Walls of Mass Destruction (continued)

The Times announced today that 270,000 people have signed up for Times Select, the service that lets you get content that used to be free like op-ed columns.

About half of this 270,000 are print subscribers who get Times Select for free so that means the Times has generated close to $7mm in subscription revenues in two months.

$7 million is a pretty large number and so many will say this has been a success. But as I pointed out in a previous post, the traffic to these opinion pages has dropped off significantly since the implementation of Times Select.

Let's assume that they will continue to sign up new Times Select subscriptions but at not nearly the rate they did at launch and that they will end up with 250,000 paying subs at the end of the first year.

That's a $12.5mm per year revenue stream.

Since the Times never sold ads on its opinion pages, that is a windfall and its real money.

So I suppose the walls are going to stay up unless the columnists revolt.

And so far, it seems they are willing to go along. Maybe the op-ed columnists are going to get a piece of this revenue stream. That might make a lot of sense to compensate them for losing their audidence in the name of a business model.

I still think this is a bad business move long term, but it certainly seems like a smart move in the short term.

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Posted November 9, 2005 in Venture Capital and Technology

Comments

Some how these number smell a little. I am not sure if there is any funny business with the 135k online only subs, but I am guessing that the bulk of these would be previous archive subscribers who have been migrated over to be Times Select subscribers.

Nothing knocking the fact that they are real people paying real money, but I'd say there would have been some generous re-classification to make the launch a 'success'. Just a guess on my part.

Posted by: Niki Scevak | Nov 9, 2005 4:08:08 PM

Of course, 250K eventual subscribers represent only 2 percent of the Times' estimated 12.5 million registered user base. So, the editorial columnists, not all of them on the op-ed page, just saw their influence online decrease by 98 percent.

Posted by: brian | Nov 9, 2005 4:08:54 PM

influence and audience are extremely nebulous terms, and defy conventional meaning. lets not fall into the "page views" or "eyeballs" always equal success trap. if thomas friedman wrote for the national enquirer he'd gain a huge audience but would radically lose influence. it is not at all clear that publishing op ed stuff free on the web increased any writers or the nytimes "influence."

op ed pieces in The Nation and The Weekly Standard definitely have material "influence " amongst the intellectual/political audiences that matter, and its unlikely that even printing them in People magazine, or free on the web, would materially boost that influence, no? is esther dyson planning on abandoning her pay for content business models? how about o'reilly?

Posted by: steve | Nov 9, 2005 4:22:34 PM

Fred, one thing you may be forgetting - everybody gets a 3-month free trial - the real numbers will be in a few months and must count retention - the NYT doesn't have that $7mil in its pocket.

It's a horrible move...

Posted by: Tom W. | Nov 9, 2005 4:39:33 PM

Also, Times Select gives you limited free Access to the article archives, which previously needed to be purchased. So there's some lost revenue that is being offset by the subscriptions fees. I'm not suggesting that lost revenue is substantial, but to the extent that Times Select also attracts the hardcore users most likely to pay for the archives, there is some cannibalization.

Posted by: hunter | Nov 9, 2005 4:47:31 PM

I dunno, Fred, $12 mill a year, or even if the real number is $7 mil a year found money for content they're producing anyway....sounds like one of the best arguements FOR paid content yet.

Posted by: Jason Chervokas | Nov 9, 2005 6:34:46 PM

Has a home pulp subscriber I get TimesSelect at no extra charge - fyi. I have had the code they sent via snail mail on a postcard on my desk for three weeks and still have not logged in.

Posted by: mark g | Nov 10, 2005 7:53:59 AM

Fred:

I am sure the NYT folks did something like the following analysis:

270K subs is 2% of the 12.5M subs

assuming 1 op-ed pageview every other day AND
2% CTR AND
$0.10 per click
Times ad revenue would be $5M v. $7M subscription.

Early returns would suggest "this works".

1. But then there is churn, reducing the lifetime value of a sub v. no churn in the ad model.

2. And I would guess there is a 'cross-elasticity of behavior' component from a walled garden. If I read the free op ed, I am likely to stay longer and read other articles. Each page I visit has some finite probability of leading me to another page on the site. The fewer pages there are to visit, the less likely I am to 're-circulate'.

I imagine the Op Ed move is an experiment to test price elasticity to predict impact for a walled NYT in the future.

A walled versus ad supported version has one other consideration. Profits v. market share.

Walled may be profit maximizing in the near term, but it is doing so by "selling share". I heard a great quote last week about pirated software. "The only thing worse than pirating my software is pirating my competitors' software". The same applies to content. The only thing worse than free content from me is free content from the competition.

Posted by: Peter Rip | Nov 10, 2005 11:18:21 AM

My customer recently did this exact same thing on a very small scale (small CA city daily newspaper).

From my experience, the first 2-3 months had terrific numbers - and beat expectations.

However, after three months the number of new subscribers slowed to a much lower, consistent rate.

I think people that rely on the online version of the Times will sign up (or have signed up) in the coming weeks.

Then those numbers will fall to a consistently lower level.

Posted by: Rick | Nov 10, 2005 12:04:39 PM

not sure how relevent this is, but the irony is fun:

in TV, in the 1980s and 1990s, the exact opposite phenomenon occurred: essentially the entire viewing audience abandoned free content (broadcast) and opted in to paid content (cable and satellite). (and the conventional wisdom for a loooong time was, "who the hell will pay for TV?" -- which is why the smart savvy media honchos all sat out the gold rush and left it to visionary pole-climbers like charlie ergen and john rigas)

why? better content ("I want my MTV")

further, no model killed any other -- broadcast survives as does pure paid content (HBO, pay per view) as well as paid-plus-ads (ESPN, TNT, USA, et. al.)

likewise, the exact same thing is happening now, in realtime, in radio, as huge numbers of listeners migrate away from free to paid media...

Posted by: steve | Nov 10, 2005 4:20:54 PM

Quote from a recent Paul Krugman interview:

''Q: How do you feel about Times select? Some of us are a bit heart-broken about it.''

''A: There’s no question that for the columnists, Times Select was a really significant reduction in readership and it happened just as the dam is breaking on the indictments and all of that, and now people like Frank Rich and myself who would normally be emailed all over the place are suddenly behind a pay wall. On the other hand, the Times is a business, and it has to pay its way. It is encouraging that now columnists are a profit sector, because they can see who generates revenue. I would certainly have had more internet hits by a large multiple right now if they hadn’t put in Times Select, but I’m living with it.''

Whole interview is here: http://www.campusprogress.org/features/641/five-minutes-with-paul-krugman

Posted by: Ben Tanen | Nov 11, 2005 6:50:31 AM

It is encouraging that now columnists are a profit sector, because they can see who generates revenue.

Can you subscribe to individual columnists? Maybe I'd pay for David Brooks, but not for MoDo or Krugman. That would be a true test.

-TS

Posted by: The Sophist | Nov 11, 2005 5:04:12 PM

A VC

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