The New York Times Broken Digital Business Strategy

I subscribe to the New York Times and the Minneapolis Star-Tribune, for Sunday-only newspapers, both with full 24/7 digital access.

But I’ve gotten sick of throwing a pound and a half of newspapers into the recycling bin every Sunday morning the moment they come through the front door. I’d rather read my newspapers on my iPad or laptop.

So today I cancelled the Sunday Star-Tribune went to their digital-only subscription.NYT

Then I called the New York Times to do the same thing—and they told me that their all-digital subscription is $35 a month–but if I kept receiving the Sunday newspaper product, it’s only $34 a month. It’s $1 a month cheaper to get all-digital plus the Sunday newspaper.

That means I now have to pay the NY Times $12 a year for the privilege of *not* receiving their Sunday print newspaper. Really.

Oh and: it took me 30 minutes on the phone to the NYT call center to make the change to all-digital happen. It seems they have *six* different digital products, depending on what platforms you want to use–desktop, tablet, Apple iPhone, Windows, Android and, and…

But here my friends is the coup de grace! Until now I was using PayPal to auto-pay my monthly NYT Sunday paper subscription, but when you switch to the NYT all-digital subscription you *can’t* use PayPal.

Wow.

This is a classic example of myopic digital business strategy.  To understand it, you need to turn 180 degrees and think about from the perspective of the New York Times CFO.  IF they can get me to pay $34 for a subscription to both digital and print they can split the revenues in half, give half to the digital group and half to the print division.  The motivation is that the old print supply chain–paper mills, printing presses, distribution trucks, delivery cars driven by minimum wage workers—all of that has to be paid for somehow.  By getting me to receive the Sunday paper they can justify pushing $17 a month into the print supply chain.

The digital team is still happy because their incremental cost of giving me all-digital access is almost zero.  Their $17 a month can be seen as pure profit that drops straight to the EBITA bottom line.

At the end of the year the books balance for both digital and print operations.

In fact if I was willing to get the New York Times seven days a week, I can get a promotional offer of four months for $16 a month, because daily print subscribers are even more valuable (once the promotion is over and they can charge me $40 a month. )

This is the curious case of a business model–print newspapers–slowly deflating out of existence.  The New York Times has to keep the print supply chain going as best they can because while they’ve lost half their subscribers since 2001, they still have a large number who want the print product.  And without their money (and the money from advertisers who want to reach them) the New York Times as we know it would go broke fast.  Digital-only news services can’t support much staff, and perhaps they never will.

The big challenge isn’t getting older people to give up paper in favor of digital.  It’s getting younger people to care about the news at all.  For people under 30 Jon Stewart and The Daily Show is the most trusted source of news, according to research by the Brookings Institute.  Perhaps we’re more attracted to the glut of online and cable entertainment.  Perhaps people are making stronger connections online that aren’t bounded by geography.

Getting a daily newspaper was once a sign of prosperity for middle class families.  Now its having a 50″ flat panel HDTV. And a smartphone.  And an iPad.  And a Fitbit.

And getting a daily newspaper just means a trip to the recycling bin.

About Rohn Jay Miller

I'm a strategic designer who works with clients who are transforming their business models because of change brought on by the Internet. Solving disruption is often a problem and an opportunity at the same time. Previously I was a founding partner of Ikonic/USWeb in San Francisco, and Senior Vice President--Product & Technology for Knight Ridder in San Jose.

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