New York Times experiments with perverse incentives

The New York Times paywall (don't call it a paywall? Right...) is a strategic error, and not even a very complicated one.

So there's some science behind it, and the number of articles you can see before you have to pay (20) has been calculated from actual traffic data rather than just pulled out of the air, which is a good start. And it's always good to see a news org putting in some serious R&D, which at $40 million just to develop NYT's paywall definitely counts. It's not as if there's nothing about the move to like - it's considerably more thoughtful and nuanced than TimesSelect or the other, many, failed experiments in charging for (non-porn, non-finance) content that have failed over the past decade and a half.

Felix Salmon crunches the numbers and works out that the paywall (which cost $40m to develop) will make about $24m a year, "a minuscule amount for the New York Times company as a whole; it’s dwarfed not only by total revenues but even by those total digital advertising revenues of more than $300 million a year". Cory, of course, points out how geeks will avoid paying (which they will, just like they avoid paying for movies or watching TV ads) so the real revenue figure is probably $24m minus however many of the NYT's core audience are harcore technophile paywall-avoiders.

But the problem here isn't with the pricing model or the numerous potential technical work-arounds but with the fundamental strategy and what it says about what the New York Times thinks it is and thinks it is for. Here we go back to 2006 and Terry Heaton's old tale of Mr and Mrs Media (if you haven't read this before you should do so now). NYT, like all news orgs, faces any number of challenges - but the big one is the loss of the good old gateway monopoly. Where once the US paper of record was the place its readers started when they wanted to know what was going on in the world, now it's just one of millions of possible sources of content, and for people wanting to know what's going on in the world the starting place is Google or Google News or Twitter or Facebook or...something else that aggregates and filters content from all providers.

On one level, NYT acknowledges this shift - FAQ point twelve says:

"We encourage links from Facebook, Twitter, search engines, blogs and social media. When you visit NYTimes.com through a link from one of these channels, that article (or video, slide show, etc.) will count toward your monthly limit of 20 free articles, but you will still be able to view it even if you've already read your 20 free articles."

So if you come in to the site from Twitter, or from Facebook, or from Google, you aren't bound by the 20 articles a month limit. So long as you arrive that way, you can keep arriving that way as often as you like. This is a perverse incentive to say the least - it encourages NYT readers to use Twitter or Facebook or Google or a feed of news blogs as their starting point for news, and only end up on NYT if one of those sources happens to point there (which they might, if they haven't used up their 20 articles). "Don't come here", says the strategy. "Go over there, and see if those guys point you this way". That's no solution to news fragmentation. That's an admission that you don't know how to deal with it, and hope instead to just keep monetising loyalists at a central point. 

Over to Vin Crosbie, writing in 2004 (these are not new problems): 

"The core connection between a newspaper and its readers isn't its newsprint, its local or national news, editorials, columnists, opinions, cartoons or its classified or display ads. No, a newspaper's routine - automatic and intact daily delivery of everything that the reader should want to know on that day - is the core connection."

With the new paywall, invisible to Twitter and the social web but solid to regular readers, the New York Times concedes its position as that source of everything the reader should want to know. It's not where you go to find out what's going on - that, says, the Times, is Twitter and Facebook and blogs. Go to the Times looking for that and they'll bounce you out to a paywall after twenty articles. So what is the New York Times now? It's one amongst millions of places that the people you follow via social media might point you for news. That's a massive climb-down, and exactly the wrong strategic direction for one of the greatest news organisations in the world.