By Lukas I. Alpert
When New York Times Co. launched its NYT Now mobile app last
year, hopes were high internally that it would appeal to younger
readers and ease them into the habit of paying for quality
news.
But after a few months, it was clear that the subscription
service, a cheaper and slimmed-down version of the main Times app,
wasn't meeting expectations. In the end, only about 20,000 people
agreed to pay $8 a month for it, well short of the newspaper's
target of 200,000, said two people familiar with the matter. In
May, 13 months after its launch, the Times made NYT Now free.
The change signaled a shift in digital strategy at the Times
toward courting young readers with free content rather than trying
to turn them into subscribers right away. That approach has the
Times experimenting, to varying degrees, with making its content
available across a multitude of platforms, from Facebook Inc.'s
Instant Articles program to Apple Inc.'s coming News app to
messaging platform WhatsApp and even on Starbucks Corp.'s mobile
app.
The moves, however, leave the Times with a delicate balancing
act: The paper is trying to boost its Web and mobile audience to
bolster ad sales without undermining a steadily growing digital
subscription business that has drawn almost one million customers
and contributed 11% of the company's revenue last year. The
newspaper's top digital executives argue that aggressively going
after younger readers on platforms outside of the Times will
persuade some to subscribe.
"We need to be wherever readers are, regardless of the
platform," said Kinsey Wilson, the Times' editor for innovation and
strategy, echoing sentiments often heard from executives at digital
startups like BuzzFeed and Vox Media Inc. "We consider this to be a
series of experiments to figure out what our audience wants and how
best to make them paying customers."
The Times' digital approach has been more aggressive than many
other large traditional publishers, like the Washington Post and
Gannett Co.'s USA Today, which have so far stayed on the sidelines
of Facebook's and Apple's news initiatives. The Wall Street
Journal, owned by News Corp, said it has engaged in talks with
Facebook and Apple but has yet to sign on to either program.
The new way of thinking has taken hold in the 16 months since
the Times published an in-house study, the Innovation Report,
detailing where the paper was failing to adjust to the
fast-changing media landscape. Findings included the declining
value of the home page, the publication's need to experiment more,
a lack of digital talent, and a need for more collaboration between
the newsroom and business side.
The Times is trying to address a problem faced by all
traditional publishers, including The Wall Street Journal: Younger
readers now get their news from a wider variety of nontraditional
sources--and it is usually free. A recent Pew Research Center
survey found that six out of 10 people between the ages of 18 and
34 said they got some political news on Facebook, compared with
just 17% from the Times.
"We need to build habits to get people to come back to us every
day," said Alex MacCallum, the paper's assistant managing editor
for audience development.
In recent years, the Times, like other newspapers, has come to
rely more heavily on circulation and subscription revenue to offset
steady declines in print ad revenue. The Times' biggest move was
erecting an online paywall in 2011 that generated $169 million last
year. Thanks to online subscriptions and print edition rate
increases, circulation overtook advertising as the biggest driver
of revenue in 2012.
While print and digital circulation sales rose 22% from 2010 to
2014, ad revenue fell 15% to $662.3 million. Digital ad sales,
while growing, totaled a modest $182 million in 2014 and haven't
come close to offsetting the decline in print advertising. As a
result, over the past five years, the company's overall revenue
growth has been effectively flat, so a slowdown in new digital
subscribers could prove destabilizing.
The shift away from print has meant falling ad revenue
industrywide. Ad revenue at the Journal fell 11% in the quarter
ended March 31, although its emphasis is increasingly on growing
digital subscriptions. Gannett Co. just reported a 11.5% decline in
second-quarter ad revenue. This has led all publishers to make
digital strategy a priority in newsroom structure and hiring.
John Janedis, an analyst at Jefferies, predicts that growth in
the Times' digital subscriber revenue will taper in the next five
years. At the same time, print ad revenue is projected to continue
falling faster than digital ad sales rise, which he estimates will
reduce the Times' annual revenue by as much as $100 million by the
end of the decade.
"The problem the Times has is that they have no more revenue
streams to mine," said one former New York Times executive. "The
real risk is that if you start making your content free elsewhere,
it may end up giving no incentive to new readers to start paying,
and that could cause a dangerous spiral as time goes on."
In recent years, the family controlled New York Times Co., which
has a market value of $2.2 billion, has pared back its holdings,
selling off the Boston Globe, About.com, TV and radio stations, and
other assets. While that has allowed the company to bolster its
balance sheet and focus on its flagship brand, it means it is
largely dependent on its namesake publication's ability to evolve.
Arthur Gregg Sulzberger, son of publisher and chairman Arthur
Sulzberger Jr., and his cousin Sam Dolnick, have been instrumental
in many of the Times' digital projects and last week both were
promoted to senior newsroom positions.
Mr. Wilson, who joined the Times in February, said using the
vast scale of social networks and outside distribution platforms is
essential to connecting with new audiences.
For example, Facebook's Instant Articles allows publishers to
publish free content directly on the social-media site rather than
have it link back to the publication's site, something Facebook
says will greatly speed load times on mobile. Apple's news app,
meanwhile, will bundle free content from several outlets into a
customizable stream.
"This is very different from going only after eyeballs and
clicks. You have to deliver value and you have to help people
navigate in a world where they are overwhelmed with information,"
Mr. Wilson said. "With that, we believe the economics will
follow."
Mr. Wilson said the advertising split Facebook is
offering--publishers keep 100% of any ads they sell and 70% if
Facebook sells the ad--made the deal "mutually beneficial."
"The Silicon Valley approach is to learn and tweak what you did
yesterday or last week and adjust," said Ms. MacCallum. "A newsroom
in the new era requires that kind of constant strategic
thinking."
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