Inside the NYT pay strategy

newsonomics reporting:
The numbers have quieted most of the skeptics, including Clay Shirky. Today, the New York Times summed up a year of its digital circulation strategy, and the report reinforced the notion: there’s a there there. It’s not the there of saving the newspaper industry, or even the Times, but it’s a strong indication that some readers will indeed pay for digital news access — and that paying for subscriptions opens other doors as well. The numbers in brief, from this morning’s Times 2011 earnings report:

• 390,000 digital subscribers overall.
• Growth rate of 20% fourth quarter over third quarter.

Those are the public numbers. We’re left to extrapolate the dollars. My extrapolation is that the run-rate for the Times’ new digital revenue is about $86 million a year. We take the 390,000 digital subscriber number and assign an average revenue per digital customer of $221 a year. At its four-week (or 13X a year) billing rate, that’s a little less than $17 every four weeks. Full all-access (tablet + smartphone + online) costs $35 each period, tablet access $20, smartphone, $15. So let’s take the differing price points, rolling intro offers (99 cents for the first month), special deals and cancellations into account. Let’s believe that it’s the lowest price point digital product (online + smartphone) for $15 each four weeks generates the majority of buys. Let’s then use a $17 average.
That produces $86 million a year, or more than eight times what the Times took in annually from Times Select; time to bury that ghost. If we compare it to some other Times’ yardsticks, it takes on more meaning:

• It’s 12% of the New York Times overall circulation revenue for the year. That puts the annual circulation number in positive territory — up 3% for the year, and a lively 8% for the fourth quarter – reversing the 2010 trend.
• It’s $100 million less (about $186M for New York Times itself) than the amount of digital advertising revenue for the year. So it’s important, but the digital ad number still is more decisive in making up for the print revenue decline. Despite 10% digital ad growth for the News Media group (without About properties), the NYT property still saw a 3% decline in ad revenue for the year. One more way to look at it: the Times took in $22 million less in advertising overall in 2011, so new digital circulation revenue exceeded that decline by 4X.
• It’s 1.1% of the Times’ 33 million U.S. unique visitors, once we take out international buyers. That one percent seems like a tiny number, but it’s 34% of its print circulationhttp://newsonomics.com/at-almost-400000-digital-subscribers-inside-the-new-york-times-pay-strategy-year-2/