Will people pay for the New York Times online?

In Clay Shirky’s brilliant essay “Newspapers and thinking the unthinkable” one line stood out to me as odd:

“The Wall Street Journal has a paywall, so we can too!” (Financial information is one of the few kinds of information whose recipients don’t want to share.)

It is true that The Wall Street Journal is one of two newspapers (along with the Financial Times) that seems to have been pretty successful getting people to pay. It’s not clear why Shirky thinks people don’t want to share financial information. Hopefully he doesn’t think business people want to keep the Journal to themselves to keep some competitive advantage. Pretty much everyone in finance and business that I know reads the Journal every day – no one would seriously consider anything in there a competitive advantage. People send Journal links to each other all the time. It is background knowledge that everyone is expected to know.

The reason people are willing to pay for the Journal has nothing to do with their unwillingness to share or pirate financial information. It’s quite simply the fact that the Journal is a valuable business input that can’t be found anywhere else. Most people, when presented with something of value that is scarce and reasonably priced, don’t pirate (especially when they can charge it to their business). The revenue-maximizing price of any good – including digital goods – is determined by value and scarcity, not what it costs to produce it.

The fact that the cost of distributing newspapers is dropping to near zero only affects the price of newspapers if the content is commoditized. The problem the New York Times has isn’t that people are willing to share or pirate their content. It’s that with the advent of the internet, competition for general news went from one or two per market to thousands per market. (The other big blow was classifieds getting decoupled from newspapers).

Most business people I know consider the Times an essential daily read, not just for its business and finance news, but also its section A news and op-eds. If you are a running an operating company or investment firm you want to know not just narrow business news but the broader context of what’s happening in the world.

Most smaller newspapers will go out of business over the next few years, vastly increasing the scarcity of news. If the Times creates content that is scare and valuable – and remains an essential “business input” – it can have the same success online as the Journal.

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joshuakarp

Chris – you're right on with these thoughts. I often thought that the NYT should consider dramatically REDUCING their online content – just headlines, forcing people to go to the paper version, where scarcity keeps ad rates higher. I think that the NYT should look beyond charging for content – they should look at charging people to collaborate on stories – developing a community of interested people (bloggers, etc.) around a story BEFORE and AS it is written, and giving credit for development to everyone involved – and thereby inspiring dozens, or hundreds of people to spread the word (and to buy a physical copy of the paper). If they can think out of the box, they may find success where others are failing… Josh
jacopogio

All is related to the value that news-users are giving to the “trusted source” of their own news. Is your neighbor or your friend' friend' blog among other millions sources, the best news source for, say, my investment portfolio ? Well if it is, do not buy the WSJ ! But if in the long term, the WSJ (or FT or the Econimist) are giving me some real value, then I will be prepeared to pay for them (As I did with the paper edition)
Kyle

I think one other aspect of the WSJ that makes its paywall a success is that a disproportionately high number of subscribers do not pay directly – their company foots the bill for it. That isn't a dynamic the NY Times can ever hope to replicate.

http://twitter.com/cdixon chris dixon

Yeah, that's definitely an issue, although if the NYTimes puts up a paywall and has corporate discounts I could see that becoming pretty common, at least at info-intensive jobs like finance.

http://twitter.com/ianrosenwach Ian Rosenwach

I think that, put mildly, this will be a challenge for the NY Times. If people are going to pay for content, that content has to be highly unique. The NY Times invests a lot of resources in creating quality content, as does the WSJ, FT, etc. The question is can the consumer get the same (or close) quality content in the same content vertical without paying?

The WSJ and FT are focused on premium business content, which works for them. The NY Times is more broad, covering all topics. I am not sure this broad approach will work with a paid model, given the proliferation of high quality free content.

The NY Times may need to rethink what they stand for. Is it general news, interactive experiences, or something else that makes the NY Times unique, and worth paying for?

http://twitter.com/cdixon chris dixon

True, although interestingly the WSJ has been getting much more general lately. To me, at least, this has made it less valuable since I already read the Times and the WSJ becomes more redundant.

http://twitter.com/ianrosenwach Ian Rosenwach

Good point. I think Rupert Murdoch wants to make the WSJ more general for just that reason – to compete with the Times in general news and Wash Post in politics. But, he risks alienating core WSJ readers. I find myself reading the Times for more cultural pieces, art, travel, style, Mark Leibovitch's politics writing, and the occasional good business story.

I find the WSJ not so much focused on breaking news but on commentary. Could be a good thing if breaking news is becoming commoditized (Twittter, Drudge, etc) while adding context/commentary to that news is where news organization could add value.

http://visualrevenue.com/blog/ Dennis R. Mortensen

If one think of the New York Times as a collection of individual News Articles, then I believe the answer to your question is No! But in my opinion, that might be the wrong viewpoint. There is a certain value in a curated editorial product that can be consumed, completed – and finally referenced to and commented on, as a whole. With that mind, then I think the answer to your question could be a Yes! (with this comes another question, which is whether the NYT is one of those few trusted sources that might emerge, I personally think so, -and not just because I live here)
http://benatlas.com/ Ben Atlas

I have no doubt that the NYTimes will be more profitable online than in print and it has a much wider appeal than the journal.
http://blog.botfu.com Kevin Marshall

I think newspapers used to be about generating quality content…and I think that's what has been commoditized…to me, the key to any newspaper surviving right now is in their ability to shift from focusing on generating content, to intelligently selecting and dissecting content…I think the average 'person on the street' would still happily pay a small fee for 'experts' to bring the most 'interesting' things to their attention each day (and add some 'expert analysis' to why the things they are picking are interesting)…

In the age of information overload, selling information is an uphill battle…I think selling people a quality filter (the times reputation and classically trained editors basically have this filter built in already) and discovery tool is much easier (and smarter)…until the Times (and other newspapers) focus in this general direction I think they'll continue to struggle with generating revenues…

http://www.twitter.com/marshallclark Marshall Clark

I agree Kevin – while the content still needs to be created, this contribution to the process is commoditized. What still has premium value is the curation service delivered by the NYT excellent editorial process. What stories make the front page? Which rising artists get their shows covered? What political opinions are promoted? There are hundreds of great writers contributing to the Times, but I'd argue that its this curation process that makes the NYT a great paper.

