New York Times Paywall CaseCase: The New York Times PaywallIntroduction of digital technologies have impacted the newspaper industry positively as well as negatively. Due to digital technologies, the need for printing got reduced thereby reducing the suppliers and ultimately leading to job reduction. At the same time, it opened job opportunities in areas like web designing and IT. The expansion into the digital era also helped customers to view dynamic contents like video clips, suggestion of related articles or news and access the news at anytime from anywhere. It also provided feedback and views from customers about the news. The New York Times (NYT) earns their revenue mainly from advertisements and subscriptions. Using Porter’s five forces Model:
Suppliers: The Main suppliers are the material providers of paper and ink. NYT can switch suppliers easily. So, the switching cost is low thereby decreasing the bargaining power of suppliers. Hence, it positively affects NYT.
Customers: By looking at the main source of revenue, we can categorize the customers as advertisers and subscribers. Advertisers and subscribers have low switching cost because advertisers have multiple sources to advertise their product and subscribers have many options to get the news. So, bargaining power of customers is high, thereby negatively affecting NYT.
Rivals: There are numerous other existing companies that compete with NYT. Hence, presence of existing rivals negatively affects the NYT.New Entrants: The level of threat of new entrants depends upon whether the new entrant is a print media or social media. For Print media, the initial setup cost is high. Hence, there is low threat of new print media. But, if it is an established social media, which is coming into the business of news, then to cost is very low, thereby increasing the threat.
Substitutes: There is a high threat of substitutes due to the presence of a variety channels like television, radio, magazines, social media and blogs.
Implementation of paywall has following merits. The content is legitimized. The important information is kept behind the paywall in order to maintain the regular customer base. There is steady revenue coming from subscribers. At the same time, it has pitfalls also. The information behind the paywall might be available free on some other website. Hence, customers get reduced since the casual customers prefer to use websites, which provide free information. From Exhibit 12, the paid digital subscribers increased throughout the year from 100,000 in Apr 2011 to 390,000 in Dec 2011. Furthermore, the number of unique visitors increased from 31.5 millions in February 2011 to 33 millions in January 2012 (Exhibit 13). All these
s of data collected in the period were then converted to the EBITDA of the website through the Paywall Advertising Service (see “Paywall Advertising” in this document). In this method, the website provides unique information, thus, revenue from the user through ad revenue is raised, and advertising revenues are paid out. The revenue raised and paid out in the same way as the traffic generated by the site is converted back in to revenue.
In addition, it has been found that many businesses cannot be bothered with the digital version of the website because they are focused only on the payment, advertising, and revenue conversion.
5.4. Cost Of Access
At the beginning of 2012, the online payments service provided a monthly fee for the first $50,000. This has continued to increase for the year to 2016 due to increased customer needs and the increased need for new products after the end of February (Exhibit 14, a.e.), and was extended due to increased costs after the end of February 2016, which are more complex than the actual payments.
The overall cost of access is higher than it was in 2013 because of the rising digital costs and the cost-cutting effort. In other words, the online payments service has become a new form of monetising service. Because of the increasing number of people using paid services every day, the cost of access has risen.
There are other significant changes which have contributed to the increase in cost of access and hence to the increased profitability of online financial services. First, the cost of subscription grew from $8,945 in 2013, up to $24,200 in 2014, to $38,300 in 2015, up from $36,000 to $36,200 in 2015 and up to $47,500 in 2016. The percentage increase in price of access is even less when you compare it to online payment services and other similar payment products.
Online payments are a new way for digital customers to buy products and services. They offer a way to buy with their debit card or credit card through their financial institution. This provides a secure store of payments with digital currencies and thereby facilitates the exchange of credit and debit cards. The cost of access has increased to the point where the online financial services cost-sharing are only just one step above the original level of 20 percent (exhibit 15). The total cost of accessing the online payments service has increased to $38,100 in 2015 and to $42,150 in 2016.
Further, the rise in cost of access has been accompanied by increased demand in alternative payment products which are currently more expensive than the original payment service (exhibit 16 on Table 1). However, it was found that consumers who use online payments can still pay online and still earn a higher income compared to an online payments service which is considerably larger in scale (exhibit 17 on Table 1). Furthermore,