The Times has cut as much fat as it can. It had cut staff, offered buyouts, cut pays to employees, cut freelance staff, cut discretionary budget and even cut subscription to other magazines and newspapers. It is still difficult to show profit growth because there is no upward movement on the revenue side of the profit equation. Its Ad sales are declining and its weekly circulation has fallen sharply.
There is only so much they can do on the cost side if they want to maintain product integrity and quality. It is easy for outsiders like us, whom Times executive editor Keller calls as “armchair experts”, to call for charging online access to nytimes.com.
Keller said: “It’s a much tougher, more complicated decision than it seems to all the armchair experts. There is no clear consensus on the right way to go.” At stake are millions of dollars from online advertisers who want the largest possible number of readers. Putting up any kind of pay wall has the potential to drive away readers and some of those dollars.
Keller is correct, it is not a easy decision. The revenue equation he is looking at is
R = annual subscription + single copy sales + Print Ad revenue + Online Ad revenue
Online Ad revenues depend on page views which will go down significantly if Times charges for access. It is not a question of will it drop, but how far will it drop? Will the online subscription revenue be enough to compensate for the lost Ad revenue?
In case of WSJ which still charges for online access it was easier to do the math going the other way from fee to free, but is not the case for the Times that never charged for online access. Any attempt to introduce pricing, without carefully managing customer reference price, will fail.
Here is what I recommend for Times :
- Versioning online content: Your marginal cost to serve one additional online reader may be $0 but that has no relation to pricing it. Not all customers value your content the same. You can come up with multiple versions at different price points and target specific segments. Since you require readers to register to read articles you must be sitting on mountains of data on customer’s reading pattern and discern segments.
- Start charging for access to articles older than 30 days (like Factiva of Dow Jones) – if someone wants access to past articles it must be adding unique value to them, something that is not substitutable. The lost Ad revenue from lost page views of past articles must be lower than revenue gained from selling these articles (they must have gobs of data to validate this). They should also set prices similar to Factiva, high prices for individual copies or an annual subscription with lower price per article.
- Increase price of print copies – those who value the print version will stay and the others will switch, either to online version or to other newspapers. Any increase in online move is measurable and will give them more data on what the drop will be if they introduce pricing for online subscription.
Mr. Keller, what do you think?