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5 Reasons Why The New York Times Paywall Will Fail (And Why It’s Really Dumb)

2011 March 23

Stupid is as stupid does.

As most are aware, The NY Times recently announced that it is finally rolling out their paywall.  It’s a classic case of “blame the victim,” trying to punish users  instead of learning how to run their business profitably.

They are, in effect, attempting to fit an old newspaper model that depended heavily on classified advertising  (they never really made money on distribution) into a new medium.  Instead of owning up and adapting to new realities, they are masquerading old myths as a serious business plan.

It won’t work.  Here are five reasons why:

1.   The Paywall Devalues Quality Journalism

One central assumption of the paywall is that consumers will pay for quality journalism.  The NY Times is indeed a fantastic journalistic product with award winning columnists such as Nobel Laurette Paul Krugman and David Brooks.  So, the thinking goes, people should be willing to pay for it.

In actuality, high quality features are a loss leader.  They create the expectation of seeing something special, even though most articles are really quite ordinary.   Nevertheless, the loyalty “quality” creates generates more page views and time spent on the site.  This “long tail” of clicks is where the bulk of revenue comes from.

The metered model, then, works against The NY Times. It encourages readers to go to the site for what they like the most and then to get their standard fare elsewhere.  Not very smart.

2. It Favors Clickers, but Punishes Linkers

Another interesting feature of the paywall is that there is a social media exception.   When a user arrives at the site by clicking on a link from social media and search engines, the views don’t count towards the 20 article limit.

In theory, this will preserve The NY Times’ massive audience while also allowing them to earn subscription revues.  The best of both worlds, right?

Probably not.  The policy ignores where the links come from in the first place.  Articles receive high ranking in search engines and popularity on social media only if there are people to link to them.  By restricting access, they are discouraging link sourcing.

On this blog, expect to see more links to The Washington Post.

3. Occam’s Razor

The new scheme is one only an econometrician could love.  I won’t go into details (to be honest, they make my head hurt), but suffice it to say that good ideas are never structured like a credit card contract.

You can almost feel the committee horse trading at work.  While no thought has been put to serving the consumer (except to the extent that it’s clear that they believe that people who like their product should pay more), much thought has obviously been put towards which fiefdoms should be protected and which get thrown under the bus.

The paywall is not a business plan, but a balancing of fiefdoms within the company.  That’s no way to make money. They need to learn to follow Occam’s Razor.

4. Why Newsweek Failed

I previously explained why Newsweek failed and it’s clear that The NY Times is making the same mistake.  They are confusing editorial values with consumer value.  In effect, they assume that anybody who shares their mission must be more worth more.

Interestingly, their announcement included the following quote:

“Advertising is about adjacency,” said Andrew Swinand, president of global operations for the Starcom MediaVest Group, a media-buying agency. “I’m paying for an engaged audience, and if that audience is willing to pay, that demonstrates just how engaged they are.”

With all due respect to Mr. Swinland, that’s a load of crap.  It feels good for media buyers to say such things, because it makes them feel intelligent and thoughtful to believe that they “look beyond the numbers.”  In reality, they invest enormous amounts of time, money and effort to evaluate media by the numbers to the exclusion of almost anything else.

Mr. Swinand’s parent company, Vivaki, recently launched their audience on demand initiative, which allows them to buy audiences across media entities  with the intention “to provide access to an audience of this scale through a single point of entry, with optimized pricing.”  They will do this by aggregating audience across sites, not by giving The NY Times extra credit for having paid subscribers.

5. Paywalls Ignore Media’s Golden Rule

Most of all, the publishers at The NY Times fail to understand media’s golden rule:

Marketers are willing to pay more for consumers than consumers are willing to pay for content.

What’s interesting is that they are blinded to that simple reality because they themselves value readers more highly than they value advertisers.  That’s what makes The NY Times a great product and, in that sense, they should be commended.  Nevertheless, interesting stupidity is still stupidity.

They need to learn to walk and chew gum at the same time.  Banners are not placed next to content in the same way that print ads are. so the potential for a conflict of interest isn’t what it used to be.  This simple reality has to be taken into account in how they operate their business.

The old tradition of the “chinese wall” needs to be rethought.  You simply can’t develop a profitably web business without editorial and business interests working closely together.  Serving readers and advertisers aren’t mutually exclusive.  In fact, they can even be synergistic.

(And Why It’s Really Dumb)

The paywall is, quite simply, an act of desperation, which begs the question:  Why are they so desperate?

