Summary of the Decision Situation:
In the closing days of the first quarter of 2011 (March 28), The New York Times restricted access to its once free-read news website The Times, except for the home page and the front pages of each section (Kumar, et al., 2013). Users who exceed its free 20 articles each month were directed into its digital subscription page, which is referred to as “the paywall.” The test launching, however, occurred mid-way through March in Canada. The goal: to test paid reading acceptance. The newspaper battled for the value of its journalism. The critics decried its short-sightedness. However, the digital subscribers grew. Within a year of launching, The Times new online subscribers reached 390,000 in December 2011, 163,000 new subscribers higher than the 227,000 new subscribers in the Times Select paywall experiment in 2007.
Alternatives/Evaluation/Analysis:
Not engaging online news readers through The Times is never a wise option. The superior traffic of unique visitors and page views, which is the highest in the United States, provides The New York Times a unique opportunity to take in revenues (Kumar, et al., 2013: Exhibit 13). Like disengagement, giving full free access is also not a profitable option. Thus, there are three income-generating options that can fine tune its income potential as well as avoid a decline of these traffic indicators.
Reverse Paywall:
1) Potential Increases in User Metrics from Frequent Visits Behavior.
Offering a reverse firewall will reward frequent visiting subscribers to visit The Times more and more. Loyal readers will feel good for a slight difference of its rate from the less avid readers. This encouragement has the potential to increase the number of unique visitors and page view metrics to a phenomenal level, keeping the online paper’s leadership over competitors in the United States market and abroad. Moreover, a strongly growing subscription base as a consequence will inevitably entice more advertisers even at relatively higher prices.
However, its presentation to the subscribers and the potential subscribers should not be in the form of “loyalty reward” because the concept of loyalty may be undervalued with relatively small but meaningful pricing difference in-between tiers, such as a pricing difference of 10% from a daily visitor to an every-two-days visitor or a 15% price difference. The pricing range, however, must be under the full discretion of the management considering their close knowledge to its operating and related costs. The rule must be: The downward difference must not be too small as to be meaningless and the upward difference not too high to be significant.
2) Potential for Subtle Increase in Average Subscription Price.
Using a reverse paywall can subtly allow The Times to increase the average subscription price across subscribers without each subscriber even noticing a significant change in pricing based on the frequency of their visits. Consistent with the rule cited above, the increase in subscription price among less frequent visitors must not be too high to be financially burdensome but significant enough to remain attractive to increase visit frequency.
Device Specific Offer:
1) Indirect Pricing Appeal.
Online subscribers who pay for the iPad app for The Times tend to attribute the price to Apple and not to The New York Times management. Inevitably, according to Kumar (2013), pricing differences between electronic devices (e.g. iPad vs. tablet pricing) will be well-known among potential subscribers, consequently associating these expected divergence of prices to the gadget manufacturers instead of The Times itself, thus, leaving The Times less negatively exposed to pricing issues. However, this offering system must be supported with a flawless technology when accessing the online contents. App makers and distributors must provide a reliable technology that works with new content’s technology. A slow loading app even in a cheaper priced subscription can cause dissatisfaction for The Times.
2) Potential Increase in Subscriber Base.
This approach also allows The Times to ride on the growing users of lean back electronic technology. The larger the consumer base of the device the larger the potential new subscribers will be for the online newspaper. Pricing can always be designed to minimize revenue cuts through this approach based on user statistics. However, there must be selectiveness in the use of apps distribution partners in order to maximize partnerships with strong subscriber driver potential. Less popular apps store may be offered lesser share in the subscription price at a well-designed price tiers.
Recommendations
There are two areas that The Times must be more attentive in its intention to make money out of its superior online user statistics over its closest competitors.
1) The first recommendation is to let go of the idea that pricing must always be fixed across subscribers: The online news content market has left behind the traditional newspaper market, which demands a fixed price for all subscribers and newsstand buyers. Online technology has provided numerous tools that can be easily employed to better serve the reading and subscribing consumers based on their specific reading behaviors. The metric for advertising value in an online news website no longer depends on the subscription base alone, but more greatly on the number of visits each subscriber makes to the website content and their page views to specific page contents. More of these will make advertising more attractive.
2) The second recommendation is to be prepared to make small revenue sacrifices in certain groups of subscribers in order to gain greater advertising appeal:
The potential revenue sacrifices on the more frequent visitors’ subscription prices as explored in the Reverse Paywall alternative must be made at least as perceived by subscribers in order to drive further their visiting behaviors, which will have significant impact in assuring online advertisers on the added value in advertising in The Times web pages.
References
Kumar, V., Anand, B., Gupta, S., & Oberholzer-Gee, F. (2013, January 31). The New York Times Paywall. HBS Case Study No. 9-512-077, 1-19.
