Q&A: New York Times Digital Czar Martin Nisenholtz on the Paywall, Pricing, Google and Apple

A lot of you have done a lot of reading, and a lot of writing, about the New York Times’ digital paywall/subscription plans. And if any of you who care about this stuff haven’t read Ken Doctor’s dissection of the strategy, go do that immediately.

Back? OK. For extra credit, here’s a condensed and edited–but still very long!–version of a chat I had yesterday with Times digital czar Martin Nisenholtz. I’m not convinced Nisenholtz is convinced that the plan the Times rolled out yesterday is the best possible plan. But if that’s the case, he certainly didn’t let on.

The big takeaways:

• The Times is limiting referrals from Google because it can. Specifically, it’s taking advantage of Google’s “first click free” program. (Worth noting that the 5-a-day limit gives you another 150 articles or so a month above the initial 20-per-month cut off. So it’s not particularly punitive.)
• The Times is charging more for access to its iPad app than for smartphone apps, because it thinks it can. iPad users spend more time with the paper, and the Times thinks people who spend more time with the paper will pay more for it.
• The Times only expects a small sliver of its Web readers to become paying users. Niseholtz doesn’t exactly say this out loud, but if you piece together his commentary, that’s what he’s saying. He doesn’t expect the “vast majority” of readers to ever see the paywall, so what he’s really trying to do is convert a percentage of the remaining minority. But if you’ve read Doctor’s piece, then you already know this.
• The Times isn’t trying to price its digital subscriptions in a way that protects its print subscription business. On the one hand, this makes sense–after all, the subscription plans are aimed at converting heavy users of its Web site who aren’t already print subscribers. On the other hand, given that print subscribers remain the Times’ most valuable asset, this one seems hard to reconcile.

Peter Kafka: Just to be clear, when the Times says non-subscribers can read stories above their 20-per-month limit if they come from referring links, you’re not just talking about Twitter and Facebook, but any link from any site, right?

Martin Nisenholtz: That’s correct.

Kafka: It could be the Journal. It could be a blog, it could be the Financial Times, anything on the Web, right?

Nisenholtz: Yes. The only other thing is that Google has a methodology where they can limit the number of inbound links per day, and we intend to take them up on it.

Kafka: So that’s Google doing the actual gating, not you?

Nisenholtz: Right. They had made this feature available prior to us going pay, so it’s not like it was inspired by us per se. We’re just taking advantage of it.

Kafka: Why limit Google’s links, but not any other site’s?

Nisenholtz: I think the majority of people are honest and care about great journalism and the New York Times. When you look at the research that we’ve done, tons of people actually say, “Jeez, we’ve felt sort of guilty getting this for free all these years. We actually want to step up and pay, because we know we’re supporting a valuable institution.” At the same time we want to make sure that we’re not being gamed, to the extent that we can be.

Kafka: But if you really do want to game the wall, you’ll be able to do it. You could could go through Microsoft’s Bing, for instance.

Nisenholtz: We’re obviously going to be vigilant over the next couple of months, in looking at the ways that people are doing that.

Kafka: I’m surprised to hear you say you’re going to spend calories trying to make sure that people don’t abuse the system. I would think you have other things to do.

Nisenholtz: I don’t think we’re going to spend enormous resources to go tracking people down. But at the same time, we’re going to obviously work to see where the source of these workarounds are, and work to close them off, if they become substantive enough.

But in looking at the research that we did, we expect [paywall jumpers] to be a very significant minority, a small, small number of people. When you look at your Twitter feed, based on the people you follow, it probably seems like it’s looming very large. But in the scheme of things, among people who don’t live in Silicon Valley or don’t cover it, the vast majority of people do not have this on their minds.

Kafka: What does research say about the total number of subscribers you can expect?

Nisenholtz: Obviously we haven’t released that. We are very, very confident, based on three rounds of research with three separate groups of loyalists, three separate vendors, over three separate time periods, that the conversion rates among that group are going to be sufficiently high to layer in the second revenue stream.

But I’d just remind you that we’re still very much in the advertising busienss. It’s our core business. We don’t expect the vast majority of our users to see the paywall, and we expect to remain a very very large player on the web. The conversion rates are built off of folks who are fairly heavy users.

Kafka: Why charge different prices depending on the screen–laptop, smartphone, iPad, etc–your subscribers use to read the Times? Netflix charges one price and that seems to work well for them.

Nisenholtz: We built the pricing architecture off of the research as well. We basically found a greater willingness to pay among iPad users. We see iPad app users spending much much more time with our brand than either Web users or smartphone users. So the more you use it, the more you value it.

This pricing research was very clear from a consumer perspective. It was not built off of what we charge for the paper, or what we think we desrve, or anything like that. It’s what our loyal users said they would be willing to pay.

Kafka: For first-time subscribers, at least, you can get more for your money by buying a print subscription than a digital-only offer. I assume that’s intentional.

Nisenholtz: Not really, no. I don’t think anybody ever had a discussion of favoring print over the Web. This research was done on digital loyalists. Obviously, the print subscribers are very, very valuable to the franchise, but I can’t remember a single disucssion where we linked the digital price point to our print subscriptions.

Kafka: You announced this in January of 2010, and now you’re going to launch it in March 2011. I know you spent time researching your customers, but what else have you been doing?

Nisenholtz: If we were just rolling out a web-only digital subscription to the Times website it would have been a 3-month project. But you have to remember that we were very intent on trying to create the kind of customer view that took customers in one setting–for whatever they had–across platforms.

What that means is we had to tie in a legacy circulation management system, as well as a digital system, as well as our legacy customer systems. You have these big iron legacy systems that have to be joined with web systems.

For us, the 14 months didn’t feel like a particularly long time. We were starting from a standing start.

Kafka: When Apple announced its subscription plans last month, you guys said, essentially, that it wasn’t going to affect your plans. And now you’re working within Apple’s new rules. Did you know about them in advance?

Nisenholtz: No. We had heard the same rumors that you had, so we knew what the rumors were. But we heard about Apple’s plans pretty much at the same time as everyone else.

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Again, the Q&A above is an edited excerpt of our chat. As an experiment, I’m embedding our entire 21-minute conversation here, just to see if anyone derives any value out of it. I can’t advise listening to it, as the sound quality is sub-optimal (it’s recorded via a BlackBerry’s speaker phone onto a digital recorder) and it’s also, um, rambling. But if you’ve got a weird desire to see/hear some Web content sausage being made, have at it.

[UPDATE: The Times argues, gently and politely, that it would have been nice had I told Nisenholtz in advance that I intended to publish the audio of our conversation. I think they're right, so I've taken down the track.]