Why does The New York Times only have two million digital subscribers, when there are two billion smartphone users on earth?

Those billions of people need access to high quality journalism today more than ever, and The Times – arguably the world’s strongest news organization – is perfectly positioned to provide it.

Yet after years of trying, The Times still seems stuck in second gear in the digital world. Netflix has 120 million subscribers. Spotify has 70 million. NYT has 2.6 million.

What’s holding The Times back? Here’s my view:

1) The Times’ subscription pricing is too high

The Times has wonderful content, but it needs to be accessible to far more people. The Times should charge $99 or less per year for full digital access, not $192, and their subscriber growth would accelerate dramatically.

Digital subscriptions and ads brought in about $600 million for The Times last year. If they cut their digital price in half, and subscriptions doubled, they’d come out even. But at a more accessible price, subscriptions would more likely triple, quadruple, or quintuple, and digital revenue would surge to $900 million, $1.2 billion or $1.5 billion.

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Current NYT digital pricing is $16/mo. with a teaser rate of $10/mo.

Since The Times’ cost to serve each digital subscriber is nearly zero, almost all this revenue could go toward fixed costs, like the newsroom and technology.  So faster subscriber growth could drive accelerated investment in journalism (more and deeper coverage). And there would be that many more satisfied subscribers to spread the word.

But it takes vision, not a market research committee, to price for growth.  You can’t test and optimize this – you have to stick with a low price until people believe it and word spreads.

Netflix started at about eight dollars a month and stayed there for years. So did Spotify, Amazon Prime, and other big global winners. Those CEOs insisted on ultra low prices, barely above their variable costs, and then resisted the temptation to raise them for short-term gain.

2) The Times isn’t thinking big enough

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Adolph Ochs, who bought The Times out of near-bankruptcy in 1896 and coined the phrase ‘All The News That’s Fit To Print.’

Management at The Times probably isn’t coming into work saying, ‘let’s aim for 100 million subscribers, and take big swings to get there.’

The Editor isn’t saying ‘please triple my newsroom budget this year, like Netflix does with their content budget.’ The CFO isn’t saying, ‘let’s raise more capital so we can invest in growth like Tesla’ – but rather, ‘let’s not jeopardize our stock price by taking risks with cash flow.’

And the Sulzberger family probably doesn’t want to risk screwing up the company they’ve been good stewards of for 120 years. They’ll (rightly) be thrilled to simply survive the transition to digital from print: getting to breakeven on digital alone before the print business vanishes completely.

It’s also possible that The Times believes there’s a limited market for high quality journalism or paid news. As a high-placed friend at the company once told me: “Our research traditionally shows we’re a niche brand, and only a small number of people will pay for us online, so we might as well charge them a lot.”

I believe this is self-fulfilling, self-defeating and wrong – there’s a gigantic global market. But not at $16/month.

The lesson of the internet is that the big get bigger, get more mindshare, invest more and build better products, grow faster, and ultimately become the destination of choice globally for hundreds of millions of people.

But you have to be aiming for this, and willing to go for it.

3) The Times can’t shake decades-old instincts

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Times subscription ad, 1964

The Times, like most newspapers, is hooked on techniques like market segmentation and opaque pricing that don’t work well online, but have historically enabled them to maximize profits.

Subscription pricing was always a tricky balancing act for print publishers. They needed to lure as many subscribers as possible to maximize ad revenue, but they couldn’t overtly discount prices without forfeiting revenue from loyal subscribers who’d pay full price.

So newspapers resorted to complex, segmented pricing strategies with lots of promotions. As you can see from this 1960s ad, you had to ‘call for pricing!’

Today, The Times, like other legacy marketers, continues to use ’teaser’ rates to suck people in, betting many will renew later at a much higher price. The result is a lot of churn, and a terrible customer experience.

And then there’s the ads. Most successful subscriptions on the internet are ad free – that’s a main benefit of subscribing. Yet The Times continues to bombard its paying subscribers with ads – also not a great experience when you’re paying close to $200/year.

I’m not saying The Times should go ad-free, but rather tone them down while lowering the price. Price low and keep raising the value – that’s the winning formula on the internet.

Will The New York Times listen to these ideas? I hope so. The world desperately needs their journalism to scale and reach far beyond an affluent elite. In the digital age, there’s no reason ‘All The News That’s Fit To Print’ shouldn’t reach everyone on the planet.

Dave Margulius is co-founder and former CEO of Quizlet Inc. He also co-founded Boston.com in 1995, as an employee of The Boston Globe and The New York Times Company. You can read about that experience here.

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