When “Enormous” is Picayune: the NYTimes.com Paywall

The ‘Reality Distortion Field‘ is a term coined by Apple Computer employees and competitors to describe how the bravado and charisma of Apple co-founder Steve Jobs tends to make his audience overlook otherwise obvious flaws in what he promotes. Job’s  Reality Distortion Field works because his audience wants to believe what he says.

So too operates The New York Times‘  Reality Distortion Field about its website paywall. Like Apple fanboys, NYTimes.com fanboys, primarily composed of professional journalists other newspaper people, want the paywall to succeed and are more than willing to suspend their critical faculties when judging it.

Two recent cases are Seth Mnoonkin‘s article The Kingdom and the Paywall in New York magazine and Felix Salmon‘s The New York Times Paywall is Working in Columbia Journalism Review.

Salmon writes:

Back in April, I was very skeptical that The New York Times would achieve its leaked goal of getting 300,000 paying digital subscribers, and I put my money where my mouth was, entering into a bet with John Gapper. John wouldn’t bet me that the NYT would get to 300,000 within a year, so we pushed it out to two years instead. But he needn’t have worried, as Seth Mnookin explains:

It will take years for the ultimate wisdom of the Times’ strategy to be apparent, but the company’s second-quarter-earnings report proves that its digital-subscription plan has thus far been an enormous success. The internal projections have been closely held, but several people have confirmed that the goal was to amass 300,000 online subscribers within a year of launch. On Thursday, the company announced that after just four months, 224,000 users were paying for access to the paper’s website. Combined with the 57,000 Kindle and Nook readers who were paying for subscriptions and the roughly 100,000 users whose digital access was sponsored by Ford’s Lincoln division, that meant the paper had monetized close to 400,000 online users. (Another 756,000 print subscribers have registered their accounts on the Times’ website.)

If an organization such as an automobile company, a bank, or even a charitable organization claims that it’s achieved an enormous financial success, journalists objectively research such claims. Journalists are trained to report outside judgements, such as interviewing outside experts, even try to find dissenting opinions. But when a journalistic sacred cow such as The New York Times is the subject, fanboys’ abilities to perceive reality or objectivity become distorted.

Moreover, in this case, The New York Times itself is directly behind and fueling the Reality Distortion Field.

Look at what Salmon writes. “…its leaked goal of getting 300,000 paying digital subscribers.” If a publicly held company wants to achieve a success, the best ways is for the company itself, rather than anyone objective, to set the definition of ‘success’. And to set that definition as a level that the company’s already conceived business plan can easily achieve.

Journalistic fanboys unquestionably accepted The New York Times‘s own definition of success for its paywall. Unlike what they would do with any other organization’s claim; they didn’t ask outside experts if gaining 300,000 paying digital subscribers would prove that the newspaper’s paywall was a success. They simply accepted the Times‘ own proposed definition of success, swallowing it hook, line, and sinker. And particularly because the newspaper leaked it to them.

Let’s objectively examine the newspaper’s own definition of paywall success:

If we are to believe the newspaper’s own claim, NYTimes.com has more than 45 million unique registered users each month. Now more than four months after the site launched its paywall, 224,000 of them have agreed to pay. If you believe that 300,000 is the definition of success, then achieving 224,000 within three months will seem like a success, even a ‘enormous success’.

Yet 224,000 is a mere half of one percent of the site’s users. After a third of a year, exactly 0.498 percent of the site’s more than 45 million registered users have agreed to pay to read more than 20 Times stories per month. I think that’s an abysmal percentage. Even if you add the 57,000 Nook and Kindle subscribers, it laughable to consider that a success, and fatuous to consider that an enormous success. After four months’ use of this daily newspaper’s website, 99.5 percent of its users have decided not to pay.

Look at it another way, the printed edition of The New York Times is available daily in the majority, but not all the United States, a country with a total population of 308 million, and this edition has an average weekday circulation of 916,911 paying users. However, the Web version is readily available daily to the world’s more than two billion users of the Internet, yet has achieved only 224,000 paying users. The online edition is available to more than six times as many potential users but has achieved only one-third as many paying users as its printed version. Six divided by one-third means one eighteenth the performance, nonetheless ‘success’.

But this fatuous ‘success’ has motivated fanboys to imitate it.

For examples, six U.S. daily newspapers owned by Lee Enterprises are reported to be launching paywalls similar to the Times‘. The MissoulianRavalli RepublicBillings GazetteHelena Independent RecordMontana Standard andCasper Star Tribune have weekday circulations ranging from 38,364 (Billings) to 7,400 (Ravalli). Their average weekday printed circulation is 20,007 (median 17,918). If four months after launching their paywalls, they achieve 0.49 percent of their printed edition’s circulations, these newspapers will have signed up a 37 and 191 paying users of their website.  Enormous numbers?

Now, did you notice a bit of sleight-of-hand in my calculation there? I multiplied 0.49 percent by those newspapers’ printed circulations, not by the number of monthly users of those newspapers’ websites. However, the fact is that most daily newspapers have far fewer online monthly users than daily print subscribers. The exceptions are national newspapers (such as The New York Times) and a relatively few large regional newspapers. It’s very likely, if not certain, that the MissoulianRavalli RepublicBillings GazetteHelena Independent RecordMontana Standard andCasper Star Tribune each have fewer monthly online users than daily print subscribers. That means these newspapers’ website paywalls will likely generate far fewer than 37 to 191 paying subscribers, likely no more than 25 to 100 by the Times‘ benchmark of ‘success’.

