The WaPo Ombudsman’s Faulty Paywall Analysis

The Audit reporting:
Washington Post ombudsman Patrick B. Pexton has a flawed analysis on the logic of a possible paywall there and on the performance of the one that already exists at The New York Times.

How much revenue could charging digital readers really add to the bottom line? To find out, let’s look at the Times’ and Post’s annual reports — publicly available data.

The New York Times Media Group — the division that includes the New York Times and the International Herald Tribune — increased its circulation revenue (revenue from people buying newsstand copies, print subscriptions and digital subscriptions) from 2010 to 2011 by $21 million, or about 3 percent. It saw no growth in circulation revenue the year before. Let’s assume that most or all of that increase was from new digital subscriptions. It didn’t even cover the decline in Times advertising revenue in 2011, which was $24 million.

These numbers are bad (Adding: though technically accurate) in a couple of different ways. First, Pexton is comparing apples to oranges. The NYT’s paywall was only in place for nine months of last year, not all year, as Pexton implies. You can’t compare nine months of circulation-revenue changes to twelve months of ad-revenue changes and then say the former “didn’t even cover the decline in” the latter.” That’s like giving somebody a 100 meter headstart in the 400 meters and then talking about how the laggard couldn’t even compete, even though they ran faster than the rest of the field.
If you make this an apples-to-apples comparison by taking out first-quarter NYT ad revenue declines, which accounted for $3.5 million of that $24 million 2011 ad drop, then circulation revenue increases actually covered ad declines, by about a half a million dollars. That’s a lot different than Pexton’s “it didn’t even cover the decline,” which if fairly calculated should have been “it more than covered the decline.”
Moreover, Pexton doesn’t take the rapid growth of the NYT’s digital subscriptions into account. Advertising is a 160-year-old business at the paper, but the paywall was brand new last March. Digital subs got off to a quick start, yes, but there were many more of them at the end of the fourth quarter than there were in, say, May.
http://www.cjr.org/the_audit/ombudding_the_ombudsman.php?page=all