So what I'm wondering is – could the Times survive by remapping their editorial process to independent/freelance/aggregated content?

http://blog.botfu.com Kevin Marshall

I think they wouldn't just survive, but actually thrive with that approach (assuming of course that they do a good job of finding quality content and were open and engaging in the process).

http://communitas.tumblr.com/ tobymurdock

I share Ian's skepticism about the NY Times.

I think the NY Time's op-ed is definitely differentiated content, maybe its international as well. (General news? business news? I'm not so sure).

The problem is that the NYT's differentiated content covers only a small slice of its overall cost structure. Will it have the discipline, is it even possible for it as a company to transform itself to an outlet only focused on its differentiated offerings? It seems very unlikely. And as a result, I don't see its potential pay wall revenues ever covering its broader costs.

On its non-differentiated elements it should apply an approach along the lines of what Joshua mentions: different social models to power the creation of that content. But I also don't see the NYT changing that far that fast.

http://twitter.com/cdixon chris dixon

“The problem is that the NYT's differentiated content covers only a small slice of its overall cost structure. Will it have the discipline, is it even possible for it as a company to transform itself to an outlet only focused on its differentiated offerings?”
Very good point. I doubt they will have the discipline until they are absolutely forced to do it.

http://communitas.tumblr.com/ tobymurdock

Yep, and this big media lack of discipline / resistance to change is just why I've totally changed my business' go-to-market strategy. I'll be in NYC this week and would appreciate your feedback. Let me know if you'd be available.

http://friendfeed.com/needcaffeine clarke thomas

I believe you have to have an account for anything over a week old on NYT site; & pay for anything over a month/yr?. Most likely if they shortened that down to 36-48 hours; they would get more subscribers. As much as the WSJ & FT have become more mixed, in content, they center around business news. (I do have an FT subscription & prefer it over the WSJ at it has more global vs US centric). I like to read newspapers in their hard copy form, but having the ability to share content or read when out the area, makes the online options a necessity.
http://www.elieseidman.com Elie Seidman

Shirky's essay is truly fantastic – thanks for the link!

http://twitter.com/cdixon chris dixon

Yeah, he's a great thinker/writer. His latest book is one of the few business books in a long time I thought was worth the time.

http://jonathanmarcus.tumblr.com jonathanmarcus

Great stuff Chris, particularly the digital goods revenue maximizing framework. I've long argued with the Mike Arrington position that digital music must necessarily be free because of some false marginal cost argument where bandwidth and IP costs are somehow tossed aside.
http://cityandout.com/ AndreaF

Let me move the conversation to the broader topic of paying for online news and not just the NY Times. In my view, what most publishers are missing holds a great analogy with the music industry and why music publishers are losing money and iTunes is flourishing. A few years back we were forced by music publishers to buy entire CDs (at 9.99-19.99, pick your currency here) to get to 1, maybe 2 songs we wanted to listen to. iTunes came in and changed that model, now you can buy single songs from an artist much more easily, create playlists and port them to a different device dependng on when we want to listen to it. News is very similar. Off-line, I don't buy magazines anymore because I am usually interested in 1, possibly 2 articles for each issue but I have to pay (2-5 USD/GBP/EUR) to do so.
Online, I consume news by aggregating multiple feeds and picking and chosing to read what grabs my attention or is in my sector of interest.
The paper/magazine of the future is not an online version of the NY times, WSJ, etc.; it's an aggregation of news, analysis pieces, etc. from multiple sources that are specifically relevant to each individual user. Furthermore, I will be able to pick each news item and manipulate as I need to, move it to multiple devices and take it with me depending on the specific need.
Whoever builds that platform in the right way will win at least teporarily in a similar way to iTunes for music.
People don't care which publisher/music label they are reading/listening to; they care about the author/musician and that they are able to consume their content in the way it is most useful to them.
A platform like that will be able to charge for content (the right price) and distribute back a share of the profits to the publishers. I see this as the first step in the inevitable evolution of the industry. There's more behind the corner of course.
http://www.AnkeshKothari.com Ankesh Kothari

The recipe for success for Times doesn't lie in charging a subscription. It lies in finding a way to make local advertising on the web work better. To replace the loss of retail and classified ad revenue with something better.

Offline: Newspapers like Times only made 20-30% of their revenue from subscriptions. A $2 newspaper made $7 more in ads.

By focusing on the $2 pie because the $7 pie seems harder to fill up online (because now people can track how well their ads are doing) – won't solve the problems they are facing.
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http://www.justhardwork.blogspot.com Paul Marshall

Good post Chris…like you I have found the WSJ less relevant lately and the content generally available or certainly less scarce. The important thing to remember which you said perfectly is “The revenue-maximizing price of any good – including digital goods – is determined by value and scarcity, not what it costs to produce it.” The NYT valuable content for me is some of the business writings and the Section A Op-Ed pieces but really I see the NYT as nothing more than a channel for the real value which is the guys like Friedman. Who needs who more…the NYT or the great writers?? Those guys who can craft great stories and poiniently opine on relevant issues and trends are really the key for without them the NYT become another daily rag. The writers and what they do with their new-found leverage will be the interesting thing to watch IMO.

Chris Dixon