However the long-term prospects of paywalls remained uncertain. The subscriber growth was slowing down, and many of the paid subscribers of The Times were enticed by the introductory offer of 99 cents for a 4-week subscription. A previous experiment with a paywall, TimesSelect, was abandoned in 2007 after The Times secured 227,000 paying customers. Was the paywall a good idea for the long-term? Would it provide a foundation for a sustainable business model as The Times approached an ever-evolving technology and media landscape? Company Background
The New York Times Company was a leading global multimedia news and information company with 2011 revenues of $2. 3 billion and an operating profit of $57 million, and operated The New York Times, the International Herald Tribune, The Boston Globe, and About. com. (See Exhibit 1 for company structure, Exhibit 2 for business units and their revenues, and Exhibit 3 for company financials. ) The company defined its core purpose as “enhance[ing] society by creating, collecting and distributing high quality news, information and entertainment. ”7
The New York Times, the flagship daily newspaper of the company, was founded on September 18, 1851, by journalist and politician Henry Jarvis Raymond, and former banker George Jones. By 2011, the newspaper had won 106 Pulitzer Prizes, the most of any news organization. Reflecting on The Times’s importance, Michael Hirschorn, the contributing editor of the Atlantic, remarked: The Times still, I think to a remarkable degree, does set the agenda. You really can trace almost any major story these days to something that originally appeared in The Times. The problem is that once it reaches the public, they may not even know it came from The Times.
8 In spite of its prize-winning journalism, The Times was facing significant pressures. Its subscription and revenues had steadily declined over the years (see Exhibits 3 and 4). Its advertising revenues in 2011 were down by over 6% compared with 2010 ad revenues, and in spite of cost cutting, the operating profit in 2011 was 76% less than the previous year. In January 2012, the company sold its Regional Media Group consisting of 16 regional newspapers for $143 million in cash. 9 2 This document is authorized for use only by Karen Lao in Marketing Management taught by A. Prasad from August 2013 to December 2013.
For the exclusive use of K. LAO The New York Times Paywall 512-077 The Newspaper Industry The New York Times was not alone in feeling this pressure—the entire newspaper industry was facing significant challenges. Overall circulation in the industry for both weekday and weekend newspapers was declining (Exhibit 5). Traditional sources of newspaper revenues—subscription, retail, and classified advertising—were also declining (Exhibit 6). In contrast, most of the costs for editorial staff, production, and distribution were fixed and had very little room for reduction. Table A shows the revenue and cost structure of a typical U. S. newspaper.