How Being Free Profits the Times

There is a story floating around on Reuters that is going to get a lot of wrong-headed attention. According to Reuters‘ (courtesy of Brad) summary of this Business Week cover piece, the NY Times is contemplating going paid for its online edition:

The New York Times Co. is considering subscription fees to the online version of its flagship newspaper, which now is available for free, but it has no immediate plans to do so, the company said on Friday.

Yes, it is obvious why the Times would like to go paid — it beats giving away stuff that costs money to make — but it is less obvious whether people will pay. Sure, people pay for the FT and the WSJ — as I do — but those are publications that have timeliness in their favor. Financial information is very useful early, and less useful the longer the delay. It is not clear to me the same is true for the NY Times.

Anyway, here is the “money” quote that didn’t make it into Reuters. Consider this ‘graph way down in the Business Week cover piece:

ONLINE, THE TIMES ALREADY is making serious money. New York Times Digital (which includes Boston.com as well as NYTimes.com) netted an enviable $17.3 million on revenues of $53.1 million during the first half of 2004, the last period for which its financials have been disclosed. All indications are that the digital unit is continuing to grow at 30% to 40% a year, making it NYT Co.’s fastest-revving growth engine.

Did you get that? Times Digital sports 32% net margins, and is growing almost three times as quickly as, say, Microsoft. In other words, despite being free, Times Digital does very well, thanks, and is the fastest-growing revenue engine at the NYT Co. While online is still less than 10% of the overall revenue nut for NYT Co., it is not a bad testament to the merits of using free to bring traffic, and then using ads and for-pay ancillary services to build a complementary business.

Related posts:

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  3. Reuters Has Soothsayers … Or Not
  4. Profits and “Return of the King”
  5. Zen and Toys R^K R’nt Us

Comments

  1. Joe Zekas says:

    One has to wonder whether the 32% margins would be attainable if NYTD were a free-standing business or whether they’re largely an artifact of NYT intra-company accounting policies and hidden subsidies.
    We will probably never know — unless the Times were to demand of itself the transparency it demands of Enron and other corporate accounting wizards.
    Until we know the fully-costed state of the business, we don’t really know anything about the viability of the business model.

  2. C. Maoxian says:

    In future you’ll never be able to tell how the digital business is doing given the change in segment reporting the Times made last year:
    “Beginning in the third quarter of 2004, the Company changed its reportable segments formerly known as the Newspaper Group and New York Times Digital (“NYTD”). The change consisted of combining NYTD’s digital operations with their related print businesses (The New York Times and The Boston Globe), thereby creating the News Media Group. The aggregation of the Company’s print and digital businesses in this manner reflects the Company’s organizational structure and its business strategy, which emphasizes a multiple-media platform approach pursuing both audiences and advertisers within the markets in which the Company competes.”
    What was once semi-transparent becomes totally obscure.

  3. b7j0c says:

    It matters, little newspapers are dead long term. DOA. Gonzo. Digital or paper, it doesn’t matter. Long term, no one will care to substitute their white-washed, edited, scrutinized copy (by which I mean, anything truly offensive to stakeholders is removed) for the truthsphere that is the emergent behavior of the aggregate blogosphere.
    We are learning something about media companies – its manufacturing and distribution they really had nailed, not content creation. Remove the constraints on content creation and distribution (bittorrent will live on!) and you have no need for media companies. Bye Bye NYT, WSJ, all record companies, most tv stations etc etc etc. By 2025 the scrap heap of media companies gutted by citizen content creation will be very very high.

  4. Dan Gillmor says:

    Indeed — until we know how much (if any) of the NYT newsroom’s nine-figure budget is allocated to NYT Digital, we know zip about the online arm’s alleged profitability.

  5. Joe Zekas says:

    One also has to wonder just how much of NYTD’s boasted 30+% growth rate is due to Google and whether there’d be any growth without Google revenues.

  6. Jack says:

    With all due respect, you guys are missing the forest for the trees. Nobody is suggesting that NYT Digital would be profitable (or even viable) as an independent business using the free content model (since they would have to pay for said content).
    The question is whether it makes financial sense for newspapers and similar content providers to adopt the giveaway model instead of a paid subscription model, i.e. can they make money by giving away content they’ve already produced? The NYT Digital numbers, and a seeming reluctance to go the subscription route, seem to suggest that they can…. and that is quite compelling.