The NYT Pay Plan’s Most Dangerous Foe: Perception

By now, we were supposed to have clarity about how The New York Times will use a meter to create a digital subscription revenue stream. After all, the plan went into effect in Canada March 17 and is supposed to start rolling out in the United States and globally Monday afternoon. We do have details — all-you-can-click social, 20 clicks at (NYSE: NYT) before direct access is lost, pay plans of $15-$35 every four weeks — but the clearest aspect so far is how hard it is to cut through preconceptions, particularly when flexibility and complexity are involved.

Much of the reaction could have been written before the Times announced anything — and much of it was to some extent. Most of those who were against charging remained that way; many who favor some form of pay for digital access prefer other methods. There were the folks prepared to pay or willing to consider it but puzzled by the reality. Then there’s the family member (who still doesn’t quite get what I do for a living) who declared over Chinese food the other night that the NYT‘s subscription plan is “obnoxious.” He repeated it a few times. Why? Because everybody knows the Times makes scads of profit overall and especially with all the ads on the website so charging for access is “obnoxious.”

Some of the perception stems from the sheer length of time it took between announcement and reality. What to NYTCo digital head Martin Nisenholtz is “not particularly lengthy” when you think about all the infrastructure that had to be built or rebuilt was 14 months of cement to people who heard “meter” and thought “wall.” Never mind that from early on, top NYT execs insisted flexibility would be baked in and social links would survive. They also said they weren’t shutting off search access. (More on that below.)

Part stems from confusion. “Paywall equals no access” is much easier to grasp than “paywall has lots of windows and a doggie door.” Paywall also equals kneejerk reaction, as in “OMG, they’re building a solid wall that will keep everyone who really wants to go in from doing so.” That’s one reason some are insisting now that the NYT doesn’t have a paywall. Well, yes it does – one that kicks in every month after a meter clicks off 20 article views. But using the term on the front end causes problems.

Also from confusion over the way it’s supposed to work. I’m not going to call people out but I’ve seen some of the most sophisticated news-oriented people I know get this wrong-telling people 20 pageviews rather than articles, describing the payments as monthly when it’s every four weeks, completely missing the social link opportunity. The Times bears much of the blame. It is a complicated scheme with a range of options and prices aimed at a relatively small group — a percentage of the roughly 15 percent expected to hit the wall on a regular basis — but full of ammo for critics or even people who think it makes sense to start charging for some digital access.

Beyond the complications of tiers that treat access by smartphone differently than tablet or the pricing itself, the logistics are far more complex than anything should be that doesn’t require a degree in quantum physics. To underscore how complicated this is, my own interpretation of how the referred links were supposed to work turns out to have been wrong. Despite Felix Salmon’s best efforts to make me see otherwise, based on my reporting, I thought they wouldn’t count at all. But a Times spokesperson confirmed Sunday night that any link counts towards the limit. Read 20 articles from Twitter and you can read another 20 that way but the paywall will smack you if you try to access #21 from Search links are free — until you hit a daily limit. DealBook remains completely accessible.

Flexibility is free — but it isn’t easy to understand and, unless I’m missing something brilliant, the Times hasn’t cracked the marketing code. (It has answered readers’ questions and added a marketing/PR twitter feed @NYTdigitalsubs to respond.)

Following the consumer: This scheme, says Nisenholtz, is what the consumer wants. To be fair, he didn’t say the consumer wants confusion. What he told me — repeatedly the day the details were released — was the Times is following the consumer. Why aren’t there micropayments, a solution being suggested again now that the subscriptions are in play? Despite the number of people who insist they would be ok paying that way, the research showed otherwise. “Most people who we talked to felt, particularly because they were loyal users, they didn’t want to have to go through a 99 cent per article thing every time they wanted to access the Times. They wanted free and clear access over a very long period time.” Contributions didn’t gain any traction either.

“That’s the one thing the people who are writing about us can’t see and it’s not their fault. We followed the user all the way in on this. That’s where the pricing comes from, that’s where the decision to go paid comes from.”

No, we can’t see the research. For instance, I don’t know if those loyal customers said how comfortable they were paying premium prices for content others could get free. Then again, Times print subscribers have been doing that for most of the life of the web — paying for the finite version of something anyone with internet access could get for free and in more updated form. Some people think that isn’t smart but it works for those of us who do it. (I say us, because my household probably fits in the NYT‘s loyal category when it comes to print.) Electronic subscribers, whether it’s for replica editions, the Times Reader or through Kindle and other e-readers, do the same despite access to browsers. It’s convenient, it’s packaged in a format the subscriber wants, and if the reader wants more, he or she can go to the site.

