Pricing Teardown: New York Times

By Patrick Campbell
 

Deeper Insights into New York Times' Pricing

The New York Times wants to get people in the door. In December 2017, they reduced the number of free articles someone could read from ten to five to push acquisitions. COO Meredith Kopit Levien said that this was because demand for journalism was “at an all-time high.” They want to use this unique point in history and the resulting media frenzy to drive revenue.

You can see exactly the same on their subscription page—they want sign-ups. On the day Patrick and Peter were looking over the page, an orange banner offered 50% off for one year. Taking a look today, the page still offers a discount—now ~1/3 off the initial price for one year:

Screen Shot 2018-04-11 at 3.57.45 PM

Normally, we are anti-discounting. But here the New York Times are using it as a strategy to to deal with some of their initial segmentation problems. As Patrick says:

“They have millions of different customers and they all have idiosyncrasies so it is a game of segmentation and they try to cut through this segmentation with this 50% off.”

The discount is for the first year, with an automatic renewal at the full price in year two. Media companies like the New York Times see the opportunity to get people in, get them hooked, and then gain the LTV in the second year onwards.

The discount works to reduce that initial friction, but they could be reducing friction in other ways without hurting their bottom line quite so much. The one Peter focused on was pricing page design.

As you would expect from the New York Times, they have put effort into design, but they could be trying too hard and actually end up confusing customers. Patrick and Peter both saw the pictograms as a problem here:

"This is their symbol for delivery, and I didn't know that meant delivery. I don't think this is the right setup. Even if I'm a 55-year-old grandmother in Florida, or a hipster liberal in Brooklyn, or a conservative person in Montana, it doesn't matter who I am, I am still confused about what I'm looking at."

The focus here shouldn't be this initial segmentation. It should only be getting people into the service, seeing the benefits, then having them upgrade and choose features they care about. By making the subscription page tough to parse, they are increasing friction and then have to fight this with a discount.

Make the page easier, the pricing easier, and the discount can be removed without hurting acquisition.

Dynamic pricing could drive even more growth

Segmentation is vital, and with such a wide subscriber base, the New York Times has to use it to their advantage. Looking at the data, there are a few options.

The first is how they are segmenting at the moment, with delivery being a key concept for higher pricing:

Value Matrix

The people who want home delivery are willing to pay a lot more than the digital-only subscribers. Having home delivery as one of the main packages makes sense, although the Times might want to bring subscribers in at a lower price point and offer this, and other features such as NYT Crossword or NYT Cooking as add-ons to the main package.

The willingness to pay is also high for people who are reading the New York Times every day. Understanding raw usage is the key component to any value-based pricing:

Frequency Reading NYT

However, from our survey of over 16,000 current, former, or prospective NYT subscribers, there are more interesting segmentation opportunities to the company. The first we looked at was news preference:

News Preference

This is scattered. People are willing to pay more for financial news and less for domestic news. As in the Netflix Price Page Teardown, category doesn't offer a good segmentation opportunity. A few people may only read finance, but the majority of users read a broad spectrum of news and want access to it all.

Next up was more interesting—location:

Location

If you are in a metropolitan area, you have an 18% higher willingness to pay than the average. People living in rural areas don't want to pay so much for the news, at least the news from the New York Times, with their willingness to pay trending into the negative. Localizing pricing is something more often associated with different countries, but there is an opportunity for the New York Times here to local by region even within the US.

We also see obvious segmentation by age:

Age

Those in the 18-34-year-old bracket that have grown up with the internet and never bought an actual newspaper in their lives have the lowest willingness to pay, at 6% under the average. People in the 35-54-year-old bracket have a slightly higher and more positive willingness to pay. But it is the 55+ people that the New York Times really has to attract. Yet these are the people that will struggle the most with the confusing current pricing design.

The answer: dynamic pricing.

If you have a billing system that can offer dynamic pricing, and you have the data to support it, this option can help you present the right price point to the right customers.

In this case, a 58-year-old Manhattanite visiting the New York Times site might be offered just the top plan, with home delivery and crossword, and no discount. They want this package and are willing to pay. A 20-year-old living in the country will come to the same site and see a discounted plan that just lets them read online.

In both cases the customer gets what they want, and so does the New York Times.


Did you miss any of the previous episodes? Check them out here:

Episode 1 - Netflix Pricing Teardown

Episode 2 - Salesforce Pricing Teardown

Episode 3 - Spotify Pricing Teardown

Episode 4 - Slack Pricing Teardown

Episode 5 - Rent the Runway Teardown

Episode 6 - BarkBox Teardown

Episode 7 - DocuSign vs. PandaDoc Teardown

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Patrick Campbell

SaaS Economist

Find Patrick Campbell on twitter or linkedin

  
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