Outsell affiliate analyst Ken Doctor notes that last week was full of terrifying headlines for the newspaper industry: Circulation drops 2.6 percent nationally! E-Papers will replace print - soon! Google Automat revealed! Against that background, a report about the progress of TimesSelect provided good punctuation.
The New York Times reported that the number of TimesSelect subscribers has surpassed 270,000. It said about half were online-only. With TimesSelect priced at $49.95 a year, that gives the Times annualized revenue somewhere north of $5 million, allowing for seen and unseen discounting and churn. Martin Nisenholtz, head of the Times' digital operations, had set a target of $10 million in revenue by the end of 2006, so the early numbers appear encouraging.
Combine that number with the Wall Street Journal Online’s subscriber numbers - 764,000 and still growing - and it's safe to say we'll see powerful arguments for putting more newspaper content behind pay walls. Look for stirring in the field by early next year.
Then, over the weekend, the Times’ Joseph Nocera provided an inside look at the thinking behind TimesSelect and the early returns in his column (behind the Select wall). Finally, someone put a dollar amount on the cost of producing news – the dollar amount the Times' products have to earn back, one way or another, through ads and subscriptions, in order to keep the journalists writing. Nocera puts that amount at $200 million.
Nocera makes the point that Outsell’s Chuck Richard has been driving home about the insidious online/print ad price differential that’s hurting the industry right now. He cites Citigroup analyst William G. Bird, who says 6 percent of all newspaper ads are now online, comparing it to taking money out of one pocket and putting it in the other – except that “for every dollar coming out of the dead-tree pocket, only 33 cents is going back into the online pocket.''
TimesSelect is one way to try to bridge that 67-cent gap, but there’s plenty more experimentation to come before news publishers find the business models that can crack their equivalent of the $200 million nut.