Lesson of the NYT Paywall

The controversial NYT decision to reinstate a digital paywall earned some measure of vindication last week…the company’s third quarter earnings were more positive than expected, buoyed by an increase in digital subscribers.

Julie Hucke/Getty Images

Whether this is viewed a success depends on who you read.  To Ryan Chittum (in the Columbia Journalism Review) the reported 324K paid subscriptions in third quarter (up 15% from the previous) puts digital subscriptions on route to roughly 400K this time next year and perhaps $65K in annual revenue, enough to make a difference for supporting news operations… and a positive outcome.

The porous nature of the wall has been widely documented.  Aside from reading less than 20 articles a month there are myriad ways to avoid paying including switching browsers, deleting cookies or getting links from social media or search.  But to Felix Salmon (in Wired) the porous nature of the wall is a point in its favor, extracting revenue from those willing to pay without constricting overall web traffic.   The positive impact of the paywall on the perceived value of being a print subscriber…and an apparent uptick in print subscriptions…has also been noted (Henry Blodget in Business Insider).

The counterpoint, represented by Mathew Ingram, writing in Gigaom, argues that there’s nothing to get excited about.   Whether the audience will ever rise beyond current levels is an open question.  Citing an estimate of roughly $35M annually, Ingram notes that it’s a drop in the bucket compared to total NYT revenue.   But his biggest knock, echoed by others, is that this a defensive rather than forward looking strategy, charging people nickels and dimes as publishers have done for generations rather than developing new business models for the digital world.

The most interesting thing to me is that Times is taking an essentially different approach than it did with Times Select.   And the difference echoes a question I was asked as an analyst within a media company a couple of years ago…what sort of content are people more likely to pay for?

The big aha…is that was the wrong question.  The key variable is not what, it’s who.   In their last paywall experiment, the Times walled off particular types of content.   This time they’re extracting revenue from particular types of users, those that consume more content and those that are either less tech savvy…or more conscientious or more loyal…or perhaps simply too time-pressed to bother to circumvent the paywall.  The user-focused approach seems to have more legs.

New business models will not be born into the world fully clothed.   But digital ad revenue will have to be supplemented by other revenue streams for news publishing to remain viable…yes we will somehow have to extract additional nickels and dimes from readers.   There is a lesson learned from NYT’s tentative success…the critical question is not what content to put behind a wall but what users we can count on for the incremental nickels and dimes.    That insight will lead to more effective business models.    Because we surely have more ability to segment audiences in the digital world than we ever did in the world of paper and ink.

Surprise: Innovators Prefer Android

The Nielsen chart below (sourced from Slashgear, Sept 1) shows that the further people are along the adoption curve the less sure they are about the operating system they want in their next smartphone (based on likely smartphone upgraders).   Only 7% of Innovators are unsure about what operating system they want …but 30% of Late Adopters are unsure.   That’s no surprise, though it may indicate opportunity for players to reshuffle their positions as the market matures.

What is surprising though, at least to me, is the bimodal pattern for Android preference.  I had assumed that the Android phone is perceived by consumers as “the poor man’s iPhone”, with user stereotypes in my mind similar to this piece…that could be summed up as Android: Cheesesteak, iOS: Sushi

But the Nielsen data at least partly contradicts this stereotype, which can be seen more clearly if you take out the “not sures” and base percentages on those who are sure.    Android preference increases as you move to the end of the adoption curve – to the later adopters – that’s  true.   But Android preference also pops up at the top of the curve, among those likely to be the first to adopt new technology.   Apple preference is relatively strongest…among Early Adopters and the Early Majority.

This may relate to a heated discussion on Stackoverflow about developer preference between the operating systems.     The original post and reported data suggest that Android preference is rising sharply among developers; that Android surpassed iOS preference around mid-year.   The many doubting comments point to the non-representativeness of the data (e.g., do iOS developers ask their questions on sites other than Stackoverflow?) and question what it means (e.g., do Android developers ask more questions on Stackoverflow due to the inferiority of Android documentation?)

But seeing two pieces of information from different sources (and contexts) pointing in the same direction makes me wonder…is Google in fact making headway against Apple at both the bottom and the top of the tech-savvy spectrum?

Soft Programming and the Missing Platform

At the Mediapost Future of Media Forum earlier this week panelists were asked what companies they expect to join Amazon, Apple, Facebook and Google as dominant players in the new media world.

No specific company names were mentioned but there was an interesting discussion between the moderator, Josh Quittner, Editorial Director of Flipboard, and Steve Lacy, CEO of Meredith Corporation about what makes Amazon, Apple, Facebook and Google so dominant.  “Platforms” was the key word of the discussion…the notion that these companies have created an environment for interacting with consumers that other players gravitate to.  As the discussion evolved, the phrase in my mind was “network effect”; the more consumers converge on these platforms the more gravitational power they gain to attract more content…and more usage.

That is not to say that other companies won’t break in…someone on the panel said there will be hundreds of new and successful companies capturing emerging, lucrative niches.  But the implication of the discussion was…if a new major player emerges it will most likely be the creator and owner of a new platform that speaks to some fundamental consumer need.

The question then becomes, is there a missing platform?  The clue is in an article that appeared in today’s New York Times, among the many that paid respects to Steve Jobs.  As per the article, despite the huge impact of Apple products on the way we consume media, TV, the medium that captures the bulk of our time, remains relatively untouched.   Both Apple and Google have taken aim but Apple TV is still a miniscule player and Google TV seems to have little or no traction.   My bet is that somewhere in this area the new platform and perhaps new corporate player will emerge.

What do people want in the area loosely defined as TV?   This includes traditional cable and satellite delivery, multi-platform and over the top delivery of online video, players like Netflix, Hulu, Amazon, iTunes and YouTube… all competing for share of the consumer’s video-viewing time.

I think the consumer wants what they want in every other sphere…choice and control…to find through the mass of everything available the content they want to watch at any particular moment in time.

Soft programming is the phrase I would use to describe the consumer need.   Hard programming is the old-fashioned model – we’ll schedule this show at 8P as a lead-in to this show at 9P.   Video search is on the other side of the spectrum – zero programming – if you know what you want we’ll help you find it.   Soft programming is something in-between…a user-friendly narrowing of the consumer’s choice without forcing anything down his throat.   The Netflix recommendation engine is an example of soft programming that works beautifully within Netflix…though it doesn’t help the consumer cut through the myriad video offerings impinging on him from all sources.   Another example of soft programming is old-fashioned channel surfing.   That’s how the consumer used to deal with the problem rather than fully accepting any hard programmed stream.   But there are going to be too many video options for that venerable method, or existing clunky channel guides, to address the need.

Will one magical solution come to the rescue?   Of the many barriers, I’ll name two.  Content owners and distributors will do anything before they allow a third party filter to come between their assets and the consumer…unless their hand is somehow forced.  And second, perhaps less of a show-stopper but bothersome, the consumer will resist buying any additional piece of equipment, any new “box”….see Apple TV and Google TV.

But any unmet consumer need is like water building up around a dam.  As video content, linear and on demand, continues to inundate the consumer from a myriad of sources, the need for a smart, personalized, soft programming filter will grow.  Eventually some Jobs-like genius will invent the video content platform of the future…and, to get back to the original question, his or her company will be the one that joins Apple, Amazon, Facebook and Google as a major player in the new media age.