You don’t have to attend Kellogg to know that it is hard to make a lot of money by giving things away.
Selling products for nothing might make you feel good and it will often attract a crowd, but it is not a smart way to run a business. There isn’t any profit in that particular business model.
So the decision announced today by The New York Times to begin charging for online content makes very good sense.
You can read about it here:
At one point media companies thought that they could embrace the model of television and radio for online content: if you don’t charge anything you can attract a lot of people and then generate advertising revenue. Unfortunately, this model doesn’t actually work all that well in the online world; while internet advertising is booming, revenues are still fairly small. In the third quarter, for example, the internet businesses at The New York Times made up only 14% of revenue.
Print readership continues to slide and there is no sign that this will change anytime soon, so newspapers face a sobering reality: relying on the fading print outlet isn’t a viable option. Relying on a free internet outlet is also not a viable option.
This largely explains why newspaper stocks have gotten killed in recent years. Shares in The New York Times are down from over $50 to about $13.
The only sensible plan is to create compelling content and then charge for it.
This model has been successfully embraced by The Wall Street Journal and the Financial Times. It is the only obvious way to maintain the business long-term. It is high time that The New York Times adopted it.
The only big question is why it took them so long to come to the decision; apparently the executives at The New York Times debated the issue for a year.