There’s no reason an NYT paywall won’t work

by Jerry Brito on January 22, 2010 · View Comments

The New York Times
Creative Commons License photo credit: onesevenone

The New York Times announced this week that starting next year it will erect a paywall around its content. Visitors to the site will be able to view a set number of articles for free each month, but after they reach that limit they will be invited to subscribe before they can view any more.

Consensus among the digerati seems to be that this will never work. (See here and here.) That’s an easy position to take since micropayments and TimesSelect-type paywalls have failed in the past. But is it really that clear? It seems to me that what the NYT is trying to do is not so impossible.

If the NYT website’s readership is like anything else, there’s probably a power law at work. A small minority of readers make up a sizable percentage of pages read. Put another way, there’s probably a small minority of users that read a considerable amount more articles than the average user. They need to set the number of monthly free articles high enough so that the bottom (say) 98% of readers never even notice that there’s a paywall, but the top 2%, which are presumably devoted NYT fans would be affected.

Now, that’s easy to say, but figuring out the balance might be very tricky. Whatever it does, the NYT doesn’t want to affect the ad-revenue-generating traffic it’s getting. How does it do that? First, it seems to me, is that the NYT has to be realistic about how many people it can get to subscribe. It’s going to be a tiny, tiny number, but that’s money it’s leaving on the table right now. So the number of monthly free articles needs to be in the 100+ range, not the Financial Times‘ 10 a month. Second, it needs to set a reasonable subscription price. The top readers are probably devoted fans, but that doesn’t mean they’ll pay anything, and if they don’t the NYT will lose not only the subscription, but the ad revenue it now generates from those folks.

So that’s all to say that while it will no doubt take thoughtful tinkering to strike the right balance, there’s no economic reason the NYT could not segment its customers in this way. Am I wrong?

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About Jerry Brito

Jerry Brito is a senior research fellow at the Mercatus Center at George Mason University and director of its Technology Policy Program. His research interests include telecom and spectrum policy, government transparency, and intellectual property.

Read more articles by Jerry Brito.

  • Dan
    The other thing that might be helpful for them to consider is better bundling the media through which they share their content. They're said that they want to be sure print subscribers get free access, but what about bundling NYTimes.com access with Kindle access? Since the marginal cost of electronic content is zero, why not let people already paying $15 a month for a Kindle subscription to the Times have free or extremely-low-cost (think $1 or $2 per month) access to the content behind the paywall? Presumably the Apple tablet will also have a newspaper subscription feature. So consider "access" to be $15 a month or whatever for the first medium and a buck or two for each additional medium (Kindle, tablet, iPhone app). It seems there are a lot of ways to play with the different NYT editions that would create both producer and consumer surpluses.
  • Let's look at the user who is a avid NYT reader, but not willing to pay. What will they do? Go elsewhere, but they are also taking their conversation with them. All the links they sent to friends via twitter / facebook / blog go with them. The NYT will totally removed from their conversations, not only because they may not be able to see the links received from their friends, but they don't know if the links will work for their friends. All this linking is important in driving traffic going forward. I don't look for news, news finds me. News is filtered and sorted by my social network. Putting up partial pay walls is essentially making their links unreliable. Unreliable links are filtered out in the social web.
  • I understand and completely agree with your point. I guess what I'm wondering is whether the conversation will really go away? If the article limit is set high enough, bloggers and tweeters and your everyday user of facebook and digg can link to an NYT article confident that 98% of all readers won't encounter a paywall.
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