The Grey Lady's digital wisdom
The New York Times' porous paywall has been a growing success since it was installed 14 months ago. The model of two-tiered subscription alongside plentiful free access offers Fairfax a glimmer of hope.
Within the radical and multi-faceted restructuring of Fairfax’s metro mastheads that Greg Hywood unveiled yesterday was the announcement that Fairfax, until very recently something of a paywall sceptic, would introduce digital subscriptions for The Sydney Morning Herald and The Age. It would adopt a ‘’metered’’ model, with a base level of free access to the mastheads’ websites.
That’s the New York Times model, one which caused considerable bemusement when the NYT revealed it last year. The head-scratching related to the fact that while the NYT introduced tiered pricing for access to its digital versions, it left gaping holes in its walls. Not only could viewers get free access to 20 stories a month but there was virtually unlimited access via search engines and social media.
So porous was it that there was a legitimate question as to whether anyone would actually pay for a subscription.
The intent of the strategy was clear. Unlike the Financial Times, or Wall Street Journal, with limited free articles and then solid paywalls, the NYT was trying to have its cake and eat it too. It wanted to generate a new income stream from the subscriptions while maintaining as much traffic to its site and the digital advertising revenue that generates as possible.
More than a year on, the strategy appears to be working and is now shifting into a second phase.
In March, 12 months after it erected the paywall, the NYT Media Group announced it had about 472,000 paying subscribers, 16 per cent more than it had at the end of December last year. It would, at that rate, have more than 500,000 subscribers today. That’s roughly 40 per cent of its weekday print circulation.
The NYT doesn’t break down its revenues but there are estimates that about 60 per cent of its digital subscribers pay $US15 a month for its basic package and 40 per cent $US35 a month for its full suite of digital products.
That would suggest that with, say, 500,000 digital subscribers, the digital editions would be generating subscription revenues at a rate of about $US115 million a year and growing. When it launched the paywall, the most optimistic forecast of its annual revenue potential was $US100 million. The significance of the subscription revenue is that it is incremental – it is revenue that didn’t exist until the paywall was introduced.
What about traffic? Its worldwide unique viewer base has been virtually untouched by the introduction of the paywall, edging down from about 48.5 million before it was erected to about 48 million. More significantly, when its print circulation (which continues to slide) is combined with its digital subscriber base, its paying audience has increased by nearly 75 per cent from a year ago.
While digital advertising volumes and yields in the US are under pressure, that has enabled the NYT to essentially hold the digital advertising revenue base in its news media group – it was down 2 per cent in the first quarter.
So successful (albeit at an early stage) has the strategy been that the NYT has halved the number of stories it will make available free each month, to 10. The obvious next step over time, as those digital subscribers become entrenched in the habit of paying for their online content, would be to inch the subscription prices up.
It is possible to argue that the NYT is a unique masthead, as it is. Not only is it an iconic masthead within the US but it has, for a general newspaper, a unique global audience. The Fairfax broadsheets have powerful domestic brands – and seven million unique readers a month – but they’re not the NYT .
Nevertheless, the early signs that the NYT subscription model is working despite its porosity – indeed because of that porosity – would be encouraging for Hywood.
It at least suggests there is a potential to generate incremental revenue from the digital mastheads without badly damaging the size of the audience and digital revenue base and offers some prospect that at some point in the future, having got an audience accustomed to paying something for digital access, the proportion of free-to-paid viewers can be lowered and the cost of access raised.
While there is no certain digital future for the mastheads even if Fairfax can successfully introduce the NYT model, it at last proffers the hope of one.