From Staff Reports
In a move that's certain to have a ripple effect on the newspaper sector, the New York Times Co. (NYT) last night (Monday) announced that editorial content previously accessible only via subscription will be available for free, starting tomorrow (Wednesday). Currently, that content is available only through the Times' two-year-old TimesSelect subscription service at www.nytimes.com. That service charges readers who don't receive the actual newspaper via home delivery a fee of $50 a year for online access to the newspaper's columnists and certain blogs.
"I think this demonstrates the competitive issues facing newspaper publishers," says Eugene Fram, the J. Warren McClure marketing research professor at the Rochester Institute of Technology College of Business. "It shows how quickly things can change" in this new online realm.
A New Business Model
The New York Times - whose motto is "All the news that's fit to print - turns 126 years old today (Tuesday).
The company says that it is replacing the subscription-based model with one in which advertising will be the sole revenue source. The soon-to-be free content includes archive access - one of a newspaper's potentially most-valuable assets, but an asset that's rarely been monetized successfully. Other content that will be available includes news articles and opinion columns, as well as tools that will let users personalize how they interact with the newspapers website.
MarketWatch reported that the Times' expects to see a "substantially increased number of unique users referred to and accessing the site once the pay wall is gone."
Indeed, "TimesSelect brought new commentary and voices to the site, as well as an influx of subscription revenue,'' Vivian Schiller, the senior vice president and general manager of its www.nytimes.com unit, said in a statement. "Allowing unfettered, free access to our opinion content and recent archives should enable us to drive readership and advertising."
Ad Revenue, Stock Price Skids
Interestingly, the shares of New York Times hit a new 52-week low last Wednesday after the company reported a steep decline in advertising revenue for August at the business unit that includes both its flagship New York Times and The Boston Globe. The shares have traded down to levels not seen in more than 11 years, as investors continue to question whether newspapers can find a way to generate meaningful revenue in this new online world. The shares closed yesterday at $19.65 each, down 15 cents each - their , when the shares closed at $19.50 (adjusted for subsequent splits).
Revenue at the publisher's News Media Group dropped 4.6% from the same month a year ago, to $121.5 million. Classified revenue, traditionally considered the most vital component of newspaper advertising, plunged 20% on weakness in real estate, help-wanted and automotive ads. Ad revenue at the New York Times Media Group was essentially flat, rising 0.2% on growth in national ad categories such as packaged goods and technology products.
Online ad revenue at the company's News Media Group, which includes its flagship paper, www.nytimes.com and The International Herald Tribune, surged 28.2% in August from a year earlier. But total ad revenue from those same properties was down 4.6% in August and so far this year was down 5.5% year over year.
RIT's Fram says this move by the Times company indicates its prior strategy wasn't working. The company is betting that by dropping the subscription fees, it will boost traffic substantially, and hope it can recoup the lost revenue and generate substantial revenue above that, too, through the use of pop-up ads, balloon ads, display advertising and some newer technology-enabled marketing-and-advertising techniques are coming out of the R&D labs all the time, Fram said.
The $64K Question
But the $64,000 question is whether the shutdown of the Times' paid service increase traffic to www.nytimes.com? While observers say the newspaper's Op-Ed sections are widely read - especially, as Forbes.com observes, with the country gearing up for a presidential election whose contenders figure to make this a closely followed contest - any gains may be hamstrung by the fact that most of the content is already available on the site for free.
According to the Times company, TimesSelect has about 227,000 paying subscribers. However, accessing the content for free are an additional 471,200 home delivery readers, as well as another 89,200 college students.
www.nytimes.com the most heavily trafficked U.S. newspaper website, Nielsen/NetRatings reports. The website of Gannett Co. Inc. (GCI) - the publisher of nationwide U.S. newspaper USA Today - was second with 9.6 million unique visitors, Nielsen reported.- and in a big way - by the estimated 13 million readers who accessed the site in August, making
Under the news business model, current TimesSelect subscribers also have access to The New York Times' archive reaching all the way back to 1851 at no extra charge. Once TimesSelect is eliminated tomorrow, all visitors to www.nytimes.com will get access for free to all articles dating back to 1987, as well as to the newspaper's archives from 1851 to 1922.
However, according to Forbes.com, The Times said it would continue to charge a fee for access to its archive from 1923-1986.
American Express (AXP) to sign on for this new business model, inking a deal that will give the credit-card company "a significant advertising presence" on the newspaper's home page, and on the paper's Opinion and Archive sections.
www.nytimes.com is part of a very small group of newspapers that were attempting to build businesses by actually charging some kind of fee for access to their websites. One other such player: The Wall Street Journal, which charges $79 a year for an online-only subscription to www.wsj.com. WSJ.com had 983,000 paying subscribers at the end of June, up 24% from a year earlier. Although The Journal is viewed as a rare success in the digital newspaper realm, most analysts say that the subscription requirement has constrained both the number of visitors to the site, and therefore the ad revenue because of this cap on customer "eyeballs."
RIT's Fram said the move by the Times company could well have a ripple effect throughout the industry, causing other newspapers to drop any fee-based access plans in favor of the advertising model.
Indeed, once News Corp. ( NWS) completes its in-progress acquisition of The Journal parent Dow Jones Inc. for an estimated $5.6 billion, www.wsj.com's subscription access may also disappear. Rupert Murdoch, News Corp.'s chairman and CEO, during an August conference call, confirmed that the company was mulling considering a new business model for The Journal website.
Once a Core Holding
Newspaper stocks were once a top-tier holding. As late as the middle 1980s, newspaper-publishing companies still offered consistent growth, fat profit margins and attractive dividend yields. And because publishers had monopolies in each of their markets, they enjoyed a protected profit position in each of their key markets. Indeed, these very factors made newspapers the target of leveraged buyout specialists.
But no longer. In recent years, competition has escalated. First it was cable TV and specialty magazines. Then satellite TV anted up. But it was the Internet that ultimately trumped the newspaper sector's hand, offering a wealth of continually updated news-and-entertainment information - most of it free of charge. Share prices have plunged. And Lehman Brothers analyst Craig Huber said last week that the industry still hasn't seen the bottom. In fact, Huber says that stocks in this sector could lose another 20% over the next 18 months.
Fram, a self-professed "news junkie," grew up when newspapers were the main - and best - source of in-depth news. He remembers the New York Times not as www.nytimes.com, but rather as the self-professed "paper of record" for the United States, if not the world. What's more, there was a time when no one would even consider disputing that statement by the Times. But, well, times are changing. And so is the Times. For Fram, who remembers the New York Times as the news-and-business heavyweight champ that it once was, it's a truly moving turn of events. There's just so much competition, now, that even the vaunted New York Times is finding it tough to compete, Fram says.
"It's a bit like saying that the New York Yankees can no longer compete at the major league level, and are being forced to drop back to [the] AAA [minor leagues] in order to still compete" - in short, almost unthinkable, Fram says.
News and Story Links:
New York Times to offer for-pay online content for free.
New York Times Co. Reports Weak Ad Sales.
- Rochester Institute of Technology:
E. Philip Saunders College of Business.
- Rochester Institute of Technology:
Dr. Eugene Fram, the J. Warren McClure Marketing Research Professor.
- Money Morning Investment Analysis:
No Hope For Newspapers?