NYT’s Freemium Paywall Plan is (maybe) Good Business
January 25, 2010
Last week, the New York Times announced plans to start charging certain readers for access to their web site. Reaction was predictable: Jeff Jarvis complained, TechCrunch ran some numbers, and Mashable used it as an excuse to talk about a rumored but still unannounced Apple product (seriously Mashable? come on).
The first thing to understand about the announced pay model is that it is misnamed. The NYT press release refers to it as a “metered model” and most reporters are using that language. However, this phrase gives entirely the wrong impression. Most people think of “metered” as the power utility model: you pay for it all, and the more you use, the more you pay.
What the Times is actually proposing is a Freemium model: you get limited access for free, or you pay a fixed fee for unlimited access. The only thing they are “metering” (actually measuring) is how many free page views you have used. When you hit a certain number, they ask you to subscribe. (And if you already subscribe to the Times, even just the Sunday edition, you’re covered.)
The Times people have put some good thinking into this, and for once the business model does make some sense, despite what Jeff Jarvis says. The logic goes like this. People who use our product frequently are likely to think it is valuable, and are therefore more likely to be willing to pay for that value. Infrequent visitors, who value our product less, can be monetized with lower value ad impressions, but we don’t want to spend too much supplying these freeloaders, so we’ll cut them off at some point.
It’s about tweaking the dials, up and down, to capture the payments of truly loyal readers who find continuing value in the brand, while not losing a critical number of occasional visitors.
As TechCrunch pointed out, the key to making the model work is to have excellent audience analytics. The Times will have to find the sweet spot in both number of free views and cost of subscription to maximize subscription revenue without sacrificing display ad rates.
But more than that, the company needs to use the subscription as just one of many touch points to build a stronger relationship with loyal readers. It’s that relationship from which the real value of the business is derived.