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New York Times Fixes Paywall Flaws to Balance Free Versus Paid on the Web

New York Times Co. has been working to fix about 200 glitches in the technology for charging online readers of its namesake newspaper, just weeks before the project is scheduled to debut, said a person familiar with the matter.

The company has already repaired more than 500 of the 700 glitches uncovered during tests of the paywall system, said the person, who couldn’t be identified because the testing isn’t public. Among the issues still being addressed are how the system will determine who is required to pay and the point at which various visitors hit the paywall.

Times Co.’s effort to turn online readers into paying subscribers is being watched by other newspaper companies struggling with a decline in traditional print advertising. The New York-based company is spending $40 million to $50 million on the project and has said it plans to debut it by March.

Developing the technology for paywalls is challenging because publishers are trying to strike the most profitable balance between charging some online readers and letting others in free to generate advertising and attention. Though Times Co. has said it will charge visitors after they’ve read a certain number of stories, for example, the company plans to let people coming to the website from social networks such as Facebook Inc. view an unlimited number of those stories for free.

Such visitors translate into ad revenue for Times Co. and allow the newspaper’s stories to remain central to the global conversation, according to John Morton, a Silver Spring, Maryland-based newspaper consultant and analyst.

“The Times’ website gets a lot of visitors and they don’t want to drive those people away,” said Morton. “Everybody is watching them to see how they do it.”

50 Million Visitors

Any problems with the paid website are “routine” for such projects and will be fixed in time for the introduction, said Robert Christie, a Times Co. spokesman.

“This is a massive, massive technical undertaking,” Christie said.

Times Co. is trying to extract more from its website as slumping print advertising and circulation revenue cut into sales. The company’s revenue probably dropped to $2.4 billion last year for the fourth straight annual decline, according to the average analyst estimate in a Bloomberg survey.

About 45 million unique visitors worldwide access the newspaper’s website each month, according to comScore Inc., on computers, handheld devices and tablets such as Apple Inc.’s iPad. The company will charge readers less than $20 a month for full access to the newspaper’s content on the Web, a person familiar with the matter told Bloomberg last week.

“We believe that enough people will pay, but we will not cut ourselves off from the rest,” Arthur Sulzberger Jr., Times Co.’s chairman, said at a conference in Munich last week.

Multiple Options

The company’s paywall effort is particularly complex because it’s aimed at segmenting readers in several different ways and charging them differently. There will be multiple payment tiers and options, said the person familiar with the plans. The site’s technology will have to keep track of how many stories a visitor reads and then ask for payment at some point.

The site will also have to let people who find story links on Facebook or Twitter read for free, which lifts the newspaper’s profile if it helps a story on unemployment or child-rearing go viral. Times Co. will also give readers free access to stories they find through search engines such as Google Inc., a practice that helps their draw in search results.

Times Co.’s engineers are also trying to make sure the online technology automatically recognizes print subscribers, who will get full access to the site at no additional charge.

“They should never, ever, see the paywall,” said Christie.

Philly.com

The effort is aimed at generating money from the paper’s most active online readers who aren’t print subscribers, while keeping as large an audience as possible for digital advertising.

“The Times has a large devoted readership, so they are likely to do better with this than other newspapers,” Morton said.

Times Co. fell 28 cents, or 2.6 percent, to $10.53 at 4 p.m. in New York Stock Exchange composite trading. The stock declined 21 percent last year.

Many newspapers are trying to strike the right balance between paid and free, according to Greg Osberg, chief executive of Philadelphia Media Network, publisher of The Philadelphia Inquirer and The Philadelphia Daily News.

Challenging Proposition

Beginning next week, Philadelphia Media Network’s two newspapers will begin charging for access to their respective websites. Content on Philly.com, a website also owned by Philadelphia Media, will remain free and function as the main portal to the newspapers. When a visitor clicks a tab inside Philly.com to access either of the company’s newspapers, the visitor will be required to pay.

Asking for money for something that has been free is challenging, Osberg said in an interview, because total visitor numbers to the websites could drop initially.

“We may have a short-term setback,” Osberg said. “It’s sort of a step back, to make a leap forward.”

Gannett Co., publisher of USA Today, has begun testing paid content at three of its 82 newspapers, according to Bob Dickey, Gannett’s head of U.S. Community Publishing.

At Gannett’s newspaper in Greenville, South Carolina, readers have started paying $7.95 a year to access content devoted to Clemson University sports. Those subscribers view 40 to 70 pages per visit, compared with 6 to 8 pages on Gannett’s free websites, according to a presentation that Gannett’s Dickey made to investors in December.

Successful Models

Washington Post Co. is tracking the paywall experiments, though it has no plans to charge for its website at this point.

“We’re not going to be pioneers,” Donald Graham, the company’s chief executive officer, said in an interview last month. “But we’ll be watching every one and if somebody knows a better way to operate a newspaper business, we’ll be interested.”

Among those that have successfully implemented pay models are News Corp.’s The Wall Street Journal and Cooks Illustrated, published by Boston-based America’s Test Kitchen, said Dominic Venuto, global managing director of Publicis Groupe SA’s VivaKi. Users pay as much as $40 annually to access recipes, even though there are thousands of free recipes available online.

“They cut the clutter, and they have tried and true recipes, guaranteed to work,” said Venuto in an interview. “They deliver on that proposition.”

New Platforms

Convincing someone to pay for something that they’ve been receiving for free will not be easy, according to Dan Ariely, a Duke University professor of psychology and behavioral economics. “Once we consume something at the price of zero we can easily convince ourselves that it’s worth zero,” Ariely said in an interview. “If somebody wants us to pay money for that, it becomes difficult.”

New distribution models, such as Apple’s iPad, offer a way to reverse the psychology, Ariely said. Both the New York Times Co. and Philadelphia Media have said they are introducing new iPad applications this year. When consumers “move to a new platform, they’re willing to start up fresh,” Ariely said. “A new environment is an opportunity for new rules about payment.”

To contact the reporter on this story: Brett Pulley in New York at bpulley@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom in New York at pelstrom@bloomberg.net.

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