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The New York Times’s paywall launch seems to be off to a fine start, with management proudly announcing 100,000 new web-only subscribers shortly after the launch.If each of those subscribers stick around and pay $15 a month, that’s $18 million of high-margin annual revenue the company just added.
If the company can grow the digital-only subscriber base to, say, 500,000, the impact will be a much more meaningful $90 million a year.
And, of course, the hidden benefit of the paywall will be to discourage print subscribers from cancelling their wildly expensive print subscriptions because they can get the same content online for free. Now, they can’t get the same content online for free, so maybe they’ll hold on to their paper subscriptions a bit longer (or even subscribe to the print edition! Lots of folks have been gloating on Twitter about signing up for the NYT’s “Weekender” package to get a Sunday paper and digital access).
Of course, as we’ve often noted, even if the paywall is wildly successful, it won’t stop the New York Times company from gradually shrinking into a shadow of its former self.
Because of the old “digital dimes versus analogue dollars” problem. The digital business just has a very different revenue and cost structure than the print business, even when the digital business is wildly successful (as the New York Times’s is). And this problem, by the way, will continue to afflict all newspapers, not just the New York Times.
Want details? We recently dug through the New York Times’s 2010 numbers. Here are some fun facts that we discovered…
- A Print Reader Is Worth 228X As Much As An Online Reader. The NYT collects an average of $879 of revenue per year for each print reader (wow!). This is composed of $434 of circulation revenue (subscription or newsstand) and $385 of advertising revenue. Online, meanwhile, before enacting the paywall, the company collected an average of $3.85 per year per average monthly unique user, all of which came from advertising.
- The average print reader pays $434 a year to get their daily package of yesterday’s news and ads. $434 is a lot of money, especially when you can get the same news (and fresher news!) online for free.
- The package of yesterday’s news and ads is so thick that the company still gets $385 a year per print reader from advertisers in the hope that the print-reader’s eyes will momentarily alight on the advertiser’s ad. We’ve never seen a study of how many ads in a print newspaper a print subscriber actually sees (a tiny fraction of them, we imagine), but advertisers are still shelling out $385 a year to reach each NYT print reader–more than $1 a day.
- The New York Times has 1.6 million print subscribers, when you include weekdays, Sunday, the International Herald Tribune, and newsstand sales. This total is shrinking slightly each year.
- Each of these print subscribers contributes total revenue of $879 per year. Add them all together, and the New York Times’s news media division generates revenue of $1.6 billion a year. (This includes $93 million of “Other” revenue).
- The New York Times’ flagship web site, nytimes.com, gets 45 million unique visitors a month. 32 million of these come from the United States.
- The NYT’s digital business generated about $175 million of revenue in 2010 (our estimate). This includes nytimes.com, but excludes the web sites of the Boston Globe and other regional newspapers. It also excludes revenue from About.com (which was $136 million). Almost all of this revenue came from advertising.
- In other words, each of the 45 million monthly visitors to nytimes.com earned the company $3.85 of advertising revenue in the year. That’s $0.32 a month.
- Bottom line, print readers generate $879 of revenue per year and digital readers generate $3.85.
Now, hypothetically, if the New York Times were to get 1 million new digital subscribers to its paywall (an enormous success), the digital business would generate total revenue of ~$350 million a year.
Assuming no change in monthly online readership (45 million), this would equate to average annual revenue per unique of $7.88.
That’s better than today’s $3.85.
But it’s still a far cry from print’s $879.
Of course, 45 million online readers is a lot more readers than 1.6 million print readers, so the NYT can make some of the difference up in volume. And a $350 million digital business is a spectacular business, one that many digital publishers would love to have (we would!).
But $350 million of total digital revenue is still a far cry from the $1.4 billion of print revenue the company generated last year. And it’s not enough revenue to support a newsroom that costs a reported $200 million a year, let alone produce the $500 million of operating profit the New York Times Company produced in the middle of last decade.
And that’s why we think the New York Times will continue to shrink, no matter how successful the paywall is.
See Also: The Incredible Shrinking New York Times