Wait, the New York Times Paywall Is Working? Not So Fast, Mr. Blodget

The New York Times made the right decision in erecting a paywall, if you ask Henry Blodget of Business Insider. He points to the fact that the company has a total of 100,000 subscribers following the erection of its new paywall and an uptick in print subscriptions, which a NYT executive told him on background.

Blodget says, "I told you so." Not so fast. The numbers he's citing are really preliminary, the NYT is still heavily discounting its subscriptions, and this purported gain in print subscribers is way too ambiguous to carry the argument Blodget is clearly dying to make.

Fewer online subscribers than before
The 100,000 online subscriptions figure came from the company's last earnings release -- on April 21, nearly two months ago:

Digital subscription packages on NYTimes.com and across other digital platforms have been well received, and approximately three weeks after the global launch, paid digital subscribers have surpassed 100,000. So soon after the launch, the Company does not yet have visibility into conversion and retention rates for these paying customers after the initial promotional period, although early indicators are encouraging.

So, we're dealing with a dated number. Perhaps more important, how does it compare to the paper's previous paywall effort, Times Select? That venture yielded the NYT about 227,000 subscribers paying an aggregate $10 million annually. But the price then was about half of what the NYT is now asking.

Crank the arithmetic and you see that the Times' current paywall may, at best, be delivering roughly what Times Select did. That's not good news, because TS wasn't considered a big hit, to put it mildly. And as the company notes, there's no way to know how many of those discount subs the NYT will retain, or how many previously freeloading Web readers might actually buy subscriptions.

No news on subscriptions isn't necessarily good news
For all we know, that subscription number could have already fallen, possibly dramatically. And it's interesting that the talkative Times executive Blodget interviewed didn't bother to tell him what's happened to digital subscriptions since April 21.

When the NYT next reports its numbers and, presumably, the digital-only circulation, it will be possible to tell if its currently pricing model is working, or whether, by charging more, the company makes less in the aggregate.

From a recent promotional I saw for the Times, my guess is that the pricing is off. The paper is offering a 50-percent-off-for-20-weeks special to people registered on the site. Although it might be a test offer, it doesn't sound as though the Times sees demand that would enable a lower discount.

More print subscribers, yes. But how many?
According to Blodget's NYT exec, print circulation has gone up. Sure, it makes sense that one reason it originally dropped was the free availability of the paper on the Web. But here's what you'd need to know to make any real sense of that claim:

• How much did print circulation go up?
• Was it up year over year or by sequential quarters?
• Have there been similar changes in other years? In other words, is this a seasonal change of some sort?
• What factors other than a paywall might have influenced an increase in circulation?
• Has the average circulation price changed? Or is the Times heavily discounting to pump up its numbers? (In other words, what effect have all those television commercials for introductory pricing had on the business?)
• What was the cost of the promotional activities? Has the Times made money on the activity, or does it end up losing money in the process?

Without that information, Blodget's "told you so" crowing is just silly, because on its own, the claim that print subs are up pretty much has no meaning. (Maybe I'm still wary, based on the reckless touting that Blodget used to do so often and so well in his previous career on Wall Street.)

Right answer, wrong question
Better is good -- that is, if the company's business is improving. But the point of newspaper paywalls wasn't just to juggle some numbers to keep score. The larger strategy was to find ways to make a news business sustainable. And that's where Blodget and his source go off the tracks.

The real question underlying all this is whether the trade-off between digital and print subscriptions, subscription revenues, ad revenues, and operating costs improve the NYT's position. If a too-expensive paywall brings back some print people but doesn't increase digital subs substantially, the Times will still be hurting.

Is it? Too soon to tell, really. Which is why Blodget's over-eager lunge at "rightness" is not only premature, but dangerous. To claim success for the NYT's paywall on such thin data is to effectively lull the industry back to sleep when it's never been more important to stay on high alert.

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Erik Sherman

Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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