NY Times Paywall - Case Analysis with questions and their answers. PDF

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Case Analysis with questions and their answers....

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MGMT S-5010 Electronic Commerce Strategies

New York Times Paywall

by Mauricio Hill Carina (Tsai-Ling) Lee Ranoo Sharma Otto Silva Oscar Wei

Q1. Is the Paywall working? Why or why not?

The New York Times tried to apply Paywall twice in the past, and both times did not turn out as good as the management expected. The first paywall experiment conducted in 1996 indicated that the readers of The Times did not participate. The management ends up being convinced that the paywall completely destructs the value of The Times for its readers; they believed that their readers find value in no-fee registration model with advertiser-support. The second try was conducted in 2005. Rather than "all or nothing" in 1996, the second approach was to limit access to noted columnists with discounts to students and other selected readers. Since the print subscribers are not charged an extra fee to read all articles, The Times did not suffer as much loss of readers like the last attempt of the paywall. Additionally, due to the rise of the internet in the early 2000s, the rise of social media and increase in quality of blogs on TimesSelect, more and more readers are subscribing to their website. The new paywall launched in 2011 indicated that The Times has learned from its past experiments. The new paywall would be considered as a working model. This is because the amount of subscriber increased and the company has focused its main revenue from printed copies and ad on those newspaper onto the advertisement on its website. The digital advertising revenue increased 5.3% and the print advertising revenue declined by 7.8% in the last quarter of 2011. The act of The Times changing its focus on revenue model shows that the new paywall is sustainable and a working model for The Times.

Q2. How would you evaluate the current Paywall compared with the two prior ones? Do you think it is appropriately designed compared with the Financial Times or The Wall Street Journal? Paywall Version First Paywall

Year 1996

Price $35/month

Second Paywall

September 2005

$49.95/month

Final Paywall

2011

$455/year

Services Included Overseas users were charged for site access News and content remained free, discount for select groups like students. Access to noted columnists was charged Device specific charges, 20 articles were free per month per user, leaky paywall allowed free access from social media links

The current paywall model has been intricately designed keeping in mind the loyal customers, the free visitors, and social media. Also, the fact that so many users are accessing news through different devices have also been taken into account. The new paywall allows the user to browse through 20 articles free of cost per month though the print subscribers are not charged for online access, people accessing the news through their iPad or iPhone are charged for reading articles beyond "Top News." The prior paywalls had limited focus as the first one only focused on overseas customers while the second paywall charged for noted columnists which faced bad reputation in the media. The third paywall has diversified revenue stream that will maximize revenue and social media engagement. The leaky paywall will enable users to interact with unlimited articles which will maintain substantial traffic to the website through social media links which will keep the new generation aware and interactive with the brand. According to the case, The Financial Times and The Wall Street Journal did not permit any user who was unregistered to access their website. They had adopted a bulletproof paywall model where there was no free content available. Personally, we think that having a free section is beneficial to the website as it helps the new upcoming readers to interact with the content and helps expand the reader base whereas a bulletproof wall may stop traffic from social media links and only subscribers will be able to read the articles. In this new age, the news media should also diversify their plans along different devices to maximize readership and revenue which New York Times has done. The NY Times faces a huge threat from great quality blogs and free media and this may eventually drive the publication to be based on an advertising revenue model only but their model is comparatively better than the bulletproof paywalls out there.

Q3. Why are newspapers in trouble? What is the goal of The New York Times in creating the Paywall? The newspaper industry has seen a steady decrease in newspaper subscription and revenues due to the surge of social media and blogs. A typical newspaper company generates 75% of its revenue from advertising and 25% from subscription and newsstand. The New York Times advertising revenues were down from 1771 million in 2008 to 1211 millions in 2011. During the same period, revenues from circulation, including print subscription and digital subscription, only went up by 21 million. As a result, The New York Times creates the Paywall hoping to find a way out of the slump. There are four main business models deployed in media websites: all or nothing, exclusive content, metered system, and device-specific offer. The first model, all or nothing, restricts users to pay to get access. The second model, exclusive content, provides the news content for free while restricts exclusive content to paid users. The third model, metered systems, allows users to browse the news content up to a pre-specified number. The fourth model, device-specific offer, charge users based on the medium used. The New York Times opted to combine metered system with device-specific Paywall system. Users who connect directly to the website is restricted to 5 articles per day and 20 articles per month while users who connect from social media sites are free from the restriction. The goal is to increase engagement from social media sites and create additional revenue type.

