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Nyt Paywall

In: Business and Management

Submitted By lindsaybartel
Words 1943
Pages 8
1. What are the changes that the newspaper industry is going through? Where do you think the “technology” of news on paper is in its lifecycle? Where is it likely headed?
The newspaper industry is undergoing a radical change in three primary areas caused by technology. First, the underlying two-sided business model is changing. With the Advent of internet, news content is easily and freely available from various sources but lacks quality journalism and credibility. Revenues from online advertising are not large enough to compensate for decline in revenues from print advertising & subscription. Newspaper industry is experiencing new realm of new content delivery and in process of understanding and establishing sustainable sources and revenue model. The change from print media to digital media has provided a big challenge for the newspaper industry. Their main revenue streams have always been based on advertising. Online advertising brings much lesser revenues than print advertisements and a big gap appears. The internet causes on the one side the move from consumers to online consumption and on the other side a lot of retailers are using their own website as an advertising tool or are using free websites to reach their target groups.
The technology itself is going through rapid changes as is in early stage of adoption by news agencies and consumers. Exhibit 4 indicates a decline in Print subscription for NYT and Exhibit 8 demonstrates steady rise in web traffic for online newspapers. Technology is making the cost of publishing less expensive which enables the creation of many new “brands” that target very small segments effectively. The technology i.e. ipad, paywall, distribution etc. is undergoing evolution and is heading towards completely changing the platform how news is rendered to subscribers and their experience and is changing revenue sources from subscription and advertising but ,at the same time, is also presenting challenges and opportunities for cost savings and exploring new avenues for advertising and revenues. Journalists used to make a name for themselves at institutions like the New York Times. However, in the digital age, they can do this independently in certain segments of the news.
The newspaper industry follows a basic industry life cycle pattern. The classical life cycle starts with the introduction followed by growth, maturity till saturation/decline. The news on paper is definitely already in the decline phase and will head to diminish within the next 20 years. So, in summary, technology has changed the economics of the industry which will result in many marginal enterprises being eliminated and a consolidation of the big players which will offer a variety of technological solutions, for the future and past.

2. Is the paywall working? Lay out some factors that suggest that it does and some that suggest that it is not and then make your recommendation. Where do you think the digital edition is in its lifecycle?

The NYT created the paywall for optimizing their revenues from online subscriptions against the lost advertising income streams. To evaluate whether paywall is working, we have to measure its objective of monetizing the news for digital users. in Exhibit 4 that the New York Times erosion of print subscriptions seems to be flattening in 2011 indicating the attrition rate of Sunday, Weekday, and Saturday print subscribers is slowing.
The paywall seems to be working as Exhibit 12 shows steady increase in digital subscription. Over 390,000 subscribers have subscribed to times digital edition in 9 months. This can also be seen in Exhibit 3.Table B shows the additional revenue from a paid digital subscription .For 390,000 paid users; we get an annual contribution to revenue from digital paid subscribers of $118M.
On the other hand, it can be argued that Paywall may not be working as # of unique visitors has not changed in the same period when NY times SCORED 390,000 digital subscriptions (April 2011 to Jan 2012 -Exhibit 13). Also what’s unclear is if 390,000 digital subscribers were migration from print format to digital format or were net new subscribers. Revenues from circulation in 2011 have marginally increased from 2010. The difference in revenues is $2940M-$2323B = $617M and we are only recovering an estimated $118M. There is variable cost savings associated with the loss of print subscribers but this is probably offset with loss of advertising revenue and development costs for digital solutions.
Recommendation – NYT should continue with its Paywall initiative as upwards of 40% incoming traffic is from other sites i.e. Google, yahoo etc. Internet delivery on mobile devices is also becoming popular. Additionally, lots of users are able to access news content via leaky paywall. This reflects users increasing interest in accessing NYT news content in digital format. Digital edition is in early stages for adoption by end users. New sources and models for revenue generation or sharing are to be discovered and streamlined. Internet will become “platform of choice” for majority of users in near future. New industry needs to continue exploring methods to present news content to user preferred way and adapt to new and different streams of revenue. The digital edition is in its growth phase heading into maturity. There is still potential to increase and development. The data seem to indicate that the New York Times is able to identify those with more willingness to pay and they are getting them to purchase at these increased costs. This experiment with the business model related to digital content seems well timed, especially with the launch of the NYT iPad application; because digital content is growing and the print business is diminishing (see Exhibit 12 for growth of paid digital subscriptions, Exhibit 8 for online newspaper traffic, and Exhibit 5 for print subscription decreases). Growth, if it is to be found, is in the digital content area and NYT is using the early adopters to test the business model before the early majority migrates to digital content.

