One of the biggest stories in the news last week was the news itself. Specifically, The New York Times began charging for full online access. There has been much hand-wringing and speculation about whether or not it will work. And of course so much seems to be riding on it. Since the rise of the internet, the entire newspaper industry has been in free fall for several reasons.
- Online sites like Craig’s List have decimated newspaper classified sections, which were traditionally a vital source of revenue.
- The internet has gutted newspapers’ near-monopoly on written news material, which had been a key to its ongoing profitability in the face of increasing competition from broadcast (radio and television) news.
- Newspapers began to give away their material for free on the internet. This is not a healthy business model for most retailers.
The first two problems require you to raise revenues and/or cut costs in order to keep up. However, when you give the product away for free, you’re lowering revenue, not raising it. The result? Newspapers have spent a decade slashing costs to the bone. Some have gone out of business altogether. Most are but a shadow of their former selves. Where I live, The Baltimore Sun is a classic example. 
When I arrived here in 2001, I was pleasantly surprised to find a really good newspaper in the Sun. Ten years later, the paper’s a mere skeleton and I no longer bother to read it.
So if drastically slashing expenditures diminishes a newspaper’s quality, and almost everyone seems to agree on this, why hasn’t industry been able to flip the equation and raise revenue, particularly via the internet?
Beyond the factors already mentioned, I’d like to focus on another one, which also happens to bring us back to The New York Times.
As you may remember, The Grey Lady attempted to charge for online access back during the 1990s. The model it chose is known as micro-payments: a pay-as-you-go system. It required readers to keep putting a quarter in the slot, so to speak. You paid for web access to the NYT as you went along.
This approach proved to be a colossal failure, and the fallout has been nearly fatal to the industry. But I believe the real damage didn’t come directly from the Times’ failed experiment in micro payments so 
much as the lesson that was supposedly learned from it, and which eventually became conventional wisdom. In the aftermath, many proclaimed that people just wouldn’t pay for stuff on the internet, particularly newspaper content, because they were used to getting things there for free. To many at the time, this seemed self-evident.
In retrospect, however, the first bell that should go off is the notion that people were used to anything back in the 1990s. You know, when Clinton was president. The modern internet was still brand new after all.
When one considers things today, the next bell that should go off is the contention that people won’t pay for stuff on the internet. Amazon, EBay, NetFlix, Hulu, plane/bus/train tickets, and a seemingly endless streams of pornography are just a few examples putting the lie to that contention.
Micro payments didn’t fail because people won’t pay for a newspaper online. They failed because the technology wasn’t quite up to speed back then, making the process of paying bit of a headache.
Another legacy of the The New York Times’ botched micro payment endeavor is the issue of precedent. As, arguably, America’s preeminent newspaper, the Times casts a huge shadow over the industry. Its failure made many smaller papers think, Well if the Times couldn’t pull it off, what chance do we have? As a result, many have sunk without even bothering to see if they could swim.
In order for this kind of conventional wisdom to take root, people had to explain away an obvious 
contradiction: the success of The Wall Street Journal, which has had no trouble raking in online revenue. The reason that many gave is that Journal readers are loaded, and they’re willing to pay. But guess what? While WSJ does in fact have the world’s wealthiest newspaper readership (average household earning of $135,000 in 2009), The New York Times’ readership isn’t far off ($118,000 in 2009).
But as much damage as NYT’s failed micro payments effort did to the industry, the success of its new online subscription model could help revitalize it. And personally, I think it will work.
The base rate of the new plan is $3.75/week. You can think of that as .50/day, plus another .75 for the legendary behemoth that is the Sunday Times. For that price you get unlimited access through your computer or smart phone. To put it into context, that’s actually about half the price of what it would cost for seven-day delivery, and only about a quarter of what it costs to pick up from the newsstand every day. And it remains cheaper than home delivery even if you pay a little extra to also get access via your tablet.
Also consider this. Almost anyone under the age of 40 would would rather receive a daily newspaper by way of all of their electronic devices instead of having a bulky broadsheet, that’s destined for your recycling pile, and is delivered to a fixed address, thus requiring you contact the newspaper’s office to 
put the damn thing on hold every time you leave town. The question is, has that generation already forsaken the newspaper format, on paper or otherwise.
I don’t think so. I think the Times will win with this one. I think in the long run the industry will win to some degree as well. And when we look back, I think we’ll remember more than 15 years of free online newspaper access and wonder what the hell took them so long.