Companies like Yahoo and AOL make lots of money with content based models online as do many smaller niche players with specialized content.  In print, free newspapers have been one of the fastest growing areas in media over the past decade.  I’ve written before about how to fix the New York Times.

What’s ironic is that subscriptions have never been a profit center for them – in print or online (production and distribution costs for print cancel out any revenue, if not supersede it).  In effect, they are seeking out a revenue model that is rarely successful rather than learning how to implement proven winners.

And that’s what’s really stupid.  The NY Times paywall will not only fail, it will waste valuable time and resources that they can’t afford to lose.

– Greg

12 Responses leave one →
  1. March 25, 2011

    Greg, I couldn’t agree with you more. Beyond the excellent points you discussed, the paywall has been a case study of committee based implementation gone wrong. I have written about this on my blog at http://www.profitperspectives.com/2011/03/new-york-times-paywall-conundrum.html and I’d be interested in your thoughts.

    [Reply]

    Greg Reply:

    Thanks Steve! You give a great overview on your post.

    For anybody who’s interested in reading further, Steve’s got links to just about every article of import on the NY Times paywall. Follow his link!

    – Greg

    [Reply]

  2. Dave permalink
    March 28, 2011

    Plus, they didn’t offer anything “new and improved!” They simply asked for money for what people used to get free. Not a good idea.

    [Reply]

    Greg Reply:

    Good point!

    – Greg

    [Reply]

  3. Reiner Wilhelms permalink
    April 11, 2011

    I used to be a very frequent reader of online NYT until just a few weeks ago. When they began to talk about their pay wall I expected it might still be affordable. My limit was 5 dollars per month or $50 per year, and whow was I miffed that it’s a lot more. I consider it now a true sign of their arrogance which unfortunately I didn’t notice earlier. If they see themselves as such an elite organ that you have to be a committed member of the club to have a look at their glorious wares, then let them keep it to themselves and their affixed followers. Within in a few weeks I realized how little I really need the NYT. To the opposite – It opened new horizons to follow the news on Al-Jazeera english, Democracy Now, Real News network… It’s easy now to read the British newspapers and the German, and French, even Japanese ones, perhaps with a little help of google translate (the google chrome browser allows setting it up to automatically detect the language and translate, with a fair to good accuracy as I can attest for German and French). The NYT’s decision is a great cold turkey occasion for a news junkie in me, and I feel already on the way to better health :-) Others may try this, but I figure if all news outlets become pay for view – It only means they think they got enough people hooked. And this usually means that they aren’t really exceptional but are simply part of the main stream. Which is anyways everywhere reproduced.

    [Reply]

    Greg Reply:

    Reiner,

    I’ve dropped my activity on the site as well. I can cherrypick all the best stuff from places like http://www.RealClearPolitics.com and social media. What I don’t do anymore is surf around the site. As you pointed out, the basic news stories I can get elsewhere. I’ve switched my homepage to http://www.washingtonpost.com

    – Greg

    [Reply]

  4. Ralph Berrier, Jr. permalink
    April 22, 2011

    The Onion’s take. Which makes more sense than this absurd blog.

    “To ask NYTimes.com’s 33 million unique monthly visitors to switch to a cash-for-manufactured-goods-based model from the standard everything-online-should-be-free-for-reasons-nobody-can-really-explain-based model is pretty fearless.”

    [Reply]

    Greg Reply:

    Ralph,

    Thanks for sharing your insight.

    btw. How much does the NY Times make on cover price after print and distribution costs?

    – Greg

    [Reply]

    Ralph Berrier, Jr. Reply:

    More than it makes giving it away for free.

    [Reply]

    Greg Reply:

    Actually, like most newspapers, they probably lose money. So giving “free” on the internet (where print and distribution costs are basically zero) is a step up.

    Thanks again for your comment.

    – Greg

    Ralph Berrier, Jr. Reply:

    Saying that the “revenues” from the Net is a “step up” is like celebrating finding a dime on the sidewalk while a $50 bill flies out of your back pocket. Ad-based online revenues will never sustain a broad-based, original-reporting news organization. Never. The Internet Age of Newspapers is not new. The NYT has been online since 1994. We are no longer dealing in hypotheticals. The data is abundant. The free Net model has been a cataclysmic financial failure for newspapers, which should have been predictable.

    Greg Reply:

    Thanks again for sharing.

    – Greg

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