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Banking on a Paywall at The New York Times

The New York Times Co.'s (NYT) drive to regenerate revenue growth depends in large part on its plan to turn online visitors into paying customers. Chief Executive Officer Janet Robinson says moving to construct an online paywall is among her "most important decisions."

Working in the shadow of Publisher and Chairman Arthur Sulzberger Jr., the scion of the family that built The New York Times, Robinson helped lead the company's flagship newspaper through a national expansion, the introduction of color pages, and an increase in the number of sections. Now, with circulation and advertising sales in decline for the last four years and the stock down 19 percent in the past year, Robinson plans to create a new revenue stream. She will charge customers for access to the website,, starting a week from today.

"This is a big deal for the Times," says Edward Atorino, an analyst at Benchmark in New York. "She will get all of the credit if it goes well—and all of the criticism if it does not."

Convincing people to pay for something they are used to receiving for free won't be easy, according to Dan Ariely, a professor of behavioral economics at Duke University in Durham, N.C.. "Their price points are good for avid readers but not for casual readers," Ariely says in an interview. "There will be lots of people who choose not to pay."

It is the avid, loyal, online readers whom Robinson says she intends to turn into digital subscribers. "Our research showed that many users were willing to pay for content online," Robinson says.

Long Climb to the Top of the Times

A 28-year veteran at Times Co., Robinson, 60, is a former public-school teacher who ascended through the ranks of sales and marketing management to become the highest-ranking executive outside of the Sulzberger family. She was named president and CEO in 2004, less than three years before the industry began to decline, dragging Times Co. along.

The company, whose holdings include the Boston Globe, International Herald Tribune, and other newspapers and Web properties, had total revenue in 2006 of $3.29 billion—up almost 10 percent from five years earlier. Daily circulation at The New York Times in 2006 totaled 1.1 million, with Sunday Times circulation 1.6 million.

As readers moved from print to online consumption and the economy weakened, Times Co.'s results slumped dramatically. As of 2010, revenue had fallen to $2.39 billion for the year, down 27 percent from 2006. Daily circulation dropped about 17 percent over the same period, to 906,000, and Sunday circulation declined to 1.4 million.

The company's shares have lost 62 percent of their value in the past four years. They rose 29¢ to 9.18 on the New York Stock Exchange on Mar. 18.

"Questionable Financial Decisions"

While the namesake newspaper has continued to rack up awards for its journalism, the business side hasn't distinguished itself to the same extent, says Richard Levick, head of Levick Strategic Communications, a Washington-based firm that specializes in digital media. "They are a great newspaper," Levick says in an interview. "But I think there's no doubt that they have made a series of questionable financial decisions over the past few years."

The company sold its headquarters at Manhattan's Times Square in 2004 for $175 million, then spent $500 million on a new one just blocks away. Three years later the old building was flipped by the new owner for $525 million. With ad sales falling and debt to service, Times Co. in 2009 sold its new headquarters for $225 million—less than half what it had cost—and leased it back with an option to repurchase it in 2019 for $250 million.

Also in 2009, as Robinson trimmed expenses to address the revenue decline, the company borrowed $250 million from Mexican billionaire Carlos Slim, who received six-year notes with a coupon of 14 percent, plus detachable warrants. The loan from Slim, Times Co.'s fourth-biggest shareholder, is costing the company $35 million a year in interest.

One-Third of Workforce Cut

Times Co. has gained stability from both cost cutting and the growth and popularity of its digital services, Robinson says. The company has reduced its workforce by a third in the past four years, to 7,414 as of December. "The company is on very strong and stable financial footing," she says. "We have done a lot of things in recent years—not only financial restructuring, but also digital innovation."

Times Co.'s digital revenue increased 15 percent in 2010, to $387.3 million, accounting for 16 percent of total sales. The Times's website had 48.5 million unique visitors in January, according to ComScore. The Boston Globe website also is preparing to introduce a paid content model this year.

The risk for Times Co. is that consumers who currently access websites for free will go elsewhere when required to subscribe, causing a decline in online advertising revenue. Still, the need for new revenue to offset the print version's decline is paramount, Robinson says. "This will reinforce our revenue stream and put us in a position to continue to deliver high-quality information," she says. "It is one of the most important decisions that we've made."

Under the new, paid model, Times Co. will on Mar. 28 begin charging readers who don't subscribe to The Times for content on the publication's website. Times Co. will charge $15 every four weeks for unlimited access to the site from a computer or mobile phone. A package for access online and through the paper's tablet-computer application will run $20 every four weeks. Access from any device will cost $35.

A Risky, Complex Pricing Structure

Nonsubscribers will be allowed to read 20 stories free each month and can access the's home page and section fronts. Subscribers to the newspaper's print editions, whether they subscribe daily or only on weekends, will be able to register for full, free access to the website. Readers who click on links to stories from certain search engines and blogs will also be able to read those stories for free, even if they've already hit their monthly ceiling.

Building a digital subscriber base will be challenging, with pricing models so complicated that they could turn potential customers away, Ariely says. "When you charge different amounts for taking different paths, it starts looking like price discrimination and people hate that," he says.

Levick agreed that the various pricing levels may undermine the digital subscription model's success. "They seem to have made the pricing onerous and unnecessarily complicated," he says.

The industry is watching to see whether Robinson's strategy will work. Gannett (GCI), publisher of more than 80 newspapers, including USA Today, has experimented with paid-content models at some of its properties and will continue with isolated testing, says David Payne, Gannett's chief digital officer. "This way," Payne says, "it doesn't become something like The New York Times, where it is all or nothing."

To contact the reporter on this story: Brett Pulley in New York at

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