’t going to pay.

It is curious that the NYT says it is OKthat so many are finding ways around the wall, as they have loyal followers happy to pay for content. Down the road, that sounds like a poor marketing tool that punishes the loyal viewer, unless they think they can hook more people into paying eventually.

Posted by hsvkitty | Report as abusive

Of course I could evade the NYT paywall easily, and read those items for free.

But I believe that giving people money encourages them, and I definitely want to encourage the NYT to continue committing real journalism. (In contrast, most so-called “news sites” these days merely repackage wire stories, instead of doing their own reporting.)

So I subscribe to the NYT, because I want the New York Times to continue operating and investigating and reporting.

Posted by BachFan | Report as abusive

Instead of retyping your user-name and password, consider using LastPass:
https://lastpass.com/

Also see: http://lifehacker.com/5645162/the-interm ediate-guide-to-mastering-passwords-with -lastpass

Posted by AreaMan | Report as abusive

One reason that the NYT has gotten to that number of subscribers so soon is that they are offering 8 weeks for $0.99. It is irresistible to pay 13 cents a week for something as great as the NYT. Thinking that all of the subscribers are ” hugely loyal, they read loads of stories, they’re well-heeled, and advertisers will pay a premium to reach them” is an overgeneralization. They may well read loads of stories, as I do, but I know that I wouldn’t pay $200 a year to read the NYT online.

Posted by Cimorene12 | Report as abusive

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