How to successfully digitalise content and drive subscriptions, NYT-style

The New York Times (NYT) is a prominent news media publisher in the US, reaching 3 million subscribers and 122 million readers in 2016. NYT along with the US news media (print) industry has experienced sweeping changes in ability to monetise its relationship with readers. While the industry has experienced cyclical declines earlier, this period of change is catalysed by digitalisation of content and advertisement networks. NYT offers an interesting opportunity to study the responses and transformation efforts of a historically successful company into an industry disruptor.

Digital disruption of the old marketplace:

News media traditionally operated as a three-sided marketplace, creating trusted news content that readers paid for, and selling “reader views” or advertisement inventory to brands, businesses and individuals. Heavy capex requirements and complex local distribution protected large players from disruption by new players.

With the advent of the internet and internet-connected devices, this supply chain has been reshaped. Numerous device manufacturers, ad-technology platforms, aggregators and social media entities have disintermediated the ad-buyer, content creator, and reader. The creators of these connected devices and destination aggregators effectively capture the reader and harvest rich data on their needs and characteristics. This allows them to offer customised information services (shopping, news, advertisements) that legacy news media cannot match.

Further, the ability to publish content at zero marginal cost of each view has resulted in multiple content creators and low ad-inventory prices.

Aggregators control access to readers and retain the major share of growth in digital advertisement spending. An estimate suggests that print news media declined from an 8 per cent share of consumer time spent on media in 2011, to 4 per cent in 2017. Listings sites such as Craigslist are estimated to have caused decline in revenue and increase in subscription prices of local newspapers.

In 2017, 63.1 per cent of the total digital ad spend in the US went to Google and Facebook. Amazon is increasingly cited as the next big competitor for advertisement revenue, given its position as the starting point for product searches. This is further bolstered by its ability to lock customers into purchases via use of IoT devices and “dash” buttons.

Updating the newsroom:

In 2013, NYT responded to the changing context by creating a “digital innovation” taskforce tasked with examining its operating and business model. Based on recommendations, NYT set short-term goals to build the required “new-age” skills within its leadership, journalists, business and digital teams.

They worked to increase audience engagement, encouraged experimentation and usage of structured data and tagging. NYT ended the year with increased digital ad revenue growth and successful release of multiple digital products.

In the medium term, NYT embraced what digitalisation could do for its core mission of better journalism and community building. They worked towards becoming a destination site, increasing proportion of subscription revenue, engaging with global communities, developing their position as an expert voice across news, cooking, wellness, property listings, etc. They laid emphasis on working seamlessly with international offices and audiences.

By the end of 2015, NYT earned $800 million in digital revenue. It also developed a portfolio of investments into early-stage, digital/ad-tech companies: theSkimm (condensed newsletter for millennial women), Blendle (micro-payments for news), Enigma (Open data insights). Its recent acquisition of expert review site The Wirecutter reflects its desire to drive purchase decisions by providing useful information to customers that interact with it for multiple needs.

What is the future, Alexa?

NYT has succeeded in pivoting from legacy print to a digital media organisation. However, its current plans do not acknowledge the impact of further digitalisation in the information supply chain. As technology penetrates deeper into everyday lives with wearables/IoT appliances, it will reshape the advertising paradigm.

In a situation where consumers get their news via closed company-controlled platforms, NYT will struggle to find new users and retain old ones. It should consider investment into IoT companies that provide daily information such as weather, fitness level, or product recommendations. Similarly, partnering to provide a branded NYT experience on a selection of devices can provide the initial experience required to create content for and monetise such spaces.

In the absence of hardcore technology skills, how can NYT occupy a stable position in user homes/minds? Should NYT consider the option of moving towards a wholly subscription-funded future, to remove itself from the race to monetise consumers’ attention?

The article was first published on Harvard Business School’s Technology and Operations Management page.