The New York Times Paywall Is Working Better Than Anyone Had Guessed

Photograph by Michael Nagle/Bloomberg

The New York Times instituted a paywall on its website last year, a controversial move that has yielded great results.

Ever since the New York Times rolled out its so-called paywall in March 2011, a perennial dispute has waged. Anxious publishers say they can’t afford to give away their content for free, while the blogger set claim paywalls tend to turn off readers accustomed to a free and open Web.

More than a year and a half later, it’s clear the New York Times’ paywall is not only valuable, it’s helped turn the paper’s subscription dollars, which once might have been considered the equivalent of a generous tithing, into a significant revenue-generating business. As of this year, the company is expected to make more money from subscriptions than from advertising — the first time that’s happened.

Digital subscriptions will generate $91 million this year, according to Douglas Arthur, an analyst with Evercore Partners. The paywall, by his estimate, will account for 12 percent of total subscription sales, which will top $768.3 million this year. That’s $52.8 million more than advertising. Those figures are for the Times newspaper and the International Herald Tribune, largely considered the European edition of the Times.

It’s a milestone that upends the traditional 80-20 ratio between ads and circulation that publishers once considered a healthy mix and that is now no longer tenable given the industrywide decline in newsprint advertising. Annual ad dollars at the Times, for example, has fallen for five straight years.

More importantly, subscription sales are rising faster than ad dollars are falling. During the 12 months after the paywall was implemented, the Times and the International Herald Tribune increased circulation dollars 7.1 percent compared with the previous 12-month period, while advertising fell 3.7 percent. Subscription sales more than compensated for the ad losses, surpassing them by $19.2 million in the first year they started charging readers online.

Those numbers also underscore how much the Boston Globe — its only remaining asset outside the Times media brand — has dragged down the company’s total sales. Had the Times sold the Globe when it offloaded its regional newspapers, it’d most likely be reporting a sales spike this year instead of a decline.

The Times’ online paywall lets visitors read 10 articles per month before prompting them to subscribe. Readers can still see articles linked from an authorized social network, such as Facebook or Twitter.

Part of the argument against paywalls is that newspapers could make more from open access. More readers means more sharing and is thereby sure to mount increased traffic. Online advertising, however, sells at much lower rates than print ads. Also, the common tactics for attracting eyeballs on the Web may not work as well for the Times, which has a reputation to protect.

That said, the company doesn’t separate digital ad and circulation sales figures from those in its print business. What we do know is the Times and IHT had 566,000 paying online subscribers as of the end of September, an 11 percent increase since June, while print readers have been on the decline. Sunday print editions slipped 1.6 percent this year from a year earlier, while weekday circulation dropped 6.9 percent to 717,513, according to the Alliance for Audited Media. That means paid Web readership is quickly coming to rival those in print.

To be sure, the digital subscription business isn’t the only reason for the increase in distribution sales. The Times raised print delivery prices by 4 percent this year and plans to raise prices again next year by 5 percent. But those increases may have only offset the drop in print circulation as outlined above. It’s also possible those price increases caused some to drop their print subscriptions.

Despite the metrics, the larger significance of the Times’ newfound subscription wealth is that readers, not advertisers, are now more directly responsible for the Times’ business — minus a few stubborn bloggers.

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