Q4.-Should the New York Times actively manage a transition from print to digital? “The digital evolution has changed the global media and publishing landscape, with the availability of services and content variety significantly altering the way information is consumed. To survive in such an environment, media companies need to innovate to attract and retain readers.” 1 New York Times should definitely create a medium and long-term strategy to migrate most of its content to an online version of the newspaper, now a day's readers want to get the news as soon as events happen, this is not possible with the physical edition of the newspaper. The arrival of smartphones, tablets, and companies as Amazon and Netflix are making things easier for the New York Times. Printed newspaper circulation along the USA is dropping rapidly. There is a niche market that cannot be neglected by the company in the short and medium term, this is the people that like to have their hard copy of the newspaper delivered to their address or the ones that are used to buy a physical copy from the newsstands. 1

From print to digital: the changing face of the media. (2014, February) Retrieved from http://performance.ey.com

Q5. Competitive forces against the newspaper industry: Potential threats of new entrants – (1/5) The newspaper industry is filled with huge established players; these players have enormous production and distribution structures and often have the best columnists on their payrolls; these great barriers for entry make for a very little potential threat of new entrants. Bargaining power of buyers – (2,5/5) There is some bargaining power in the hand of buyers in the sense that they can freely choose which, if any, printed newspaper they are going to read; but that power is a little diminished when we see the percentage of the revenue that’s collected by the top 50 firms, this means that while buyers (in this case readers) can freely choose a company, they are most likely going to select among a few of them. Bargaining power of suppliers – (1/5) The main supply needed for newspapers is the paper, and as it is a basic product with a lot of suppliers the switching costs are very low. Threat of substitute products – (5/5) Here lies the biggest threat to the newspaper industry, as the world has changed to a more digital environment, the newspaper companies have seen their means of communication take an enormous drop in terms of reach; a lot of digital competitors appearing every day – physical newspaper companies migrating to the digital world, blogs, social media – and that takes the competition in terms of who gets the users attention very high. Industry competitors – (3,5/5) The competition among the established companies usually works on two factors: location and price; readers focus on the news that regard the region they live in although there is a market for national news – and inside that sphere of the local newspapers and the big national ones the competition works via price, since the news are usually the same, people who are not loyal to a certain brand tend to go to the cheapest alternative they find. Evaluating the standing of the New York Times in that industry, we can see that, when it comes to the printed newspaper, the NYT has accomplished a solid competitive position. The case shows us - with 2011 numbers - that they are the first local newspaper company in the USA in terms of average daily circulation - according to the website Statista, in September 2015 the NY Times was still the first (https://www.statista.com/statistics/272790/circulation-of-the-biggestdaily-newspapers-in-the-us/). This tells us that while they are in a highly competitive industry, the company has been able to maintain a strong lead in terms of readers. Analyzing the threat of substitute products and the bargaining power of buyers, we can see in the case that the NY Times has when comparing to the physical newspaper that transitioned into the online world, an even bigger advantage in terms of readers, surpassing national medias like the Wall Street Journal and USA Today. Although the whole industry has been suffering from the emergence of the digital media outlets, the New York Times has been able to sustain a solid position in terms of physical readers and gained a very good advantage, when comparing to their direct competitors. Q6. Does the Paywall seem like a good strategy for newspapers in general?

Paywall may seem like a good short-term revenue strategy for the falling print media. As more and more people are navigating towards the internet from paper, the print media is trying to recreate the same business model on another platform. This may be beneficial in the short run but we highly doubt the strength of this model in the long term. The access to news is a right and with social media networks like Facebook, Twitter, YouTube etc. plus the thousands of websites, a user can gather information from anywhere and anytime. They wouldn't necessarily be inclined to pay for a subscription especially the young upcoming audience who wouldn't attach the "prestige" element to news articles. The older generation is aware of the brands as they have been reading them for their entire lives but it won't hold true in the future. The best bet for the print media would be to maximize their revenues through advertisements, sponsorships and creating massive social media following which would redirect anyone to their website and help increase customer engagement. They could even take a step further and customize their websites to create personalized content. For example, if I have an account on the NY Times website and I have selected the topics of interest like "fashion", any time an article with a tag "fashion" is updated, I am notified. This can help create a loyal following. Even though partial content can be monetized by a paywall but a dedicated following has to be created in order to do so, this would, in turn, help them gather huge profits. To summarize, Paywalls can only be profitable when there is a massive and engaged customer base but it may deflect the potential new reader generations who are unfamiliar with the brand....