[21 January 2010]
CHICAGO — New York Times Co.‘s move to introduce an online pay model seems like a reasonable measure to cope with deteriorating advertising revenue, but it’s unlikely that many newspapers across the country will be in a position to follow suit right away, experts said Wednesday.
Pressured by steep print-ad losses as more consumers get their news and information via the Internet, the company said Wednesday that NYTimes.com, its flagship newspaper’s Web site, will move to a paid model at the beginning of 2011.
At NYTimes.com, users will have free access to a certain number of articles per month, after which they would be charged under what the company called a “metered” approach.
Subscribers to the newspaper’s print edition will continue to have free access to the Web version.
“The New York Times has a very unique content portfolio and a very loyal readership base,” said Mike Simonton, credit analyst at Fitch Ratings, in an interview. “So this isn’t a surprise. But we don’t expect many other newspapers to successfully follow in its footsteps. They may try.”
The Financial Times has a metered model at FT.com, and The Wall Street Journal, via WSJ.com, has had a Web-based pay model for many years.
Simonton said Washington Post Co., with its heavy emphasis on political content, might be able to make a pay wall work for its namesake WashingtonPost.com.
At Cox Newspapers, which includes the Atlanta Journal-Constitution, the Dayton (Ohio) Daily News and other dailies, there are no plans to move any of its sites to a metered model right now, said Leon Levitt, vice president of strategy at Cox Digital Media. However, he said, things will have to change.
“This is not about (a pay wall). At the end of the day, there aren’t enough people that can be associated with paying for digital content,” Levitt said. “But there has to be a different model. There has to be a model that values the expense associated with gathering content. I applaud the New York Times for being aggressive. Whether that’s the model that works, I don’t know.
“But I think we have to find ways to drive subscriber revenue across whatever platform readers are consuming the information. ... It might be print, online, e-readers or any way people might want to get it,” Levitt said.
The Times has taken a big step toward beginning to fix the Web’s information culture, said Tim Harris, chief executive of Questia, a digital library that contains the world’s largest online collection of books and journal articles.
“In the short run, it could be viewed as risky, because there’s this perception out in the world that anything provided digitally, for some reason, should be free,” Harris said. “But the only risk here is the time it takes to change perception. The biggest risk here is not doing anything.”
Harris said that eventually the entire newspaper industry will be able to adopt a pay model, whether it takes the form of metering or employs another method, but it will take a core of powerful brands like the New York Times to lead the charge.
“Once that transition begins, and that perception begins to change, that provides the impetus for other content providers to do the same, and that’s what I think you’re going to see,” he said.
One of the main arguments against charging for online content is that Web traffic to a site may decrease dramatically, thereby eliminating much of its value to advertisers.
However, said Simonton, the metered structure puts a premium on readers who are more likely to visit NYTimes.com anyway, while more casual readers will still get to see articles for free.
“There’s more willingness on the part of the user to pay, because they’re obviously dedicated to the content. So we wouldn’t expect the metered approach to minimize the user base significantly,” he said.
The pay barrier shouldn’t hurt NYTimes.com’s ad rates, said Matt Wise, chief executive of Q Interactive, a Chicago-based ad network that specializes in predictive-behavioral targeting. “I don’t think it’ll give them a premium, though, either. Whether people coming to the site pay or not isn’t a determinant of what kind of consumers they are, unless the New York Times can show that they have a higher income or are more desirable in some fashion.”
The company said the move will allow it to “keep an appropriate ratio between free and paid content,” while at the same time its articles would remain searchable at Google and other search engines.
In a statement, New York Times Co. Chairman Arthur Sulzberger said the newspaper’s audiences “are very loyal” and will be willing to pay for its “award-winning digital content and services.”
In a broadly lower market, the stock was down 4 percent at $13.15 in afternoon trading.
Last year, New York Times Co. CEO Janet Robinson said the newspaper was considering various ways to charge for online content. It has previously tried pay models on the Web — most recently in 2005 when it charged for digital access to its columnists on a tier called TimesSelect. Discontinued in September 2007, TimesSelect generated about $10 million in revenue per year.
Wednesday’s announcement comes at a time when other newspaper companies are seriously considering paid models online.
Rupert Murdoch, chairman of News Corp., reiterated in October his plan to institute charges in some form on all of the company’s online news sites. He has insisted for several months that newspapers can no longer give away Web-based content while print readership continues to decline.
News Corp. is the parent company of Dow Jones & Co., which includes The Wall Street Journal, Dow Jones Newswires, Barron’s, Factiva and MarketWatch, the publisher of this report.
During the 2005-07 period, the newspaper industry had hopes that online advertising could grow enough to ultimately offset losses in print revenue, but, as a recession deepened into a historic downturn in 2008, online ad sales began to slide.
New York Times Co., like other major newspaper publishers, has been cautiously optimistic about improving ad revenues since the summer of 2009, but results are still dismal.
In December, New York Times said it expected fourth-quarter advertising revenue companywide to drop 25 percent compared with the same period in 2008. Online ad revenue was projected to rise 10 percent, after plunging 14 percent as recently as the second quarter.