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ink-stained wretches

Why the Times Is Wary of an Apple Tablet Deal

Last year, New York Times Company chairman Arthur Sulzberger Jr. traveled to Apple's headquarters in Cupertino, California, to meet with Steve Jobs to discuss the paper's digital strategy, according to two Times sources with knowledge of the meeting. Since then, rumors have swirled that the Times was preparing to partner with Apple to distribute its content on Apple's rumored tablet device, which is expected to be debuted next week. During a speech in the fall, Times executive editor Bill Keller fanned further speculation about a Times-Apple partnership when he told the audience, "I'm hoping we can get the newsroom more actively involved in the challenge of delivering our best journalism ... [on] the impending Apple slate."

But, according to two senior Times officials, the announcement that the paper would be launching a metered pay model for its website has nothing to do with the upcoming release of the Apple tablet. One senior business-side executive said the announcement "had no bearing on what Apple may or may not be doing," and a senior Times journalist with knowledge of the paid-content debate confirmed that view. "We made this decision for a lot of reasons, but it has nothing to do with Apple," the source told New York. Bill Keller added that the announcement of the meter had been planned for a "good long while" and had nothing to do with Apple's pending product launch. "This is something we were going to do on our own, no matter what partnerships might or might not come along."

The Apple tablet until now has been portrayed as a potential savior for old media, as publishers have rushed to ready tablet-ized versions of their publications. But despite the fevered speculation of just what the Apple device might be, publishers like the Times are taking a revised view about the tablet's potential to reinvent their digital businesses. With iTunes or an Apple-controlled online store, publishers will be cut off from their readers. Apple will handle payments and Apple will control all the lucrative demographic information that publishers collect to sell to their advertisers. The tablet may vastly improve the mobile reading experience, but in terms of providing a business model that publishers will leap to adopt, there's a strong case to be made that the Times and others shouldn't fall prey to the iTunes trap.

In announcing its semipermeable pay wall today, the Times is signaling that it wants to be in control of its vast readership and fully monetize its audience. Media writer David Carr made the point in his 1,400-word analysis of the meter announcement that "in the long run, [Apple and Amazon] would have controlled and benefited from the relationship far more than The Times." The paper may very well sell its content through Apple's app store or some new iTunes-like service, but as much as they can, the paper wants the primary point of payments to come through the meter.

For a sense of how the Times meter will develop, I talked to Rob Grimshaw, who oversees the Financial Times' metering system. Grimshaw was pleased the Times decided to adapt a metered approach. He explained that the system gives publishers maximum flexibility to attract the widest audience possible while capturing the loyal segment who will be willing to pay. Also, the meter is superior to a conventional pay wall because publishers don't have to decide which content should be placed behind the wall. Readers decide how much to read and what they're willing to pay for. "We found the straight pay-wall model created a lot of headaches," he says. "An article that's gold dust to one user is irrelevant to the other. With the meter model, you never have to make that choice. The consumers are always right — they know what they're interested in."

Grimshaw says the Times should be conservative in its approach to setting up its meter. The FT debuted its meter in 2007 and allowed readers to sample 30 free articles per month. A year later that number was ratcheted down to fifteen free articles. Now it’s down to ten articles. Grimshaw added that the Times needs to make sure its technology is ready. Any snafus and readers might be scared away and never return. "What we found is that the consumer doesn't mind paying and registering, but what they do mind is hassle," he said. "If you don't have good quality, you're going to struggle through those hurdles. You want to get the basics right before you put it out there. It's very important to focus on getting things right instead of a specific launch date."

Grimshaw agreed that the meter is a far-better sales platform than ceding control to Apple or Amazon. "There is a battle developing around this," he said. "The platform providers are recognizing that if they can interpose themselves between the publisher and the consumer, they have an opportunity to create an incredibly lucrative business without the costs of producing content in the first place."

Currently, the FT has a free iPhone app that works on the meter model. Presumably, the Times could follow suit. "iTunes and others want to own all the customers," Grimshaw said. "Publishers have an opportunity to avoid that happening."

Later this year, the FT is planning to upgrade its meter with a micro-payment model. Readers will have the option of purchasing a day pass instead of an annual subscription, or potentially a single article for a nominal amount, if the technology for processing the tiny payments can be implemented effectively.

"We think there's a large audience out there that would be happy to pay for content but doesn't have the willingness or the need to pay for an annual subscription," he said. "But it's a big leap. You are completely disaggregating your proposition. It may be that's the way the world is going."

Earlier: New York Times Ready to Charge Online Readers

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Photo: Wikicommons.com