New York Times building

Stuart Monk /


The New York Times has bet on digital subscriptions to play a central role in its long-term future. But while selling access to the paper’s Web and mobile versions was an initial hit, growth is slowing — and may stop altogether if the company’s earlier projections are correct.

Four years ago, before the Times put up a paywall around its then-free site, the paper asked consulting firm McKinsey & Co. to estimate how many digital-only subscriptions it could sell. The conclusion, according to people who have reviewed the study: In the most optimistic case, just under 1 million subscribers would pay $15 to $30 a month for access to the New York Times website and app. More likely, however, the theoretical limit at these prices would be 800,000 to 900,000 subscribers.

The problem is, the Times already hit the low end of that projection in June with 831,000 paying online readers. And the number of new customers it added in the three months leading up to that point, about 32,000, were mostly for the new NYT Now app, a slimmed-down version of the Times that costs $8 a month. It looks like the McKinsey study got it right.

There could be some cannibalization from the new app, of course, but even if all 32,000 were for the main digital subscription (which costs $15 to $35 depending on how many devices you want to use), that would still fall short of the previous two quarters when the Times averaged 36,000 new subscribers.

Paywalls are important because of how quickly they’ve become the main (or only) strategy for a lot of U.S. newspapers as advertising deteriorates. About four in 10 papers in the U.S. charge online, and it’s likely to only increase. In the case of the Times, the paywall is now a significant part of its total business, accounting for a tenth of annual sales.

And it’s all new money for the Times, about $149.1 million last year, a palpable performance in a short period of time. Put it another way, in a little over two-and-a-half years, the paywall went from $0 to $150 million.

But a slowdown in digital subscribers means it’ll be that much harder for the Times to make up for its losses elsewhere, specifically in advertising, once the life-blood of the business. The company lost close to $90 million in ad revenue — print and online together — from 2011 through last year, and it has been on a downward track ever since.

Online revenue alone would not sustain the New York Times as it exists today. If the Times were to become a digital-only newsroom, it’d be a $312 million business, including the $162.9 million in online ads it generated last year. But that’s only 20 percent of its current sales. In other words, a digital-only Times could just support a fifth of its current newsroom, or around 200 journalists.

It’s worth noting that the Times was the first general-interest publication to charge for online access. While it followed in the footsteps of the Wall Street Journal and the Financial Times, which created the metered model the Times adopted for its own paywall, it broke new ground. It wasn’t clear if anyone would bother paying for general news online.

“They deserve a lot of credit for that,” said Ken Doctor, a media analyst at Outsell. Doctor independently analyzed the Times’s addressable market for online subscriptions and arrived at roughly the same figures as the confidential McKinsey study.

New Apps, Lower Cost

The Times declined to comment on the McKinsey study, but the company referred to comments CEO Mark Thompson made at an investor conference in May: “It’s not ridiculous to think of a high single million number in the U.S. as an addressable market.”

Translation: We think we can sell 8 million or 9 million subscriptions — eight or nine times where we’re at now — at a variety of price points, but likely with the bulk of growth at lower than current price points.

The McKinsey study did show that lower-priced subscriptions could draw in millions of customers. At a half-inch thick, the report included an exhaustive market analysis showing how many readers the Times could draw at different retail costs, a standard price elasticity survey, according to one insider. The Times hasn’t run a similarly exhaustive study since, this person said, though it has more recently run a series of smaller market studies leading up to the launch of NYT Now.

More than a year ago, company executives — including Thompson, publisher Arthur Sulzberger Jr and Denise Warren, who leads the Times’ digital products division — anticipated the Times would soon reach the ceiling of subscribers predicted by the original study and aggressively pursued the creation of new apps to spur growth, one of our sources said.

That led to NYT Now and also NYT Opinion, a collection of its daily commentary and columns for $6 a month. A food app will be available this Fall.

The new apps helped the Times add 32,000 paying online readers in the second quarter, but Doctor estimated about 20,000 of those were for NYT Now, which he calls, “subpar and below expectations.”

Warren acknowledged that the Times’s marketing strategy around the new apps didn’t work. “We need more precision to determine which is the right customer for the right offer,” she said on a conference call with analysts following its earnings report at the end of July.

The idea of charging for content wasn’t just a flash point among outside observers. There were plenty of people inside Times headquarters who were either outright against the proposition or weren’t entirely sure of its merits, according to several people who preferred to remain anonymous.

But at least one Times person had publicly touted the benefits of online subscriptions: Former executive editor Jill Abramson, who was unceremoniously ousted in May. Just a month before her exit, she hosted a gaggle of media reporters at a cocktail reception on the 15th floor of the Times building to talk about its new digital subscription products.

“I believe that a lot of the people who are gonna subscribe to NYT Now are going to become hopelessly addicted,” she said to the gathered, as Sulzberger and Thompson looked on.

We’ll get a chance on September 4 to see if Abramson’s views have changed, when she sits down for a chat with Re/code’s Kara Swisher at our next Code/Media conference in New York. It’ll be her first onstage interview since leaving the Times.

Dennis Paine
Dennis Paine

$360 per year for a comic book?  No wonder subscriptions are declining.

It would take a serious realignment of how news is presented, and a clear separation of 'opinion' from news before the NYT could replicate the success of WSJ . . . and it's not going to happen. 


