The New York Times‘ expanded paywall offerings are off to a poor start, and its three-year run of higher circulation revenue may be at an end.
The Times‘ digital-subscription strategy has been a huge success since it launched in March 2011, tallying 799,000 subscribers by the end of last month. But the high growth rates for the $195-a-year product, which have saved the paper’s bacon, were leveling off, while print circulation continued to dwindle and digital ads went backward. The Times needed a new source of growth.
So the paper launched NYT Now and NYT Opinion last quarter to try to goose digital subscriptions with cheaper offerings, and it debuted Times Premier to get more revenue from some existing subscribers. It didn’t really work.
The Times added just 32,000 subscribers in the second quarter and increased paywall revenue by $1.4 million, or 4 percent. Its costs, meanwhile, increased by $18 million, driven by investment in its digital products, including the new apps.
Here’s Times CEO Mark Thompson’s statement on the results:
But, while we expected the portfolio to take time to build, we want to accelerate the rate of growth in subscription sales, so over the coming months, we will refine some of the offers and the way we market the portfolio to accomplish this.
That’s executive-speak for “it was a bust.”
It’s true that its gain was better than it would have been without the expanded offerings, which the Times says accounted for most of the 32,000 new subscriptions.
And some of this is seasonal. The second quarter has historically been the Times‘ weakest period for digital-subscription growth, as this chart shows:
But the Times is projecting flat circulation revenue for the third quarter, despite a hike in print delivery prices. That signals that the paper has raised print prices as far as they can go, at least for now. The revenue gains from those price increases aren’t overcoming the circulation declines, and digital gains aren’t enough to make up for it.
The Times‘ digital-subscription growth looks particularly weak coming days after the Financial Times reported enormous digital-subscriber gains, and paid digital circulation now more than doubles its print circulation. The FT, whose pioneering meter (which lets readers see several stories a month for free before erecting the paywall) is nearly seven years old, saw its digital subscriptions jump 33 percent to 455,000. The NYT’s digital-subscriber count was up 19 percent from a year ago, despite the addition of low-cost products.
Here’s FT.com managing director Rob Grimshaw talking to The Audit’s Dean Starkman last month:
The gain on subscription side has been enormous, because what we found was, as soon as we pushed hard on this, and we turned the dials on the model to the point where many people were coming up to barriers, a lot of people went through, and more than that, they were happy to come through at price points that were far above what any of us had anticipated.
The NYT may well be able to tweak its model and increase subscribers more substantially. But these products aren’t likely to be major sources of growth. A better bet, and one the Times still hasn’t taken for some reason, is to experiment with pricing its core subscriptions. It needs to raise the cost of digital subscriptions, at least to cover inflation.
The good news for the Times is that digital ads are heading in the right direction again. They were up 3 percent last quarter. That’s not enough, but it continues the turnaround that started last quarter after two years of declines.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.