New Source of Revenue for the Times

The New York Times recently reinstated their digital subscriptions after years of audience growth and increased ad revenue. This time around they are employing a new strategy that they hope will retain casual readers and hook the avid ones into creating a new source of revenue for the company.

Their model is simple: twenty free articles a month, but after that, readers will be prompted to pay $15.00 for a four week subscription of unlimited access to their news through mobile apps and the internet.

Many readers have already voiced their opinions, taking the subscription fee as a personal blow and stating that they will just have to switch to the BBC News. Loyalists, however, feel it is a nominal fee for good reporting and don’t see how people can feel cheated when they are receiving a month of news for no more than the cost of 2 lunches at McDonald’s.

The new business model of The New York Times may be simple, but it also relies heavily on a sophisticated marketing model known as the cat-tail monetization strategy. This business model is a favorite among independent game developers, such as Zynga, which uses the very same principles in their social gaming smash-hit, Farmville.

The game is absolutely free to the community, but offers supplement content and benefits to players who choose to pay for them. These are called the monetization features. It’s these enticing bonuses that earn companies like Zynga millions. What is the most impressive statistic is that only a very small percentage of its community is actually willing to pay—the secret to their success is purely in the numbers.

The cat-tail strategy takes advantage of the fact that the content is poised to go viral, drawing in countless consumers, and hoping to ensnare a few of its community into the cycle of paying for additional content again and again. Although the percentage of paying players is small, the retention rate of these spenders is very close to 100%.

The New York Times has many of the pieces in place: a huge audience (in the ball park of 30 million readers), desirable content, monetization features (the subscription), and they still enable the sharing of their media to attract more readers. Even if only half of the estimated 15% of readers decide to subscribe, the Times will still be generating around 400 million dollars through their digital subscribers each year. Not to mention, most of this revenue is pure profit when considering how low production costs are for digital media compared to print. But is their strategy flawless?1

The New York Times may be making a common mistake by limiting access to the non-subscribers. Pandora, the web radio, loses many of its listeners because they switch to competitors like Slacker Radio. Once there, listeners enjoy their favorite music while recovering their Pandora time after exceeding the monthly limit. The New York Times readers may follow a similar trend after exceeding the 20 article limit.

If The New York Times wants to retain its impressive digital audience, then they shouldn’t limit access to its content, but offer additional features to its subscribers instead. Monetization features can come in many forms, such as getting rid of advertisements, or by using creative marketing ploys.

Here’s one for free: offer a digital clipping book where subscribers can save and highlight their favorite articles and have access to high res photography downloads and enhanced content, such as news reels and interactive features. Or, give subscribers their own Opinion Page that they can direct people to in the comments they leave after articles. But don’t limit the reporting!

After years of conditioning its readers not to pay, this decision could be crippling if not handled deftly—nobody likes when things are taken away from them. By providing new content and features, however, loyal and engaged readers may be willing to pay for a subscription to exclusive material.

1 From Peters JW. The Times Announces Digital Subscriptions Plan. The New York Times. March 17, 2011.

This entry was posted in Industry News and tagged , . Bookmark the permalink.