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It might go down in history as America’s worst timed product launch ever. Worse, perhaps, than the introduction of Ford’s bloated Edsel at the very moment when consumers began tiring of costly and oversized automobiles. And worse than Apple’s tiny Newton, a progenitor to the iPad that was launched in 1993, a year before Netscape began to introduce the world to the internet with its Navigator web browser.

What was this announcement?  Last Wednesday, the New York Times publicly declared that the days of free online access to its web site will soon be over. Beginning on March 28th, the news organization promised that its free site will be retired, with all of its content pulled behind a “pay wall” that will require subscription fees for access.

Why was the timing of this announcement so unfortunate? Because, just a few days earlier, the Pew Research Center’s Project for Excellence in Journalism released its annual report on the State of the News Media. One message in particular was quite disheartening for traditional outlets: that last year, every news platform continued to decline except for the internet.

That’s right; even 24 hour cable news channels, the media outlets that once posed the greatest competitive threats to traditional newspapers, are now themselves falling victim to news based web sites! And yet the Times chose this very moment to restrict access to, and raise prices for, its own web site.

A Contrarian Strategy

“Well … why not?,” you may ask. “Why not start charging for access to a news service through the one media distribution channel that is actually growing in popularity? And why not decide to stop giving away access to the same service for free?”

Those are certainly compelling questions; in fact, the New York Times may yet prove that its instincts are correct. Nevertheless, its new strategy runs contrary to the one that successful web based service organizations that cater to general audiences have employed throughout the history of the internet.

Consider Google, for instance, and Amazon as well. Although they have each grown profitable by charging fees to business organizations for advertising postings, sales support services, and other administrative functions, they have generally declined to charge access fees to the general public.

Facebook has recently become the darling of the technology industry by doing so as well. And even though Apple has achieved immense success with its compellingly simple and elegant hardware and software systems, its Mobile Me paid access service is considered an also-ran; the service is now strongly rumored to be gravitating to a free access business model soon.

A Few Niche Audience Successes

Are there any successful firms that are charging for access on the internet? Yes, there are a few such organizations, including a number of services that provide news and thus compete directly with the Times. For instance, the Wall Street Journal has maintained a pay wall around its web site for some time. And the Financial Times has done so as well, successfully accumulating over 200,000 online paying customers.

But those organizations are targeting consumers of global business news, a niche market of affluent customers who can easily afford to pay subscription fees and then write them off as business expenses. Other niche internet services, such as Disney’s Club Penguin service for parents who desire educational and social online games for their children, have survived for years on a paid subscription model as well.

A few general audience news sites have likewise attempted to establish subscription based revenue models, albeit with limited success. Salon, the first online-only news service that launched in 1995, continues to struggle with its mix of free and fee-based articles. And the New York Times itself launched a paid service called Select in 2005, only to close it down and revert to a free access model in 2007.

Holes in the Wall

Are you looking for opportunities to continue reading the New York Times online without paying subscription fees? Fear not; the Times itself has knocked a few strategically placed holes into its own pay wall. Readers clicking through to their site from Facebook, Twitter, or most search engines will continue to enjoy free access. And virtually every one else will be allotted a quota of twenty articles per month.

With these exceptions, the Times is clearly attempting to hedge its bets by segmenting its readership base into a primary group of dedicated readers (who, presumably, are able and willing to pay for access) and a secondary group of casual readers (who, presumably, are not, but who might support an advertiser based ancillary service). It is indeed possible that the Times, with this strategy, will be able to differentiate between these two groups and earn revenues by catering to each of them.

On the other hand, it is just as possible that its new policies will only result in driving its most dedicated readers away to its online competitors, hence exacerbating the trend that has been clearly described by the Pew report.

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