Wednesday, July 14, 2004

Pricing for Archival News: The New York Times Strategy vs. Search Engines

Shore's headlines today include a story in Wired News titled Searching for The New York Times. The article by Adam Penenberg, an assistant professor at New York University, cogently makes some points that we've been harping on at Shore regarding the appropriate business model for general news content. In short, publishers of general news information do best when they maximize their circulation, so that they can charge a premium price to their advertisers--for both display and classified ads. Today, the model applies in online as well as print, due to the growth of online advertising (and online readers of news). In fact, advertising revenue for NY Times Digital is up 39.8% year-to-date. So, why does The NY Times put archival content behind a firewall and charge $3.00 per story? Certainly, this policy doesn't maximize the number of readers of archival stories; quite the opposite. And, the revenue earned is minimal--just 2-3 % of annual profit for the division. Penenberg posits that the reason lies in the long-time deal between The NY Times and Lexis-Nexis for which The NY Times receives $20 million per year. He states that the NY Times "simply can't charge Lexis-Nexis tens of millions of dollars while giving away the same content free over the Web". In Shore's opinion, the current situation is untenable, but not without possible solutions. Lexis-Nexis, part of the Reed-Elsevier empire, is already moving away from being a passive repository of content toward an approach that focuses on providing content-driven solutions to clients. Over time, providing hosted access to an archival collection of all Times' stories may not be as important to Lexis-Nexis. If The NY Times resists sensible pricing and packaging policies for its archival collection because of its current relationship with Lexis-Nexis, it may well find that it has missed out on building long-term growth opportunities for monetizing its digital archive through Web search and advertising, and that the relationship it has been protecting is ready for a break-up.
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