by Tien Tzuo
During its Q1 earnings call last week, The New York Times reported that it had attracted more than 100,000 digital subscribers since employing its new digital paywall. That’s an impressive number for only the first three weeks, especially when you consider that the Times’ privately-stated goal for the entire first year (according to PaidContent) is 300,000.
The success of the NYT is merely the latest example of the power of subscriptions. Metered, “pay as you go,” and other subscription membership models have exploded across billion dollar industries in the last few years. And, we’re just at the beginning of the growth curve. To this point, Gartner analyst, Chris Fletcher, recently wrote, “By 2015, more than 40% of companies selling media and digital products, such as software, services and content, will rely entirely on SaaS or hosted subscription management services to manage their fulfillment, entitlement, billing, renewal and customer loyalty requirements.” (“Building a Strategy for the Subscription Economy,” Chris Fletcher, Gartner, April 11, 2011)
All of this is showing that subscription business models are not just for “innovative” or “emerging companies, they are for companies that seek to re-write and dominate entire industries. In the past, I used to point to Netflix vs. Blockbuster as a prime example. Now Netflix has shown that was only the beginning: In Q1 2011, Netflix added 3.6 million subscribers and has more than 23.6 million total subscribers. That’s a 69 percent growth in subscribers year-over-year. And as Ryan Lawler of GigaOm points out, Netflix is now bigger than Comcast in total subscribers.
I would love to see The New York Times and other traditional media properties replicate growth like that. But with the Times there is one matter that seems hard to reconcile: different reports have put the cost of the subscription paywall at $25M to $50M to build, deploy and maintain its paywall, which according to Bloomberg took a year to build. Certainly, it’s no small matter for a company to do all of this in-house. We can substantiate that from our experience and expertise across hundreds of deployments. But even so…$25M?