Will Online Revenue Return the NYT to Wall Street Glory?
January 24, 2010
In my opinion, the NYT’s online charging plan may not return the NYT to Wall Street glory? My instincts were confirmed when I read the interesting article by Erick Schonfeld. The story “The New York Times’ Online Meter Will Hardly Move The Needle” works through some assumptions about online revenue for the NYT. The net net for the analysis is that the NYT may not make much headway in traffic or online revenue. I agree. But the addled goose has several observations to make about any online revenue projection. I am not disagreeing Mr. Schonfeld. I want to add some color to the challenge of generating revenue online.
Will the NYT’s plan for online fees create a triumphal moment for the company? Source: http://2.bp.blogspot.com/_gcgZo60Vlvo/RtmLbS2ttmI/AAAAAAAAAPY/nnlQN2aQSG0/s400/Arc_De_Triumph_Flag.jpg
The Need for Big Money
First, the NYT has to generate more money from online than Mr. Schonfeld’s analysis outlines. The reason is that increasing costs in the NYT’s other businesses forces new revenue streams have to outperform expectations. If not, the NYT will continue to suffer revenue pressure. In my model of online pricing, I include such factors as the increase in G&A costs, rising costs for consumables, and increased sales and marketing costs. If online performs at a level consistent with Mr. Schonfeld’s analysis, the NYT will have no choice but find other revenue or just get much smaller. Drastic steps may be need to get the NYT back on the investors’ must-buy list. Will the 2011 target and the revenue from online make this happen? No in my opinion. Cost control will be the killer.
Second, an online product is different from a print product. The audience or customer typically reacts in a way unique to online. The result is that different products and services are needed. In my experience, the domain expertise of print and traditional audio or video programming cannot be quickly or economically repurposed. More that technology is a challenge. The “deep knowing” is different for print and online.The people right for print or traditional media may not be the ones for online. A core competency, it is producing content using a scheduled, serial method. Online and the new audio and video distribution channels require different methods and different “deep knowings”.
Third, the NYT’s online product– like that of the WSJ and the FT for that matter– is going to get some oomph or an “X” factor. Today I reviewed for a client the now defunct or at least non responsive FT Newssift.com (you may get a 404). The FT has not been able to leverage its global brand with its successive “reinventions” of its online service. Newssift.com was to be a new approach using nStein, Endeca, and Lexalytics. I don’t think it worked. The WSJ as well as the FT and NYT present news and information is a way shaped by their print siblings. Putting print online works to a degree but more is needed to make online generate the type of revenue the NYT needs. The NYT, like other newspapers containing more general interest information, my not be be “must have” content for a big chunk of Web users. The problems are the users and the Web medium. Where’s the hot service that makes NYT content the cat’s pajamas.
Here are some items from my notes about traditional publishing and online:
ITEM. Thomson Reuters jumped into for fee online by buying Dialog Information Services. Thomson Reuters jumped out of online by selling at a hefty discount the Dialog for fee online service to a unit of Cambridge Scientific Abstracts. Thomson Reuters is a canny outfit. Net net: online is a tough sector for experts like the Thomson Reuters’ management team which saw problems in traditional publishing a long time ago, tried online and did serious reengineering, and now is moving in new directions such as value added software and services plus information. Will the NYT follow in Thomson Reuters’ footsteps?
ITEM. Newsstands, book stores, and NBC face difficult market hurdles. Without a viable traditional distribution mechanism, the traditional business models don’t work very well. As a result, the traditional producers of content must raise prices, cut staff, and find new products to sell. The result is that both the buyers and the distribution channels for traditional products are constricting. In short, market realities are going to increase the financial pressure on traditional publishers, not reduce it.
ITEM. Individuals who used to work at traditional publishing companies now have to find a way to make money. The result is that there are some skilled journalists who write blogs, create content for outfits like Demand Media, or who go to work for a company and write white papers. The challenge is that as the volume of digital information goes up, algorithms not human editors can make sense of this information. With more humans writing and algorithms making decisions, what’s the money making niche for the traditional publisher?
Why do Google, Microsoft, and Yahoo focus on online advertising, fees, and other charging methods? My hunch is that these three companies focus on getting revenue, not applying traditional publishing business models to their information businesses.
Stephen E Arnold, January 23, 2010
Yep, another freebie. I was on the phone from Europe with a client on another continent. I was paid to talk, but not about traditional publishing. I will report this failure to bill for this write up to the closest US embassy.
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