The New York Times Company (NYT - Analyst Report) gets ready to limit the number of free articles that can be read by online traffic visiting the website of its flagship newspaper. Come April, and online visitors will not be able to access more than 10 free articles per month, which is exactly half of what the pay-and-read model offered when the system was launched on March 28, 2011. With this step, the company intends to augment its digital revenue.
The publisher of The New York Times, the International Herald Tribune and The Boston Globe adopted the Financial Times' metered system, whereby after browsing a certain number of free articles, readers will be asked to subscribe to enjoy access to its full articles on phones, tablet computers and the Internet.
The New York Times Company fixed monthly charges of $15 for access to more than restricted number of articles on its website and a smartphone application; $20 for unlimited access online and on Apple Inc.'s (AAPL - Analyst Report) iPad tablet computer application; and $35 for online, smartphone and iPad application. Moreover, in order to woo new subscribers, the company introduced a plan of 99 cents under which one will be able to enjoy all digital offerings for one month.
It was also specified that subscribers to the New York Times’ print version will be able to access content or articles online as well as on all applications of The Times for no additional charge.
Despite hiccups in the economy, The New York Times Company’s pricing system promises a guaranteed revenue generation avenue. The company notified that NYTimes.com and the website for The International Herald Tribune together had a paid digital subscribers’ base of 454,000. Digital advertising revenue remains the sole performer that grew 5.3% during the fourth quarter of 2011 at the company’s News Media Group segment.
What Called for the Need?
Changing consumer preferences and advent of new and innovative technologies have been altering the way news is read and offered. Readers now have more choices to collect and read articles and news through devices such as netbooks or other hand-held devices.
These have been weighing upon the print newspaper industry, as advertisers now get low cost avenues through which they can reach their target audience more effectively. Print advertising revenue across News Media Group fell 7.8%. We believe that an alternative and a stable source of revenue is the demand of time to salvage the dwindling print newspaper industry.
Newspaper companies have now been remodeling and restructuring themselves to better align with the growing need of marketers, targeting younger people, affluent households and other demographic groups. The publishing companies are adapting to the changing face of the multi-platform media universe, which currently includes Internet, mobile, tablet, social media networks and outdoor video advertising in its portfolio.
Others Following the Trend
”To read further please subscribe” is the new mantra that newspaper companies are fast adopting. To curb shrinking advertising revenue and improve market shares battered by the recent economic downturn, some of the publishing companies are now considering charging readers for online content. We believe that this would mark an end to the free usage of online content.
Recently, Tribune Co.'s Los Angeles Times started a subscription based model for accessing its online content. Online visitors are permitted to read 15 free articles every month. Further, Gannett Co. Inc. (GCI - Analyst Report) hinted of initiating a pay-and-read model, under which Internet users will be allowed to access 5 to 15 articles per month without shelling out a penny. The company said that once implemented the model will fetch $100 million.
We believe the success of the pay model depends on the accessibility of new articles across the Web. Potential customers will be reluctant to shell out a penny if content is available free of cost elsewhere. There still exists a chink in The New York Times Company’s pay wall system. Readers visiting the company’s website via blog links or social-media sites such as Facebook or Twitter will be able to access unlimited number of articles free of charges.
Holds Zacks #3 Rank
The New York Times Company remains committed to streamlining its cost structure, strengthening its balance sheet and rebalancing its portfolio. However, we remain apprehensive about risks that the company faces due to its high dependence on advertising revenue.
Currently, we have a long-term Neutral recommendation on The New York Times Company. Moreover, the company holds Zacks #3 Rank that translates into short-term Hold rating.