So, it looks like an intriguing deal.
Ford Motors' Lincoln is subsidizing 100,000 new NYT digital subscriptions. Well, it is an intriguing deal, but it's more nuanced than it seems, and in that nuance, we see some of the next models for how the digital circulation business and the digital ad business will newly intertwine, and open up new revenue streams and new marketing opportunities.
It's just one deal, but it points to the fact that the new business model in creation will be based more on digital advertising than digital circulation. Making that new interplay work is as important as setting prices and deciding how to restrict content accces for anyone putting up a pay wall, pay fence or pay obstacle of any kind.
While much of the blogosphere focused on the "complicated" $15, $20 and $35 price points, the Times was busy behind the scenes, effectively itself subsidizing 100,000 of its targeted-for-pay-conversions customers. What is going on in this pay tweak wasn't immediate obvious, and the nuance points to what a news company can do when it values its digital content, or as The Onion as put it so elegantly, "To ask NYTimes.com's 33 million unique monthly visitors to switch to a cash-for-manufactured-goods-based model from the standard everything-online-should-be-free-for-reasons-nobody-can-really-explain-based model is pretty fearless. It's almost as if The New York Times is equating itself with a business trying to function in a capitalistic society".
The Times had emailed more than 100,000 NYTimes.com readers that Ford Motor's Lincoln "is offering you a free digital subscription for the remainder of 2011. Enjoy all that NYTimes.com has to offer every day — investigative news and special reports, videos, blogs and more. It’s all yours at no charge, compliments of Lincoln."
So, it seems, Lincoln is paying the tab for those 100,000 digital subscribers, right? Which would be about $15 million, with those 100,000, 40-week subscriptions costing $150 each. Well no, Lincoln is not paying for the subscriptions. It is buying sponsorship on the Times sites. Of course, it could also buy advertising or sponsorship, and has, on the Times' sites. In this deal, though, Lincoln is paying some additional amount, of course undisclosed, as its brand achieves a halo affect with the target 100,000. However much Lincoln is paying beyond what it would pay anyhow for advertising is considerably less than $15 million, but the sum acts as an "offset" for the Times, Denise Warren told me.
Warren runs both advertising and NYTimes.com for the Times, and in this deal, we see that synergy bearing direct fruit. The curious, moving pieces, and, most important the psychologies accompanying them:
- Let's start with the 100,000 readers. These weren't picked at random. They are non-print subscribers (since subscribers are getting access included within their print subs now). They are heavy NYTimes.com users. As such, they represented an opportunity and a threat. The threat: facing the pay fence, they'd bump into it, and then go elsewhere, lost to the Times, taking many page views with them and contributing to traffic loss. The opportunity: convert them all into digital subscribers, and the Times could take in as much as somewhere between $15 million and $35 million by the end of the year. The Times' Lincoln gambit removed the threat. Presumably, these readers are glad to get free access and will go merrily using the Times. The opportunity, well, it's an opportunity cost. In reality, the Times may have immediately converted 10% of this group. That's 10,000 people at an average price point of $20 per four weeks or $2 million. Offset that $2 million with the added Lincoln money, and you can see the logic.
The stealth motive, though, plays out in November and December, as those free subscriptions expire. The Times hopes that these 100,000 heavy readers will be accustomed to digital access -- and more likely to pay for it. So it's a two-fold reader strategy: 1) hold on to their traffic this year; 2) and make it more likely they'll convert in 2012.
- Now, let's consider Lincoln. Lincoln gets that halo effect. It's an effect they can't achieve simply by buying advertising. Because the Times valued digital access -- thinking of them as customers, and not users ("The Newsonomics of Overnight Customers,") -- it had something new to offer Lincoln. Lincoln, in turn, had a new relationship it could make with a target audience. Without the Times charging for digital access, it's a deal that couldn't be done. Interestingly, Lincoln is getting its warm fuzzies mainly from the initial messaging. The 100,000 "Lincoln" subscribers won't be getting targeted Lincoln ads, or much in the way additional messaging over the nine months, says Warren.
Digital circulation. Digital advertising. And the making, we hope, of a new virtuous circle as the two feed each other, bolstered by data and underpinned by bettering understanding consumer psychology. At this point, we're early, but we can see glimmers of growing business models.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.