But aren’t I forgetting growth? After all, NYTimes.com has been charging for little more than four months. Well, if that daily newspaper has converted only 0.49 percent of its registered users after more than four months, do you think that percentage is simply going to continue at the same rate or go up? Decades of data from the newspaper, magazine, and pay TV industries show that conversion rates peak rather quickly after conversion starts. The targeted avid users quickly sign up, then conversion rates rather rapidly decline. If you think NYTimes.com will continue to gain 224,000 paying users every four months, you’re either dreaming or more likely suffering from the Reality Distortion Field.

Moreover, as my friend Bob Cauthorn has reminded me, there is something called churn. Newspaper circulation workers know all too well what that term means, but remarkably few journalists (particularly the fanboys) do. Churn means that not all of the 224,000 people who’ve already signed up will continue as paying subscribers.

As newspaper analyst John Morton pointed out a few years ago, nearly 58 percent of subscribers to printed newspapers cancel their subscriptions within a year and must be replaced by new subscribers (among newspapers the size of The New York Times, it was nearly 66 percent). These percentages, calculated by the Newspaper Association of America, were from the 1990s. I’m reasonably certain that today’s percentages are even higher.  I don’t think that NYTimes.com will keep all 224,000 of its paying subscribers. And as that number grows, its percentage of churn will grow, too.

What percentage of its registered users will NYTimes.com have converted to paying subscribers within the first year? It will be lucky to achieve a percent, although I think the actual percentage will be lower. Nearly nine years ago, I wrote a ClickZ.com column examining the paywalls that has then been launched by Salon.com, The Irish Times of Dublin, the South China Morning Post, FT.com, the Columbus Dispatch, and the Cedar Rapids Gazette. I concluded:

Each spent 4 to 18 months trying to convert users into paying subscribers for traditional content. Each converted no more than 1 percent.

My study of these and others indicates the average free-to-paid conversion rate for general interest news sites at between 0.4 and 0.7 percent of unique users.

I stand by this 2002 column. The Irish Times ceased charging, realizing that it had been a mistake, as did Salon.com. The exception has been FT.com, a financial daily, which has signed up 230,000 paying subscribers from among its 3.7 million registered users: 6.2 percent. I’m quite happy to see that financial dailies, whose content is much more specific than general-interest dailies, do better. For example, During the past 13 years, WSJ.com has signed up over one million paying subscribers from among its 20 million unique monthly visitors: 5 percent.

Since you’ve read this far, here’s the kicker: I’m not against daily newspapers charging for content online. What I’m against is their attempting to charge for providing exactly the same content to all of their users. It’s that practice online that’s ruining the newspaper industries in post-industrial countries.

For instance, it’s been no secret in the newspaper industry that the average user of a print editions generally reads only two to six of its 20 to 100 stories published per day, that individual doesn’t consider the other stories valuable enough to read. When that print user switches to online, the number of stories he goes to on any publications site each day is almost always even less, simply because he can access online elsewhere more stories he that he might want. So, why continue to give all online readers the same selection of content each day? Particularly when most newspapers don’t publish—in print or online—most of their available content?

As a former daily newspaperman, wire service executive (UPI and Reuters), and now media professor, I estimate that The New York Times‘ newsroom receives more than 5,000 stories each day from AP, Reuters, AFP, DPA, and other news services and news syndicates, plus at least a hundred daily submitted by the Times‘ own 800 or more staff journalists. Yet the print edition publishes only some 50 to 100 of those more than 5,000 stories because there’s not room for more in print. However, that spatial limitation doesn’t exist online. NYTimes.com does publish somewhat more stories than the print edition does, probably 200 to 300 stories, yet that’s far fewer than it could.

But how would an individual find the stories he wants among some 5,000? A good question if you believe that NYTimes.com must present the same selection to all of its more than 45 million users. But the fact is it doesn’t. What it should do is show a present a different selection of stories to each of those users.

No, I don’t mean that way not everyone will see the important stories. The editor can still mandate that every user see the U.S. federal debt ceiling limitation negotiations stories, the Oslo bombing and shootings bulletins, etc. However, not every, or even most, readers will want to see the story about a coup in the Central African Republic or about the new flooding in Bangladesh. Give Milwaukee Brewers fan the story about their game last night rather than providing everyone with Yankees and Mets stories. Indeed, provide the foreign-born, Houston resident, fan of cricket who cares nothing about American sports with nothing but cricket stories if he chooses.

Better utilize more fully the NYT newsroom’s inventory of its own and third-party stories, thereby making NYTimes more valuable to its users.

That’s how to raise its number and percentage of paying online subscribers. Not by transplanting the spatial limitations of the printed edition into a new media where that limitation doesn’t exist. It’s a shame, but that’s what NYTimes.com and almost every other daily newspapers’ website is doing.  Only by that hobbled measurement can the NYTimes.com’s 224,000 paying subscribers be in any way be considered a success.

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