The New York Times announces a plan to charge readers for online content starting in 2011
Thursday, January 21, 2010
The New York Times Co., following the lead of rival Rupert Murdoch, said Wednesday that the newspaper will start charging visitors to its popular Web site at the beginning of 2011.
The Times Co. offered few details of the proposal other than that it will be a metered plan, meaning viewers will be allowed to look at a number of articles free each month before having to pay to see more. It is a model the Financial Times has employed since 2007 and one that appears to be gaining traction in the industry.
"We spent a good amount of time in lively discussion and deep analysis, exploring new ways to develop alternate revenue streams for NYTimes.com and to come up with the best possible solution," said Times Co. spokeswoman Diane McNulty, explaining why the paper rolled out the plan one year before its implementation. "Now that we have made the decision, we want to mobilize our employees to implement this new approach."
McNulty said prices will be announced nearer to the launch.
Murdoch, chief executive of News Corp., which owns the Wall Street Journal and several other newspapers, said last May that his company would start charging for its online journalism. News Corp. erected its first new pay wall at one of its community newspapers in Massachusetts this month, using a metered system. The Journal has long charged for online content.
The announcement by the Times -- which for years has given away online content -- marks a major shift in online publishing strategy by the biggest newspaper on the Web. Publishers have feared that if they began charging for online content, readers would simply go to another paper's Web site. Further, projections for online advertising spending up until about 2007 were nothing but a straight line up.
But then a recession hit the U.S. economy and a fact became painfully clear to publishers: More than 60 percent of online ad spending was going to search companies, such as Google and Yahoo. Display advertising began to shrink and now accounts for only 20 to 25 percent of the online ad pie -- a piece that is fought over by every major media outlet.
The only way to increase online ad revenue is to increase user traffic. Because online ad rates are so low, traffic numbers have to be enormous to generate meaningful revenue.
At current online ad rates, "You need 4 billion page views per month in order to make $50 million in revenue per year," Rob Grimshaw, managing director of FT.com, said in an interview Wednesday. The Financial Times gets about 85 million page views per month.
As of October, the Financial Times had 121,200 customers who pay between $186 and $299 per year for access to the paper's online content, a subscriber increase of 22 percent from the previous year. That is in addition to the Financial Times's print subscribers.
Washington Post Publisher Katharine Weymouth said she has "no plans to charge consumers for access to our stories on the Web," but added she will carefully watch attempts by others to do so.
The Times Co. tried a pay wall around content from its opinion columnists in 2005 -- a feature called TimesSelect -- charging $49.95 per year for online access to such writers as Maureen Dowd and Paul Krugman. The Times got 227,000 subscribers to sign up, but abandoned the plan in 2007; behind the pay wall, some of the paper's star writers had been effectively removed from the national conversation.
Worldwide, the New York Times site draws about 20 million unique visitors a month.
The Times, like other newspaper companies, has been hurt by long-term declines in advertising revenue and circulation. But the Times has struggled more so because it is not a diversified company, meaning it does not own businesses other than newspapers that generate substantial revenue. In addition, the company built a new headquarters in Manhattan at the height of the real estate boom; it has since sold a large chunk of that building to pay off debt, and it rents back the space from the new owners.
Because of those problems, the Times turned to Mexican billionaire Carlos Slim for a $250 million loan last year at the steep rate of 14 percent. The Times Co. said Slim was not involved in the decision to raise a pay wall.
In retrospect, Grimshaw said it was a "huge mistake" for publishers to give away their product. So why did they?
Grimshaw said newspaper publishers realized they did not understand the Internet, so they hired Internet experts and "let them do whatever they wanted and whatever they said was the right thing," he said.