3. Product strategy: Do you think the paywall was designed well? Is the leaky paywall better than a “bulletproof” one? Are digital and print products substitutes or complements?

NYT blended device specific and metered system for digital subscribers. The paywall addresses the business model directly by segmenting users into those unwilling to pay and those willing to pay a (significant) premium for unlimited access to the digital Times. Second, the daily news is searched in real time on the web with over 40% of the traffic coming from the top 5 sources (see Exhibit 10). Third, the authors can deliver their articles under the brand of the times, which mean they can still reach the masses and do so under the credibility of the Times .We believe this design suits well to NYT goals to stay connected with light users for free while maintaining quality and in-depth journalism exclusively for paid subscribers. It appears that a leaky paywall has worked in interest of NYT as web traffic from other social media sites managed to access news content for free. There is approximately 60% of incoming web traffic sources from non-google site. These “free users” indicates that users are interested and believe in news content from NYT.This certainly helps NYT to understand users choice and behavior towards accessing digital content. Once NYT plugs the leaky paywall, a large portion of these users will, potentially, turn into paid digital subscribers Some free content and the strong branding leads consumers to get interested and the step to sign up for a subscription is smaller. Due to the loyalty of their readership which are not extremely price-sensitive, because they receive quality content, subscribing itself is not a hurdle for NYT. That it is not bulletproof makes it more attractive
The digital edition is a substitute of the print edition if increases in the price of the print subscription increase sales of the digital edition and vice versa. We don’t see that in any of the exhibits. The digital edition is priced high in addition to the print edition. There does not seem to be a substantial effect on usage of either. Consequently, we believe these are complements which are consistent with the product pricing of adding digital to print subscriptions.

4. Pricing strategy: Should digital and print be bundled together? Why price by medium? Why not by content like with TimesSelect?

The case lists 4 ways to meter the content provided by news agencies. These are effectively the 4 levers, dimensions, of control to monetize the content on the site.
Pricing the medium, a device specific offer, has much better adoption rates as shown in Exhibit 12. This indicates that looking at the problem along the dimension of medium/device and pricing along this dimension is a good way to indirectly price discriminate. Customers find value, and pay for it, accessing the New York Times digitally. As is seen in Exhibit 13, there is unique demand for and some customer segment seems to have higher willingness to pay for the content on a specific device or in a specific medium.
Now, given that medium/device is an important economic variable, and devices/mediums are complementary, it follows that bundling could only increase revenue for those that value both. It is a complementary strategy, not a cannibalistic strategy.
TimeSelect subscription model was withdrawn as it faced resistance from columnist coupled with rise of social media and freely available, high quality, blogs on internet discouraged users for content based pricing model in previous experiment in 2005. Times Select used the “Exclusive Content” lever but started to level off very quickly in subscribers. This seems to indicate that this lever is not that effective as an indirect price discrimination mechanism. Furthermore, a paid subscriber is paying for the content twice, once in print and again on the web. The numbers seem to indicate this has limited value.

5. What is the long term goal of NYT in creating the paywall? How do you recommend they transition to that goal?

The long-term goal of NYT in creating paywall is to identify and refine a business model for the changing environment while it is still a leader in the industry. This is simply changing the business strategy and the organization’s people, architecture, routines, and culture to address the changing environment of the digital world where the old models of revenue and relevance no longer hold the same value.
Our recommendation is continued data driven experimentation. The growing use of digital media allows NYT to collect data on user behavior and preferences. This growing amount of data and the rapid nature of change on the Internet and in digital media allow NYT to quickly experiment and refine the business model that extracts the maximum value from the market. News is not going away, the delivery is changing. Exhibit 13 shows that NYT has a flagship brand. They have a first mover advantage with mobile and need to continue research to pioneer how the business. NYT should continue to lead the development of the best experiences for consuming news on the relevant devices/mediums, just as the layout of a newspaper has been developed over the years. In addition, continue employing top journalists that curate stories in the sense that they selectively choose stories that are the news. In this way, the Times remains the “news” not just a reporter of the news. Finally, the Times should focus on those with a high willingness to pay for digital. It is likely that this group will be valuable to advertisers. It seems from Exhibit 11 that NYT knows this and they are charging the substantial premium to identify those customers.

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