Financial Times: NYT's Paywall Will 'Absolutely' Work

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The New York Times will begin charging for online content at the end of March, when a full year's subscription to NYTimes.com will come out $455, basically the same as subscription to the print edition and the website combined. The New York Times is the first major generalist newspaper in the U.S. to experiment with a paywall. The Washington Post, LA Times, Chicago Tribune and USA Today are all free online publications.

But the paywall model is alive and well in the financial newspaper world, where FT.com imposes a hard cap of 10 articles a month for non-payers. I spoke with Rob Grimshaw, managing director of FT.com, who helped the Financial Times transition successfully to a hybrid model that is the envy of the online newspaper world and a template for the NYT. Our conversation, edited for clarity, appears below.

Let's get straight to the point: Do you think the Times' paywall strategy will work?

I do. Absolutely. I felt for some time that the model we placed on FT would also work for general news content.

How do you define "work"?

It's going to be a different measure for every publisher. For us, "work" is about building a successful model online. We have 210,000 digital subscribers, and 400,000 copies circulate in print. We've grown digital revenue by 50% across the last year.*

The Times' full digital access is as expensive, sometimes MORE expensive, than a print subscription plus full online access. Does that makes sense?

"The reality is that the habit of reading a broadsheet is not something that is for everybody."

I think so. Our premium subscription, at $389, is pretty much the same as our print subscription. I think that's right. Our paper is a dollar a day. The Times is a $1.25 a day. People pay $2-3 for one cup of coffee every morning, and this is a couple hundred articles a day.

Also, I don't see why online should be a cheap substitute for print. If you want to maintain your print for as long as possible, you want to make print and online equal so people chose the channel they prefer.

You have to acknowledge that online can be more valuable. It's more timely, we have an archive and community features and blogs. Print is great and we love it, but there are things you can do online that you can't do in print. So maybe you should charge in the same.

The FT and WSJ rely on businesspeople and companies flush with cash. Who's going to buy a NYTimes.com subscription who doesn't already get the paper at home?

I think there is a generation of people who are comfortable buying items online, who pay for games and iTunes. But also some kids from a younger generation won't pay for digital content. The FT is aiming fairly upmarket. The reality is that the habit of reading a broadsheet is not something that is for everybody. The number of people who do that is a single digit percent of the population, and the demographic breakdown of that group is skewed to the top end.

If you were advising the Times, what would you tell them about mistakes you've made and seen made in the industry?

I think you have to have some [paywall] out there. We found that a measure of sampling helps. We allow registered users to have 10 free articles per month. That has allowed people to come into the shop and look around before they decide to buy.

We started with our barrier at 30. Then we gradually brought it down over two years. We've been able to grow both advertising and subscription every year, year over year, since we put the model in.

Do you expect a fall-off in advertising revenue for the Times website?

No. The other important factor to keep in mind is that registration and subscription data gives targeting info to advertisers, and they're prepared to invest in gaining access to that kind of targeting. So you push up your advertising yield.

What's the number one mistake somebody can make in turning to a paywall strategy, and is the Times making it?

I think they've avoided the main mistake, which is to put in a straight paywall right across everything and force everybody to jump straight over it. They created [a 20 article limit] and they can toy with it over time. They're not putting everything on red. They're exploring it.

When will we know that they've succeeded or failed?

I think you have to give it quite a period of time. My experience with building a subscription business is part of this is the technology and part of it is pricing. Both take time. Give it a year and a half, then you can start making conclusions.

*Update: The FT emails more stats:
1) Digital services accounted for 40% of FT Group revenues (up from 14% 2006). 
2) Content revenues grew to 55% of our total revenues (up from 33% in 2006). 
3) Advertising accounted for 45% of our total revenues.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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