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New York Times Moves Toward Netflix Model as Ads Decline

The New York Times

Mark Thompson, CEO of the New York Time is taking a leaf from Netflixs’ book and moving over to the subscription model for it’s services in a bid to drastically change the publisher into an internet company that relies less and less on advertising revenue.

In an interview with Thompson he said “the creation of new digital products and services was based in part on company research, which showed an appetite for lower-priced plans and specialized subscriptions for coverage of areas such as politics and technology. There are potential customers “numbering in the many hundreds of thousands, It’s the single most important thing we’re doing in the company.”

From Open to Closed Pay Wall 

The change in the way the New York Times brings in revenue will gradually shift from advertising centric to subscription centric, much like the online movie streaming company Netflix or Hulu. The gradually shift is great news for customers so they will be able to decide whether their content is worth the subscription fee, instead of being locked out on a certain date without any knowledge of the change.

In addition to cheaper plans, the New York Time expects to produce a high end package along side the existing plans that offers broader access to online features, which would allow subscribers to attend New York Times events – a rapidly growing area of the company.

The Times also says that it will being producing more online videos as part of Thompsons strategy and the Netflix-isation of the company, the added video content is expected to roll out late 2013 and early 2014.

Why the Move to Subscription 

Mark Thompson to the reigns of the company last November and is focusing on revenue from the content to make a big move of reducing industry wide print advertising, last year revenue from subscription overtook ad sales for the first time in the company’s history.

Kannan Venkateshwar a media analyst at Barclays PLC in New York had this to say “The reality of the New York Times is they are moving away from ad dollars, Thompson wants an HBO or a Netflix model, which means growing content revenues as opposed to ad revenues.”

The statistics look like this; advertising dropped more than 11 percent to $191.2 million in the first fiscal quarter, while subscription sales rose 6.5 percent to $241.8 million.

Subscription and Assets 

Even though the company is looking to switch over to completely subscription based they are still selling more ads for their online content, they online ads don’t command the sort of rates that the print edition did. Whereas the a subscription model offers the company a stable income.

The Times set up a ‘pay wall’ in 2011 has encouraged some of their internet users to sign up for a subscription that allows them to access restricted areas to other non subscribers. Paying users climber to 676,000 at the end of March – a 45 percent gain from the same time last year.

The company has restructured to focus on its flagship product – New York Times – rather than wasting resources be keeping assets like and its regional newspapers and a stake in the Boston Red Sox baseball franchise. Getting rid of these unnecessary branches of the company will streamline the operations of the company and will hopefully increase quality and amount of content being pushed out.

Rebranding and Fiscal Gains

The Times is currently in the process of selling the Boston Globe branch of the company and rebranding the international Herald Tribune as the ‘International New York Times‘. After the Boston Globe was sold the company consists now of only Times branded newspapers and Times related assets.

The Times net income fell 93 percent to $3.14 million (2 cents a share) from $42.1 million (28 cents a share) one year previous. The companies one time gains int the first fiscal quarter of 2012 include the sale of the Times’ stake in the ‘Fenway Sports Group‘.

Source – Bloomberg

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