The NYT announced its paywall plans, and the mediasphere is aflutter about what it might mean. To summarize, the Times will start paid subscriber plans (that most feel are expensive), but allow Web visitors 20 free articles per month, and will allow unlimited access to articles linked to from Twitter or Facebook.
This is the new classic: the hybrid business model combining advertising and subscriber fees. Same as it ever was. But will it work? I don’t think so.
Online advertising works in two extreme modes: CPM and CPC. CPM is cheap so you have to serve up millions to make money. CPC is expensive, but you have to accurately target your users (like those about to buy a camera) to make any money. Print media historically enjoyed the luxury of both, without having to deliver on either, simply because advertisers didn’t know any better. Now that the Internet exists, they do.
Subscriber-based models work great online, but there’s one catch. You have to deliver a lot of value to your users. You do this by digging deep into a subject area: Cooks Illustrated works because they deliver a lot of value to home cooks. The Economist still works because they deliver value to the global-minded finance crew. ThinkVitamin works because they’re teaching you to be better at your job (or get a better one).
So, the Times continues to sit on the fence, enjoying the revenues banner advertising brings in, but worried enough about falling CPMs that they are erecting this subscribers plan. The big questions: will traffic fall, decimating their banner revenues? And will subscribers join, offsetting the loss (and begetting future growth)?
So will traffic fall? Yes, it probably will. But even if it remained flat, that would be a loss for the Times. Remember, CPMs are falling. That means traffic has to grow a lot if you expect to continue to pay for stuff like writers. Social media has established itself as the grease in the media wheels, as The Huffington Post so aptly proved, and any friction you add to that system (like a paywall) will effectively kill your momentum. Twitter works because its fast. Slow it down, and all you’re left with is Hotmail.
Will subscribers join? This is a bigger question. What the Times and most media organizations fail to realize (and when I say that, I mean institutionally) is that there is a big difference between the readership outside and inside the paywall. You have to be prepared to not care about those outside, and to fawn over the ones inside.
Because the company relies so heavily on advertising, it’s unlikely they will ignore their outside readers. And because it’s early in the game, and no one’s fully sure, and they’re journalists after all (who are committed to nothing like writing about whatever they feel like writing about), it’s doubtful that they will fully commit to changing their content to be more valuable to their paywall readers. And so it will go, tilting up and then down, and eventually, as renewals come along, the numbers will start to slide down and to the right, unendingly.
It comes down to this: Cooks Illustrated is a very different magazine than Cooking Light. The Huffington Post is a very different paper than the NYTimes. They all provide different value propositions and are held to different standards by readers. It remains to be seen if the Times is prepared to start serving the needs of a paying readership or the needs of its advertisers. Or it might just continue its old ways, pretending to serve both masters, while secretly serving itself.