A year into the 'Times' digital subscription program, analysts and insiders see surprising success, and more challenges to come
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Even the print edition has benefited: The Times announced in November that home-delivery circulation had increased for the first time in five years, a bump that was attributed to more people being willing to pony up for a paper that also comes with unlimited digital access.
And, as predicted, other publications have followed suit. The Los Angeles Times, for instance, is one of the latest newspapers to implement a metered digital subscription plan. In developing the program, which launched earlier this month, the paper "looked closely at a number of transactional and subscription models" including "the impact and implementation of The New York Times' roll-out," according to a spokesperson. All told, roughly 150 daily newspapers have now done the same, and as many as 100 more are expected to make the leap in the coming months, according to a new study out today from the Pew Research Center's Project for Excellence in Journalism.
On earnings calls and in public appearances, Times executives have expressed nothing but confidence in the success of the metered model. (The Times declined to make any of them available for this article.)
"I don't get the weekly memos on how the business of the Times is doing anymore," said former executive editor Bill Keller, whose final year at the helm of the paper's newsroom was largely consumed by talk of its digital transformation, during a discussion at the City University of New York's Graduate Center last month. "But from what I understand, the number of people who are paid subscribers to the Times online is considerably bigger than we had forecast. The predictions that traffic would plummet have not borne out … And rather than hurting advertising, on the contrary, advertisers seem to think: People like this so much they're actually willing to pay for it."
And inside the building, the success of the meter model has inspired a new confidence among the Times' journalists.
"The sense that we know we took a thoroughly risky decision and that it's working better than anticipated is palpable," said a senior newsroom source. "It's given a renewed sense of confidence to the place, that they pulled off something this big and this hard and made it work. There's talk now of investing in and growing for the future, with the knowledge that whatever the height of the stool, they've put another leg under it."
But it's only the beginning, and there are signs that making this model continue to work at an increasing scale will take significant effort and resources.
Already, the rate of subscriptions has slowed since the initial burst that accompanied the metered-model launch last March. The Times Company, meanwhile, saw its profits slide by 12.2 percent to $58.9 million dollars in the fourth quarter of 2011, and the company has yet to name a new chief executive to plot the paper's future following the abrupt retirement of longtime C.E.O. Janet Robinson in December of last year.
"I think over time it's got a long way to go," said Edward J. Atorino, an analyst with the Benchmark Company who has covered the media industry for 30 years. "If they could get to half of their print subscriptions"—around 1.2 million on weekdays, according to the Audit Bureau of Circulations—"in the relatively near future, I think that would be very good, and eventually they've gotta get to a million people. If they could get this thing to a million at some point, then they own the industry."
One person close to the metered model told Capital that 600,000 to 700,000 subs was a realistic goal for now: "I think that's achievable and that would be great."
But even with its existing confirmed subscriber total of 390,000 (probably over 400,000 at this point), the metered model is bringing in a healthy chunk of revenue that didn't exist before, albeit not an astronomical amount in the grand scheme of things.
Ken Doctor, an analyst with Outsell, estimates that the metered model is presently generating $86 million a year; in other words, 12 percent of the Times' yearly circulation revenue and $100 million less than the company's annual digital advertising revenue. A March 8 investors note from Barclays Capital predicted a potential annual revenue bump of $100 million over the next two years, according to a report in Crain's New York Business.
"So, overall, the Times digital circulation seems to be an increasingly important part of the next-gen publishing model, but not an earth-shaking one," Doctor wrote in a recent blog post.
Scaling the paid model, Doctor said in an interview with Capital, will require further investment in marketing, social media and new technologies in order to grow the subscriber base well beyond the core pool of mostly U.S.-based readers that signed on during year one.
On the marketing side, the Times has already seen success.
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