Silicon Insider: Online Media Fees

Jan. 13, 2005 -- -- As the Rathergate debacle begins to fade, the CBS production team fired, Rather allowed to quietly slip into retirement, and CBS' once-sterling reputation thrashed for years to come, up steps The New York Times to be instructed on the new Digital Zeitgeist.

As it happens, I have a little history with the Gray Lady. Twenty years ago, when I first started freelancing, I worked as a stringer for the business section of the Times, and managed to do enough big stories to earn a byline. I had a chance to turn that gig into a full-time job -- until I found out that the Times expected me to spend five years in New York before going back out into the field. Moving a Silicon Valley guy back to New York to cover Silicon Valley struck me as nuts, so I passed.

Then, five years later, I found myself writing for the Times again, this time as a Sunday business "lifestyle" columnist. It was a monthly deal, so not much of a stretch, but I still found it disturbing. On deadline day, my phone would ring and I'd hear a woman's voice say, without even a hello, "Where is it?"

"It's on its way," I'd reply.

On the other end, the phone would click dead.

This went on for a year. Then one day, the phone rang. It was the same editor, only now she said, "Mike! How are you?" She then proceeded to launch into a long and friendly conversation -- leaving me more confused by the second. Was this the same woman who didn't even say hello?

Then she said, "The reason I'm calling is to tell you that I'm leaving the Times ..." Suddenly, it all became clear. I remember thinking: What kind of place would cause that kind of personality change in a person? Just how big is the reality distortion zone back there on 43rd Street?

I don't know the answer, and perhaps it was a unique case, but every time I read the Times I think of that phone call.

I thought about it during the Jayson Blair scandal. During the last presidential campaign. And I thought about it again a couple days ago as I read about an upcoming Business Week story (as described by Reuters) that claims the Times is having an internal debate about whether to start charging subscription fees for its currently free online version.

The Times' reasoning is straightforward: Currently, nearly 19 million unique visitors read NYT stories online each month. For free. Convert those easy riders to paying subscribers -- well, at least a sizable fraction of them -- and you're talking a serious contribution to company profits. That's what The Wall Street Journal does, charging its 709,000 subscribers $79 per year ($39 if they are print version subscribers too) -- and it just drives the Times nuts.

But that's not the only reason. In a revealing statement, Times publisher Arthur Sulzberger Jr. was quoted as saying, "It gets to the issue of how comfortable we are training a generation of readers to get quality information for free. That is troubling."

If ever a quote seemed a perfect candidate for some future "Famous Last Words" collection, this is it.

First, the obvious answer. The New York Times is not the Wall Street Journal, the former being a general-interest newspaper, the latter a business publication whose contents, in theory, offer an immediate potential return on its subscription cost. And that assumes the Journal is right: one can make a strong argument that in the next few years, as the sources of news continue to proliferate, the WSJ too may have to abandon its subscription strategy.

But that's only part of it. The weirdest component of this story is the attitude exemplified by Sulzberger's quote. Only the New York Times would honestly believe that it alone is in charge of "training" the next generation of news readers. Even worse, has the Times' management actually failed to notice that this next generation is ALREADY being trained to get quality information for free online from endless numbers of blogs, wire services, newspapers, magazines and bulletin boards? Or is that just not considered "quality" information?

As it happens, one of the things I learned by staying here in Silicon Valley for the last two decades is that nobody ever wins in tech by bucking the Zeitgeist. The trend in online news is moving away from reader pay-per-view and toward a model driven by advertising. That model may not be perfect, but the chances of it reversing direction now are minuscule. The Wall Street Journal got in under the wire; but that is already a lifetime ago in Internet time.

Perhaps in the Times' hermetic world it isn't apparent that news itself is becoming commoditized, that the same event is no longer covered by just a handful of outlets, but by thousands -- and soon, millions. And that's something else I've learned out here in the 'burbs: When an industry is commoditized, be it personal computers, flash memory chips or breaking news stories, to try to assert a premium price model is suicide. Instead you have to compete with distribution, quality, service and share of mind. Can today's New York Times claim a distinct advantage in any of these?'

But most of all, in a commoditized industry, you have to expand your customer base -- even if it means giving away the product so that you can monetize a much larger user population through other means. No doubt the Times, if it follows the subscription strategy, will be able to convince several hundred thousand of its loyal online readers to pony up the bucks -- and that will do wonders for the company's balance sheet.

But at a time when newspaper readership is falling precipitously, is the Times (or any newspaper) prepared to sacrifice long-term influence to short-term profits? Is the Gray Lady really ready to end her long reign as America's Newspaper of Record?

Michael S. Malone, once called “the Boswell of Silicon Valley,” most recently was editor-at-large of Forbes ASAP magazine. He has covered the Silicon Valley and high-tech for more than 20 years, beginning with the San Jose Mercury-News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist and Fortune, and for two years he was a columnist for The New York Times. He has hosted two national PBS shows: "Malone," a half-hour interview program that ran for nine years, and in 2001, a 16-part interview series called "Betting It All: The Entrepreneurs." Malone is best known as the author of a dozen books. His latest book, a collection of his best newspaper and magazine writings, is called "The Valley of Heart's Delight."

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.