The Exploitable Hole in the New York Times' New Online Paywall

NYTimes.com readers, your free ride is over. The New York Times announced its long awaited decision to make readers pay for the Times online. After your first 20 clicks through the website every month, you'll have to break open your wallet. If you want full digital access to the Times -- on your smartphone, tablet and computer -- it'll cost you $35 a month, or $455 a year.*

Some newspapers already charge for full access, like the Financial Times. But the FT is widely considered an industry leader for a wealthy, business-oriented sliver of newspaper readership. You could say the same for the Wall Street Journal's easily bypassed paywall. Today, however, marks the first time a leading mainstream generalist newspaper has moved from free to fee.

The implications of this decision are both enormous and unpredictable. The Times will lose readers. The question is whether it can make up with subscription fees the money it loses from free-riders. After making more money from subscriptions that ads for the first time in late 2009, the Times is continuing to place its bets on subscriptions. If the gamble pays off, you should expect a wave of copycats throughout the industry. Newspaper advertising in 2010 fell 6 percent despite a recovery in almost every other medium, including magazines and cable TV.

But savvy readers shouldn't despair. Ater you bump against that 20-article ceiling, you can still get read as many NYT articles as you want, provided that you use social media to come through the side door. The Times says:

We encourage links from Facebook, Twitter, search engines, blogs and social media. When you visit NYTimes.com through a link from one of these channels, that article (or video, slide show, etc.) will count toward your monthly limit of 20 free articles, but you will still be able to view it even if you've already read your 20 free articles.

When you visit NYTimes.com by clicking links in Google search results, you'll enjoy up to five free articles per day.

In short, the need to make money built this paywall, but the need to stay relevant carved a big hole in the middle of it.

*Some folks on Twitter point out that the daily print subscription can be had for as little as $24 a month, which includes full access to NYTimes.com on your phone and computer. That would mean reading the Times' website alone is 50% more expensive than reading the print newspaper and the website! I don't know if that makes sense.

In any case, I entered my zipcode (in Washington DC) and the Times website told me that weekly home delivery would come out $7.40. That means $32 a month for the paper product -- a hair lower than digital alone, but just a hair.

Update: NYT calls to explain that they have 13 billing cycles, meaning the price of a full year's subscription is not $420, as I originally wrote, but $455.
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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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