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The New York Times Turns The Page On Digital Transformation

May 7, 2015 by Tim Clark

It’s never a pleasant situation when you find yourself on the receiving end of the disruption stick.

Such is the case with the New York Times when in 2003, it became painfully apparent that its print business was in rapid decline. Even though individual subscribers were paying upwards of $700 per year, Facebook, Google and other social media properties were taking away massive amounts of ad revenue. While the New York Times beefed up its web presence, it did little to stem the tide of disruption.

Naturally, The New York Times had to ask itself some very tough questions: Can you go all digital and still make money? Is print still going to be a significant part of newspaper revenue?

Digital transformations can be very tricky, according to Vineet Kumar, Yale University School of Management, who presented The New York Times case study this week at SAP’s SAPPHIRE NOW event in Orlando, Florida. The New York Times core product (print) generates the most revenue, so even at status quo, revenue is minimal with the digital outcome looking even worse. With the notion that digital content should be free, no one would pay $700 for The New York Times digital service, said Kumar.

While it’s a huge challenge for any company that’s thinking about undergoing a transition with their core product, there is a way to safely accelerate the process. In the case of The New York Times, they brought their customers along for the ride.

“The company can’t make the move unless the customer makes the move,” said Kumar. “How do you incentivize them?”

For The New York Times it meant making the value proposition of digital compelling enough so customers make the move themselves. “Digital only” content helped customer migration move along. No additional investments in print, while raising the price, sped up the process.

The New York Times is obviously not alone as digital transformation effects many things, technology choices, human factors and business models. The New York Times moving to digital, which commands lower per user fees, is similar to a company that may move from selling products to services, according to Dinesh Sharma, Vice President of Portfolio Marketing at SAP.

“Suddenly, top line drops and cash flow could be an issue but over the course of the contract you’ll make more money and profit,” he said. “For the New York Times this equates to taking a hit on subscription revenue and waiting to vastly increase readership at the lower per-month rate.”

How are they doing today? While advertising is still declining in both print and digital for The New York Times, they’ve turned a page with their digital transformation efforts:

  • At the end of 2013 they retained 760,000 digital subscribers, totaling $150 million annually.
  • That number is expected to rise to 1 million this year.
  • International Expansion: Rebranded as “The International New York Times” with an eye on overseas growth
  • Taking a page from Forbes, the company introduced “native advertising” a type of ad where marketers create stories that run alongside news articles.

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This story originally appeared on SAP Business Trends.
Photo: Bloomua / Shutterstock.com

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