The much-awaited pricing system for The New York Times Company’s (NYT) NYTimes.com is knocking at the door with a March 28, 2011 launch date in the United States and worldwide. This would mark an end to the free usage of online content. The company has already launched the pay-and-read model in Canada on Thursday for test run and traffic familiarity.
Shell Out to Break the Wall
The publisher of The New York Times, the International Herald Tribune, The Boston Globe and 15 other dailies said that it has adopted the Financial Times’ metered system, whereby after browsing a certain number of free articles, readers will be asked to subscribe to enjoy access to its full articles on phones, tablet computers and the Internet. However, the company indicated that the users of NYTimes.com will be able to read 20 articles per month without spending a penny.
The New York Times Company fixed monthly charges of $15 for access to more than 20 articles on its website and a smartphone application; $20 for unlimited access online and on Apple Inc.‘s (AAPL) iPad tablet computer application; and $35 for online, smartphone and iPad application.
It was also specified that subscribers to the New York Times’ print version will be able to access content or articles online as well as on all applications of The Times’s for no additional charge.
Another media conglomerate, News Corporation (NWSA) has already taken a similar leap toward an online subscription-based model for general news content. News International, a subsidiary of News Corporation, began charging readers for online content for The Times of London and Sunday Times of London, effective June 2010.
Rupert Murdoch, the Chief Executive Officer of News Corporation, had long been pushing for the online subscription model for all general news websites. But newspaper companies had been reluctant for fear of losing readership and, in turn, advertisers.
Chinks in Pay Model?
Readers visiting The New York Times Company’s website via blog links or social-media sites such as Facebook or Twitter, or through search engines such as Microsoft Corporation‘s (MSFT) Bing and Yahoo Inc. (YHOO) will be able to access unlimited number of articles, nullifying the stipulated limit of 20 articles. We wonder if this leaves a chink in the pay model. Notably, the company is imposing a restriction on the number of free articles to five per day for traffic coming via Google Inc. (GOOG).
What Called for the Need?
The publishing industry has long been grappling with sinking advertising revenue, with the recent global economic meltdown making the situation even worse. This comes in the wake of a longer-term secular decline as more readers choose free online news, thereby making the print-advertising model increasingly irrelevant.
To curb shrinking advertising revenue and seeking new revenue avenues, the publishing companies contemplated charging readers for online content. Newspaper companies have been remodeling and restructuring themselves to better align with the growing need of marketers, targeting younger people, affluent households and other demographic groups with multiple Web and print publication.
The publishing companies are adapting to the changing facet of the multiplatform media universe, which currently includes mobile, social media networks and reader application products within its fold.
According to data released by the Newspaper Association of America, print advertising newspaper revenue dropped 8.2% to $22.8 billion in 2010, whereas online ad revenue grew 10.9% to over $3 billion.
Let’s Conclude
We believe the success of the pay model depends on the accessibility of new articles across the Web. People will be reluctant to shell out if content is available free of cost elsewhere. The Wall Street Journal and The Financial Times were the pioneers of the subscription-based model. Way back in 2005, The New York Times Company had attempted to charge readers for online access to its columnists on a platform known as TimesSelect but rescinded it after two years, as it failed to generate enough revenue.
Currently, we have a long-term “Neutral” rating on The New York Times Company. The company also holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating, and correlates with our long-term recommendation.
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