Free, then paid-for, then free again, then partially paid, then free and now possibly micro-paid. That’s the New York Times pattern for its website since 1995. Bill Keller, executive editor of the New York Times, floated the idea in an email Q&A sessions with readers:

“The idea is that readers may not pay a subscription fee for a new Web site, but they might pay a few pennies every time they click on a page, if it was simple and frictionless. In the heyday of Napster and other steal-this-music Web sites, a lot of people believed that consumers would simply not pay money to download music. Enter Apple and iTunes”.

The Paper of Record seems lost at sea, still looking for the right model to best monetize its online audience. Mocking the Times’ flip-flops won’t help. Every online news organization faces the same dilemma: some have grown a sizable audience (for the NY Times, 20m unique visitors per month), but each online reader brings ten times less revenue than a print one.  And that was before the crisis, which squeezes revenue in several ways:

  • The overall volume of ads is shrinking,
  • display ads are migrating toward the less expensive more targeted search ads,
  • and for the remaining  display ads, costs per thousand (CPT) are crashing.

Just consider this: by its own admission, in the last quarter of 2008, 50% of the New York Times’ inventory was sold to advertising networks, i.e. at a few dollars CPT (see explanation in this issue of the Monday Note).

Hence the revival of the paid model combined to a mobile device such as Amazon’s Kindle. Here we are. Last week,  I talked about iPhone-like device that could be a great way to read news in the daily commute (see “Reading from a smartphone, the smart way“).  The idea was still to rely on the advertising model that could be more efficient on a mobile device used in a commuter train than on a twenty-inch screen at the office. Now the concept is to have the reader pay few cents per page. Nothing new here. In the mid-nineties, I remember interviewing Nicholas Negroponte, at the time head of MIT’s Medialab.  Negroponte explained how the economics of news would change with readers paying a couple of cents to read a story, multiplied by a numbers of readers. A looming bonanza for the writers!

Then, several things went wrong. First, true micropayment applications took more time than expected to take off. Then the value question arose. In a regular newspaper, popular sections tend to subsidy the less attractive ones – such as politics, business or science. All of these news items are supported, without distinction, by the same revenue system: advertising and copy sales. Once you slice up the content and assign a counter to each component, it becomes a different story: an important article on the state of the national debt will be outranked by a factor of 100 by the latest Brad Pitt gossip. That’s how the world really works, like it or not. The risk is that, at some point, an obscure bean counter will raise the flag on the costs of the financial columnist vs. the celebrity desk, the latter scoring a much higher audience. Slicing up content reveals inconvenient truths that raises obstacles to the pay-per-article model .

Does this mean reinventing a paid system is condemned to failure? No. As a matter of fact, there is an immensely successful system built on less than a dollar/euro multiple payments: iTunes. Think: How many songs did you (or your kids) buy in the last six months? All the ingredients are here for an application to the news industry: tiny transaction amounts, transparent one-click process, accessible from a desktop or a mobile device, reliable. Last month, mediatech author David Carr outlined (in the NY Times) his vision in a column titled “Let’s invent an iTunes for News“. Even if he drew unfair barbs from free model advocates, Carr has a point when he states there are business model alternatives to the paid vs. free binary view of. (For the record, I also believe in the merits of the free model as I was part of the team that launched the successful free daily 20 minutes in France). One of his detractors is Jeff Jarvis, author of the book “What Would Google Do” (see Jean-Louis Gassée’s last week column In the Monday Note). Jarvis’ case relies on the New York Times’ latest unsuccessful attempt to get readers to pay for content. TimesSelect, as it was called,  offered exclusive access to 23 top bylines, such as Nobel Prize Paul Krugman, political columnist  Maureen Dowd or globo-pundit  Tom Friedman. Cost: $50 a year. Launched in 2005, TimesSelect drew 227,000 paid subscribers, generated a revenue of $10m a year… and closed after two years. (Tom Friedman, who had said, “I hate it. I feel totally cut off from my audience.” was relieved). The audience for what sat hidden behind the “paid-for” door, rose by 40%.  As a result, the gain in ad revenue more than offset the loss in subscription fees. For a short time, perhaps. Now, the brutal advertising meltdown might justify a micropaid-for, version 2.0 of TimesSelect.

By the way, according to a story in this week’s Time Magazine, paid subscriptions for the online version of the Wall Street Journal ($103 a year) grew by 7% last year. As long as you have something truly original to sell, some sort of partial paid-for system (note the precautions, Rupert Murdoch isn’t too optimistic for the short to medium term) might me worth to consider in this devastated advertising landscape.  —FF

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