Does the Murdoch Content Paywall Really Work?

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Let’s just get a few things straight, there are a lot of doomsayers out there. Those that say Rupert Murdoch is an idiot for implementing a paywall on his most prized content. If you talk to Journalists, however, they tell a different story. Although most call it bold, most also say they support it. Protecting their skills seems the right way to go.

Times Online Subscription Model

But, we need to take a step back and look at it objectively. The main question everyone wants to know is has the paywall increased the revenue per user for Murdoch’s properties? Most will say no, but it needs a bit of brainwork to see if this is the case. I’m going to base most of this thinking and number crunching on the Times Online in the UK, as this has been running for longest.

I think there are three hard factors to understanding whether the content paywall has or hasn’t worked; volume of unique visits, subscription cost per visitor, average CPM for the site. By combining these in a few different formulas, we can potentially apply a figure for whether this has worked.

First things first, take a look at the hard numbers. Since the announcement and implementation of the Content Paywall on Times Online in the UK, unique visitors has fallen by around 57%. 57%!! to any brand that has got to be damaging, but a fall from 2.7m unique visits in May 2010 to 1.1m in April 2011 is hugely significant to Murdoch. Since the July implementation the average visitors per month has fallen from 2.6m to 1.3m.

Traffic?How has the Times Online and New York Times Paywall Affected Traffic?

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So lets take those numbers for monthly visitors as our base rate of monthly visitor for Non-Paywall months (2.6m) and Paywall months (1.3m). The next number to then look at is the revenue that a subscription generates.
For Times Online, the subscription is £1 for 30 days, then it converts to £2 for 2 weeks. If we imagine that the majority of people won’t cancel their subscription once they sign up for it, then I think we can estimate a revenue of £1 for the first month, then £4 per month after this. Therefore:

1.3m x £1 + ((1.3m x £4) x 11) = £58.5m

Of course, the non-subscription model doesn’t generate any subscription income for Murdoch. With an income of £58.5m, its no wonder that Murdoch offers up the iPad free of charge to any subscribers. Plus it adds more ad revenue opportunities. The cost of producing and maintaining simply doesn’t dent the sides when added as a cost to the overall development of the Times and Sunday Times properties.

It is also useful to look at advertising, in this case, does the -57% drop in unique visitors equate to a drop in advertising revenue? If you imagine the average CPM for Times Online is £10, it gives you a financial base to work from.

The interesting thing is to then think about visitation. When the Times Online was non-paywall, the figures suggest that users were visiting on average 10 pages per month. This therefore gives total page views of 26m per month. At £10cpm, this gives an advertising income of £260,000 per month. Equating to a total £3.12m per year.

((2.6m x 10 pages per visitor)*£10cpm)*12 = £3.12m

The paywall model can be worked out in the same way. However, a study from Marketing Week seemed to indicate that although the thought was people were spending longer with the paper and viewing more pages, they weren’t. The number of pages viewed dropped to 9m in July, that is only 7 pages per user.

I don’t think this takes into account all the possible ways a Times Online subscriber can interact with the paper. Although the number of viewed online pages appears to drop to about 7 per person, there are potentially more opportunities to see content and thus opportunities to see advertising. Let’s say the iPad generates another 1 page per person per month, so the total pages per subscriber is 8 per month.

This means:

((1.3m x 8 pages per visitor)*£10cpm)*12 = £1.25m

So, as much as Murdoch is criticised for his model, and as much as it doesn’t make sense to some people. It is pretty clear that it makes a lot of sense financially, if these figures are right. (From my media background they seem reasonably right). So happy journalists, happy Murdoch, but also I am happy to be corrected on my calculations.

Any feedback much appreciated.

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