New York Times Pay Plan to Target Most Loyal, Online-Only Users

Wednesday’s announcement by The New York Times that it will begin charging for online content in 2011 poses at least one big opportunity and one big challenge.

The opportunity — for the industry as well as the paper — resides in the year the Times has given itself to get this right.

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The challenge will be preserving its relationship with the huge global audience that will bear the burden of a metered pay plan: heavy users of the Times Web site who do not subscribe to the newspaper in print. Avoiding a significant drop-off in ad revenue is at the heart of the paper’s financial challenge, of course, but that will hinge largely on how well it retains — or fails to — those online-only loyalists.

The surprising move of announcing the plan a year in advance is the smartest piece unveiled so far. The paper has nothing to lose by taking a year to figure out the details — and a great deal to gain.

I expect to see an e-mail invitation soon from The New York Times Insight Lab, the online market research operation that the paper used to gauge user reaction to pay models in July 2009.

Wednesday’s announcement indicates the paper has modified at least one of the ideas it was considering last summer — a online fee for readers who already pay to get the print edition delivered to their homes or offices. Publisher Arthur Sulzberger Jr. and President Janet Robinson told Times staffers in a memo Wednesday that home delivery customers will continue to have free access to nytimes.com. The July survey tested a model of $5 a month for online access, with a 50 percent discount for print subscribers.

One of the leading trailblazers of the metered model is the Financial Times, which throws up a pay wall after a user has accessed 10 articles during a month. The problem with that approach, as Felix Salmon and others have pointed out, is that it penalizes the paper’s most loyal online users.

The Times says it has not decided how its meter will work, except to say that its approach will enable it to “stay connected to a search-driven Web.” Also critical will be its ability to stay connected to users around the nation and world who are either unable or unwilling to subscribe to the paper in print.

“Our audiences are very loyal and we believe that our readers will pay for our award-winning digital content and services,” Sulzberger said in a statement Wednesday. Loyal, yes, but I’m betting users will be willing to pay in big enough numbers only if the Times creates sufficient value beyond the news it now makes available for free.

And that’s where the yearlong run-up comes in — time enough, hopefully, for the Times to come up with products and services compelling enough online to support the kind of paid loyalty the paper enjoys in print.

There are a couple of dimensions to the problem: creating sufficient online value for some percentage of users who are willing to pay, and structuring a pay wall porous enough to enable visits by a large enough — but not too large — share of users who will not pay.

The paper doesn’t reveal how many of its 17 million online users fall into the “frequent” category (those likely to encounter the pay wall), but the Times’ David Carr estimated the number at “two million, give or take” in a Wednesday blog post.

If the quality of the paper’s journalism, by itself, is insufficient to get enough of those two million users to pay, what else could the Times offer to discourage users from wandering away in search of free alternatives?

The first place I’d look for an answer is in the Times’ print circulation numbers: more than 800,000 people spending up to $769.60 a year for the experience of getting a print version of the same Times journalism that they could read — free! — on their computer screens.

If that many people will pay that much for a user experience in print — notably, the convenience of home delivery and holding the paper in their hands — how many would pay how much for new digital experiences of news that the Times has a year to devise?

The Times has not said how much it might charge for frequent online access, but let’s pick $75 out of the air — roughly 10 percent of what it charges for seven-day home delivery. How many users might pay that much for, in addition to full access to news, participation in networked user groups around topics of special interest?

What new services could the paper offer on a tablet version of the Times that also could be bundled with the access fee? What behind-the-scenes access to the newsgathering process (occasional conference calls with reporters and editors, perhaps?) might the paper offer to especially intense readers? What new ways of organizing — and interacting with — news might the paper provide users who pay in print or online?

The point, of course, is that the Times needs to give users as many good reasons to pay as possible. Home delivery of the print edition is just one example.

But what should the paper do about the sizable chunk of frequent users who just won’t pay? The answer, for financial as well as civic reasons, is to get as many of them as possible in the door some other way.

Steve Outing and Felix Salmon have proposed several ways of doing this. One of the most intriguing is Salmon’s idea to enable free access to any Times article linked from somewhere else — with none of that traffic counted by the meter. (He acknowledges the various ways bloggers could game such a system.)

There will be big risks attached to whatever the Times does. At least for starters, the paper will be better off risking too many nonpaying readers than too few. A reader still engaged today, after all, is someone the paper stands a chance of monetizing tomorrow.

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