Posts about paywalls

Why not a reverse meter?

As I ponder the future of The New York Times, it occurred to me that its pay meter could be exactly reversed. I’ll also tell you why this wouldn’t work in a minute. But in any case, this is a way to illustate how how media are valuing our readers/users/customers opposite how we should, rewarding the freeriders and taxing — and perhaps turning away — the valuable users.

So try this on for size: Imagine that you pay to get access to The Times. Everyone does. You pay for one article. Or you pay $20 as a deposit so you’re not bothered every time you come. But whenever you add value to The Times, you earn a credit that delays the next bill.
* You see ads, you get credit.
* You click: more credit.
* You come back often and read many pages: credit.
* You promote The Times on Twitter, Facebook, Google+, or your blog: credit. The more folks share what you’ve shared, the more credit you get.
* You buy merchandise via Times e-commerce: credit.
* You buy tickets to a Times event: credit.
* You hand over data that makes you more valuable to The Times and its advertisers (e.g., revealing where you’re going on your next trip): credit.
* You add pithy comment to articles that other readers appreciate: credit.
* You take on tasks in crowdsourced journalistic endeavors: credit.
* You answer a reporter’s question on Twitter and the reporter uses your information: credit.
* You correct an error in a story: credit.
* You give a news tip or an idea for an article The Times publishes: credit.
Maybe you never pay for The Times again because The Times has gained more value out of its relationship with you. If, on the other hand, you hardly do any of those things, then you have to pay for using The Times.

I’ve been thinking about this, too, in light of a few other trends I’ve seen with newspapers online. First, some that are trying meters are finding that very, very few readers ever hit the wall (which papers are setting at anywhere from 1 to 20 pages). That so few hit the wall is frightening. It means that most readers don’t use these sites much. That’s nothing to brag about. Engagement is criminally low. Second, I’ve seen many sites that get a surprising proportion of their traffic from out of their markets — traffic that is valueless (or even costly, in terms of bandwidth) to sites that sell only local ads. This comes from following a goal of pageviews, pageviews, pageviews — brought in with search-engine optimization — rather than valued relationships.

After hearing a few such stories, I suggested that a site with a meter might want to reward local readers by giving them more free content and charge out-of-market readers by charging them sooner.

You see, that values the local reader over the remote reader. My idea for the reverse meter values the engaged reader over the occasional reader — and even rewards greater engagement. And therein lies, I think, the key strategic skill for news businesses online: understanding that all readers are not equal; knowing who your more valuable readers are; getting more of them; and making them more valuable.

Now I’ll tell you why my reverse meter won’t work: When I spoke with all our journalism students at CUNY about their business ideas on Friday, I asked how many had hit the Times pay wall — many — and how many had paid — few. Abundance remains the enemy of payment. There’s always someplace else to get the news. The Times can make its present meter work because (a) it’s that good [the Steve Jobs exception that proves the rule], (b) it’s still sponsoring — that is, giving a free ride — to its most valuable readers, though that is supposed to end soon, and (c) its engagement is still too low and thus many readers don’t even confront the wall (that needs to change).

So never mind the idea of the reverse meter, but retain the lesson of it: Value should be encouraged, not taxed. Readers bring value to sites if the sites are smart enough to have the mechanisms to recognize, exploit, and reward that value, which comes in many forms: responding to (highly targeted and relevant) ads; buying merchandise; contributing information, content, and ideas; promoting the site…..

The key strategic opportunity for news sites is relationships — deeper, more valuable relationships with more (but not too many) people. Engagement.

Daily economics

I have not seen News Corp’s Daily (I was invited to the preview last night but travel, exhaustion, health, weather, and thus prudence had me take the train home and I couldn’t get in today because of the ice). So I have nothing at all to say about the product. I am trying to get my head around the economics and I hope better mathematical and business minds than mine will analyze what it will take for the Daily to succeed.

Rupert Murdoch said the Daily went through $30 million in development costs that are already written off. He said operating costs will run $500,000 a week. So in the first year, the Daily will cost roughly $55 million. That’s a lot. For comparison, Portfolio went through somewhere between $40-100 million. I said we’d never see another publication launch of that scale. I was wrong. Also for comparison, News Corp’s abortive aggregator, Project Alesia, went through a reported $30 million.

Let’s say that circulation covers the costs of the Daily — since getting consumer revenue is the real point of the exercise — and that advertising is profit. Note well that I have *no* reason to believe that’s News Corp’s strategy. It simply makes it easier to illustrate the economics and the questions I hope other reporters tackle.

The Daily is selling for $1 a week or $40 a year.

So how many subs would they have to sell to break even on the $500k/week cost? (Note that’s break-even on an operating basis, not on the total investment.) It’s a bit more than 500k subs at $1 each for the reasons below.

Figure that Apple is taking something less than its normal 30% share for the privilege of having the Daily. Murdoch said that it will be ported to all major table platforms but then he said that last year, this year, and next year “belong to Apple.” (I have no idea whether he means that metaphorically or contractually.)

Figure also that there will be churn as there has been in iPad magazine sales. That means — as it always does with sub sales — that one must sell new subscriptions to replace cancellations to reach your magic number. Let’s say the Daily loses–and I’m pulling this number out of a hat– 10% a month, which it needs to replace. So if you’re selling 100k this month, you need to sell 110k next month to get to 200k and 120k the following month to get to 300 and so on.

I’m not qualified to run these numbers; I wish someone with circ experience would. But to pick another number out of the hat, let’s say that the Daily needs 750k net subs to hit cash-flow break-even because around 25% of circ revenue goes to Apple and half the subs are sold at the 20% discount. With churn, they’d need to sell a total of up to 1 million gross to reach that number while accounting for a subscriber acquisition (marketing) cost of, say, $10 (which is light but given Apple’s promotion, probably not unreasonable).

I picked 750k because it’s somewhere in the ballpark — Murdoch said he eventually plans to sell “millions” — and also because it leads to an easily rounded number for marketshare: The Daily would capture about 10% of the installed base of iPad owners today (though that’s a worldwide number, so the U.S. figure would be higher). That’s pretty high.

For comparison, Wired sells about 22k issues a month on the iPad, down from a debut of 31k, Glamour sold 2,775 in November, losing 20% a month from the prior two months (even as iPad sales soared)–note the higher churn number than I used above. So the Daily would need to sell roughly 34 times the sales of Wired. But it is daily and not monthly.

Now switch to advertising. The market will be small for sometime. I’m told these days that major brand advertisers won’t pay attention to a site until it gets 3 million audience. Then again, the value of tablet advertising is supposed to be high and advertisers like the experience. I also wonder whether the ads will also go through Apple and it will again take a share of a quarter to a third. There are so many variables in advertising–unique users per day; time spend and pages and ads views; avails per page; measurement of ROI (is there click-through?)–that it’s nigh until impossible for me to guess at the revenue. But I throw this out, again, in hopes that someone will tackle it.

Once more: I have NO figures other than the two Murdoch gave. I have ONLY questions. I hope the Daily is profitable; I hope any new news venture is profitable. I’d simply like to have a better idea of what it will take to get there. Anyone want to help? Please DO tell me where I and my assumptions are full of crap and please DO add experience and data. I just want to understand the dynamics of the business.

: Folks on Twitter are saying that I say the economics of the Daily don’t add up. I am not saying that. I simply want to see the addition.