What We Know About the Business of Digital Journalism

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Columbia Journalism School | Tow Center for Digital JournalismThe FT has also been aggressive about shutting down “leakage,” as Grimshawputs it—that is, unauthorized copying of stories. And when it comes to offeringfree content, “we’re more controlled than WSJ.com,” which offers free access tomost of its stories via Google News and many stories at no charge on its homepage.The FT’s approach is a testament to the possibilities of paid content, but it alsodemonstrates how hard it is even for a premium publisher to extract revenuefrom digital advertising. When the FT’s parent company, Pearson, reported resultsin early 2011, it noted that for the FT Group, 55 percent of its revenue comesfrom “content/subscriptions” while 45 percent comes from advertising. 13 A decadeago, the FT earned 74 percent of its revenue from ads, and only 26 percentfrom subscriptions.“The outlook for the ad business online is quite bleak,” says Grimshaw. “There’sjust not enough money there.” As a subscription site with a select audience,FT.com can charge higher rates for ads than general-interest sites. “We can createscarcity in a marketplace that has no scarcity,” he says. “In that light, subscriptionsand ads are complementary.” But given that FT.com doesn’t use networks to fillup unsold ad space at discount prices, Grimshaw says “I’d be surprised if we sell50 percent” of the site’s inventory.* * *After years of internal debate, the New York Times has entered the realm ofpay-for-access. If its audacious and complex plan succeeds, that will likely encouragemany other publishers to follow suit.This isn’t the first time the company has tried online subscriptions. In 2005,the Times launched its TimesSelect service, charging those who didn’t get theprint edition $49 a year to access opinion pieces. After a fast start, with more than120,000 subscribers signing up in two months, the plan stalled, and the Timesclosed it down two years later; executives said the $10 million a year the servicewas generating wasn’t enough to compensate for the lost traffic and ad revenue. 14Paywalls: Information at a Price 75
The Story So Far: What We Know About the Business of Digital JournalismSo why would the Times take a new gamble to charge for digital access? Partof the answer lies in how dramatically the company’s revenue mix has changedin recent years.In 2005, the New York Times Media Group, which is composed primarily ofthe Times’ paper and website, generated nearly $1.9 billion in ad and subscriptionrevenue; about a third of that came from circulation. Five years later, ad revenuehad dropped by nearly $500 million, while circulation revenue had increasedbecause of aggressive price hikes for home delivery and newsstand sales. Today,circulation revenue for the group almost equals advertising revenue.New York Times Media Group revenue mixRevenue in millions $1,880.3 $1,464.1Circulation33%47%Advertising67%200553%2010$1,400$1,200$1,000$800$600$400$200$1,264.8$615.5$780.4$683.7$02005 2006 2007 2008 2009 2010The New York Times Media Group includes the Times and the International HeraldTribune, print and digital, as well as a few smaller properties. Results are not brokenout in more detail by the company.SOURCE: Based on the New York Times Co. 10-K filingsThe Times’ website is tremendously popular, but digital ads have been growingunevenly and don’t come close to making up for the shortfall in print ad sales.Indeed, the site, with more than 30 million monthly unique users in the U.S.,contributes less than 20 percent of the Times’ overall revenue.76
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