Revisiting subscriber fees

Here we go again. According to a report in Business Week, the venerable New York Times is considering charging for access to its online content. This issue is huge for newspapers, who’ve always been able to double dip when it comes to revenue. While other media rely solely on advertising, papers have generally charged for subscriptions. It’s hard for them to give that up. The report notes that the company is already making serious money online.

New York Times Digital (which includes Boston.com as well as NYTimes.com) netted an enviable $17.3 million on revenues of $53.1 million during the first half of 2004, the last period for which its financials have been disclosed. All indications are that the digital unit is continuing to grow at 30% to 40% a year, making it the company’s fastest-revving growth engine.

Advertising accounts for almost all of the digital operation’s revenues, but disagreement rages within the company over whether NYTimes.com should emulate The Wall Street Journal and begin charging a subscription fee. Undoubtedly, many of the site’s 18 million unique monthly visitors would flee if hit with a $39.95 or even a $9.95 monthly charge. One camp within the NYT Co. argues that such a massive loss of Web traffic would cost the Times dearly in the long run, both by shrinking the audience for its journalism and by depriving it of untold millions in ad revenue. The counterargument is that the Times would more than make up for lost ad dollars by boosting circulation revenue — both from online fees and new print subscriptions paid for by people who now read for free on the Web.

(Publisher Arthur) Sulzberger declines to take a side in this debate, but sounds as if he is leaning toward a pay site. “It gets to the issue of how comfortable are we training a generation of readers to get quality information for free,” he says. “That is troubling.”

What’s a platform agnostic to do? The New York Times, like all print publications, faces a quandary. A majority of the paper’s readership now views the paper online, but the company still derives 90% of its revenues from newspapering. “The business model that seems to justify the expense of producing quality journalism is the one that isn’t growing, and the one that is growing — the Internet — isn’t producing enough revenue to produce journalism of the same quality,” says John Battelle, a co-founder of Wired and other magazines and Web sites.

So here we are back at a question that has puzzled Web publishers since the beginning — how best to monetize online content.

While there are a few news Website that have successfully operated with a subscriber fee, they remain in the minority. Their common denominator is highly compelling information that users can’t get anywhere else. The Wall Street Journal is such a publication, and I think that’s why they get away with it. Business people will pay for the edge that the WSJ gives them, but who gives a crap about The New York Times? The real conundrum for any publication taking this risk is the loss of influence — the ability to set and maintain the editorial agenda of the community it serves.

A lot of news sites — especially niche sites — hide some of their material behind a pay-to-play wall. Usually, it’s the archives that are buried, and I’ve actually paid for archived articles. Ultimately, it becomes a question of the advertising value of any page versus its direct revenue potential. As Mr. Battelle noted above, the Internet isn’t producing enough revenue to produce journalism of the same quality as the print (substitute broadcast) version. However, as more ad money shifts to the Web, and ad revenue for publishers continues to grow, that issue is going to demand re-examination.

Comments

  1. I am from the generation that grew up with internet access and free content. In the past I have felt that I and my peers would be very hesitant to pay for any content. However, since free P2P file sharing via Napster was halted by the courts, we’re getting use to paying for content.

    I myself would be more apt to pay for content now, but the NYTimes would have to compete for my dollar against other national newspapers (The Washington Post in particular) and it would be wise to get to me before I sign up for other subscription-based, online media services, such as audible.com. But if the New York Times moved soon and other competitors followed that model, I would probably go along, as I think others would (if online subscriptions were competitive compared to other online services and print publications).

    On the other hand, I have never read the Wall Street Journal online because I would have to pay a fee and can get similar content for free via other websites.

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