 "Online revenue alone would not sustain the New York Times as it exists today. If the Times were to become a digital-only newsroom, it’d be a $312 million business, including the $162.9 million in online ads it generated last year. But that’s only 20 percent of its current sales. In other words, a digital-only Times could just support a fifth of its current newsroom, or around 200 journalists."

Um, you're going to want to re-think this paragraph.

It implies that 100% of costs = newsroom. If the Times went digital only, it would shut down printing (in a number of places), physical distribution, sales related to all of that, paper bill handling (yes, there is a lot of cost there), and who knows what else. 

While you're surely correct that the news operation would have to shrink, you're surely mistaken that it would shrink anywhere near 80%. 

The Times spent $630M on "Production" last year while also spending $706M on SG&A. It looks like the newsroom is in the latter, but either way... a huge portion of the first bucket ceases to exist in the digital world (not all of it) and some of the latter bucket all ceases to exist).

Spitballing it, an all-digital NYT would have costs around $700-800M if all you did was shut down physical production. That's without any real belt-tightening.

The gap to the digital revenues would certainly be severe, but nowhere near as sever as the $1.2B implied above. More like $400-500M. 


While this article highlights the painful reality of the Times' attempt to transform to the digital era, it is highly inaccurate and misleading in its reporting.

First, CEO Mark Thompson referred to an ADDRESSABLE market of "high single million" subscribers to its expanded array of digital news offerings. An addressable market is just that... the population with the remotest possibility of purchasing a product.  For the author of this article to assert that Thompson was promising actual sales at this level is inaccurate and misinformed.

Second, while undoubtedly the Times depends on print today for survival, it can and indeed must adapt to the prospect of a digital-only life in the unspecified future.  Two things to note about what will happen when they turn the lights out on the printing presses.  First, many of today's print readers will grudgingly switch to the online version, lest they totally lose access to the paper.  Second, of course, is that the Times' costs will decline.  Will the Times also have to reduce the size/cost of their editorial operation?  Of course they will, but the company will do what it has to do to survive.

Finally, the Times deserves credit for taking the steps they have.  There's a special kind of schadenfreude reserved for the NY Times and this article is an example. 

It's not fun or easy for a company to adapt to a profound industry disruption, and the Times has made commendable strides to date.  There's more work to be done, but let's not kick a sucker when he's down!

Tom Brown
Tom Brown

I applaud the Times for their attempts to digitalize and I don't object to the paywall.  .  However, the 32,000 "special" apps probably pissed off 132,000.  I am a delivery/digital reader and I suspect many subscribers are as well.  I pay top price and cannot get crossword puzzle on line?  Why?  I pay for the hard copy?  Why can't I get it on line to carry with me on the train?  No reason....multiple written complaints got no response whatsoever.  It is available for an "extra" charge.  Soon page A-1 will require and "extra" charge.



There is another equally big reason why that first paragraph is off by a mile. That reason is PRICE. Today, all printed media including the digital-only's (as opposed to television, while it lasts) are simply waaaay to expensive.

Let's do the math for the NYT. As noted in the article, it has some 800K subsc at current price level. CEO Thompson says it could sell 8 mln subsc at lower prices. That's 10 times current subsc, i.e. sales of 10 x 150 mln = 1.5 bn. Putting the lower price point at 1/3 of the current will then bring in 500 mln subsc sales.

Online ads currently generate sales at a ratio of 1:1 vs subsc sales. With a readership enlarged by a factor 10, that ads : subsc sales ratio should easily shoot up to 2 : 1. But even +without+ adjusting it, online ads should bring in another 500 mln sales.

All in all, a subsc price of 1/3 of the current one should still easily generate 1 bn total sales. And note: that's based on VERY conservative assumptions.

As noted above, current sales are roughly 1.6 bn, of which 600 mln is spent on production costs. In an all-digital setup, those costs should essentially drop to zero.





Yes. But. The NYT also deserves serious blame for not taking enough steps – and particularly for not taking the right steps. What they should have done (and will ultimately end up being forced to to anyway) is:

A) Drop the paywall - it's nonsense, only prolonging their agony.

B) Acknowledge and implement the iTunes model - it's where they'll end up regardless

The iTunes model, of course, means ultra low pricing on a per-article basis.

What is an ultra low price? Something like 5-10 cent, and probably closer to 5c than to 10c.

Why will this eventually be where things will be headed anyway? Because:

1) It's both technically and economically feasible, meaning it'll tend to happen all by itself.

2) An article is simply journalism's smallest marketable unit. In the end, people don't want to pay for other, mandatory included things which they do not want.

3) Why would anyone (except for a relatively small group of people) want to buy a subscription from ONE particular news+opinion producing organization? That USED to be the most efficient way to organize the distribution of information. But. It. Isn't. Anymore. Today, one wants to read ACROSS news+opinion organizations - without having to pay twice or triple or worse.

In short: ultimately, you only want to pay for what you want to read.

Regardless. Of. Who. Published. It.

No matter what the NYT will try or do or invent, pay-per-article is what the market WILL bring about. It's just a matter how stubborn the NYT (and all other media, for that matter) will be, and how much time+money they'll waist by insisting to keep going against the tide.


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