Michael DeGusta’s chart comparing prices of various digital subscriptions (subtitled “The New York Times is Delusional) visualizes just how much of a premium the digital NYT subscription is compared the others on an annual basis. Even the lowest cost digital-only plan of $195 a year is higher than almost all of the software, video, music or news subscriptions DeGusta shows; the all-access pass for $455 a year towers over them all, including the $3.99 a week Wall Street Journal digital plus package. His point: people can buy much more entertainment and news for less than that one subscription and eventually, that’s what they’ll do.

Now imagine the same kind of price chart with other products. Could General Motors sell more Cadillacs if they were priced like Chevrolets? Will more people buy Korbel than Cristal? The Times is banking on a different kind of positive perception here: that enough people will pay a lot for quality.

To keep that from coming at the expense of print, although Nisenholtz insists that wasn’t the thinking when the pricing was planned, digital access is included for any level of home delivery subscription. I’m a fan of bundles and that’s a welcome benefit for home subscribers but it also sends an inadvertent message that digital doesn’t have additional value at the same time that the Times is trying to charge separately for it.

(We also aren’t seeing the promo price yet; the Times promises a special offer on March 28.)

Advertising still matters: It’s no secret that the NYTCo wants to keep its mass advertising strength. The goal of charging is to create another, eventually strong revenue stream, not obliterate the ones that exist. The flexible scheme is aimed at keeping as many monthly uniques as possible while gaining some income from a very small percent. In his look at the decisions behind the plan, Times media reporter Jeremy Peters said privately execs hopes for 300,000 online subscribers the first year. That’s less than 1 percent of the 31.4 million-plus monthly uniques in February and roughly 6 percent of the 15 percent most loyal readers that month.

Quality of reader is already an important part of the pitch to advertisers for print and digital. The addition of a group literally paying a premium for digital access creates a subset that could command higher rates.

The Times is getting an assist towards that first-year number from Lincoln, which is offering free basic subscriptions to certain users through the end of 2011. The paper will lose some potential paying subs for now but gets a chance to show other it’s worth the price eventually. But is also likely to lose some readers scared away by the very suggestion of a pay wall. It doesn’t matter how porous it is; selling that idea and subscriptions at the same time is a perilous task.

Gaming the system: People who click on referred links don’t get charged. Those links don’t count toward can still be reached after the 20-article limit. Just to make it more confusing, they all show up on the meter. People who start at the source — — do. People who enter through Google (NSDQ: GOOG) or other search engines get free access to five articles per search engine per day. Those who use the search box and click on a result are chipping away at their limit. Subscribers will pay for full digital access; those gaming the system do not.

And in this case, gaming the system doesn’t mean doing anything illicit, like watching pirated shows or movies through torrents instead of paying for cable or waiting for something to officially go online. It just means knowing how to use the gaping loopholes the Times intentionally has left or created for persistent reading, rather than casual drop ins. Josh Benton spells out how a little coding makes it dead easy for anyone who knows how to install a browser add on or extension. You can also subscribe to the @NYtimes twitter feed and various other ways if you’re determined not to pay.

Users of major search engines — Google, Bing, Yahoo (NSDQ: YHOO), AOL (NYSE: AOL) and Ask, says the Times — can access five free articles a day per engine. The first version of the plans limited access through Google to five article but unlimited access through others. This week that policy changed to add limits to the others. In a scathing takedown of the search loophole — and the way it’s been explained, Danny Sullivan calls anyone who pays under these circumstances an idiot. From a series of tweets: “can we agree? it’s not an NYT paywall, it’s an idiotwall. designed by idiots to get money from idiots, the idioci. Prob will work a bit, too.”

That’s because not everyone wants to jerry-rig a reading experience. Look at what Nisenholtz had to say earlier about convenience. Some people are willing to piece together a video experience that mimics cable; others pay for cable or satellite to get broader access with less effort (usually).

But Arthur Sulzberger Jr.’s recent dismissal of anyone who would try as high-school kids or unemployed misses a big mark. The Times would be better off having more people who care enough to game the system than if people merely shrugged and moved on.

For all this research and all the effort, the digital subscription space is a work in progress and this particular plan, is still experimental. Nothing is frozen in place. Prices can change. Plans can change. Consumer behavior in research and reality may not match. The Times invested tens of millions ($40-to-$50 million, according to Bloomberg) to build the system to be as flexible as possible, including the ability to allow universal access for major news events. Sulzberger and company need to stand fast enough to see if it works — TimesSelect lasted for two years — and be nimble enough to fix what doesn’t.

Note: This post was updated Sunday night to correct a misunderstanding about the way articles are counted.