Pay-and-Read from New York Times - Analyst Blog

The New York Times Company (NYT), the diversified media conglomerate, is transmuting its business model by adding diverse revenue streams, which include a pay-and-read model for NYTimes.com with plans to launch a paid subscription website, BostonGlobe.com in 2011.

The company will adopt the Financial Times' metered system, where readers after browsing a certain number of free articles, are being asked to subscribe. According to Bloomberg, the online subscription would be less than $19.99 a month, which is the cost; customers are charged for the New York Times subscription on Amazon.com Inc.'s (AMZN) Kindle e-reader.

The NYTimes.com subscription based model is slated for launch in the first quarter of 2011. It was also specified that the subscribers to the New York Times' print version will be able to access online content or articles without shelling out additional charges.

The New York Times, which is scheduled to report its fourth-quarter 2010 financial results on February 3, 2011, now expects the rate of fall in print advertising revenue to decelerate to 4% in fourth-quarter 2010 from 5.8% in the third quarter.

The publisher of The New York Times, the International Herald Tribune, The Boston Globe and 15 other daily newspapers forecast digital advertising revenue growth of 10% in the fourth quarter. The company also cautioned that circulation revenue in the quarter under review is expected to fall by 4% to 5%.

The publishing industry has long been grappling with sinking advertising revenue, and the recent global economic meltdown has worsened the situation. This comes in the wake of a longer-term secular decline as more readers choose to get news free online, thereby making the print-advertising model increasingly irrelevant.

To curb shrinking advertising revenue and seeking new revenue avenues, the publishing companies contemplated charging readers for online content. Newspaper companies have been remodeling and restructuring themselves to better align with the growing need of marketers, targeting younger people, affluent households and other demographic groups with multiple web and print publications.

The publishing companies are adapting to the changing facet of the multiplatform media universe, which currently includes mobile, social media networks and reader application products in its fold.

Another media conglomerate, News Corporation (NWSA) has taken a leap towards an online subscription-based model for general news content. News International, a subsidiary of News Corporation, began charging readers for online content for The Times of London and Sunday Times of London effective June 2010.

Rupert Murdoch, the Chief Executive Officer of News Corporation, had long been pushing for the online subscription model for all general news websites. But newspaper companies had been reluctant to toe the line for fear of losing readership and, in turn, advertisers.

Currently, we have a Neutral rating on The New York Times. The company also holds a Zacks #3 Rank, which translates into a short-term ‘Hold' rating, and correlates with our long-term recommendation.

 
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