Brands in the News

The End of Free Content at The New York Times

20 Jan , 2010  

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: 

https://online.wsj.com/article/SB10001424052748704320104575014891649907142.html?mod=WSJ_hps_LEFTWhatsNews

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.


7 Responses

  1. Tim,

    One issue is that people aren’t all that eager to pay, and online advertising revenue is becoming increasingly important. When Newsweek went to a subscriber only system, it cost them several million to implement, destroyed their advertising revenue … and 35 people subscribed.

    The main beneficiaries of the NYT’s decision will probably end up being sites like Twitter, and do a better job of getting the basic facts out to people as quickly as possible. And for free.

    Honestly, print media has yet to find its iTunes equivalent, and I sort of doubt the iPad, or the Kindle, will provide the answer.

    Miles

  2. Tim Calkins says:

    Patricia—I think a tiered approach makes a lot of sense. Indeed, a certain amount of free access is necessary to promote sampling and trial. The Financial Times does this very well…you can read a few articles and then the system blocks you. This inspired me to upgrade. It think it is a good model.

    Tim

  3. Patricia Ledesma says:

    Tim,

    Can a news outlet like the NYT follow a ‘tiered’ approach: There are news items everyone has and that appear for free in many places: Reuters, AP, UPI. There might be no need to charge for those. However, the reason I read the NYT (and The Economist and the Financial Times) is the quality of their reporting. These publications produce high quality reporting and commentary that cannot be found elsewhere and for those I am willing to pay.

    -pll

    @Leah: I disagree on your assessment of print versus video. To be sure, there is great video reporting, but I believe print and photographs hold an important place. Even TV stations acknowledge that a good photo has more impact that 1 hour of video: TV news lack the ability to allow the consumer to stop and take in the information, let it sink in at your own rhythm.

  4. Kamlesh Tiwari says:

    Though it makes business sense for NYTimes, as you have explained, to charge for its online content, there is a risk of how its viewership changes after this step. Only strong fans of the portal would be willing to pay for reading a content beyond the introductory paragraph.

    Internet advertising has to innovate newer ways to facilitate the information flow as efficiently as possible to the bottom end (readers). In the long run that looks like a sustainable model for nascent brands.

    • Tim Calkins says:

      Kamlesh—There is certainly a trade-off in this. The pressure is now on the NYT to create wonderful content. I’m sure the NYT is also hoping other media outlets follow the move. It won’t seem as risky if all the high profile respected news outlets do the same thing.

      Tim

  5. Tim Calkins says:

    @Leah–Print is surely a troubled format. As the online world becomes more dynamic and interesting, I’m confident we’ll see continued declines in print readership. Which is why the NYT has to charge for online content, and why the recent announcement makes perfect sense.

    I’ll look into the strobe light idea and the go-go dancers.

  6. Leah Smolker says:

    People are visual creatures. Of course a large quantity of people watch the news which reels in large revenues, we prefer to watch things over reading them. Reading the news does not have the same appeal that watching the news has. Heck, if this article had strobe lights, go-go dancers and men in Chip-N-Dale outfits, then more people would read it too. Just a thought.

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