Thursday, September 02, 2010

Why Rupert Murdoch's 'paywall' strategy might indeed be adding up

[Update: Many thanks for all the feedback on the calculations, which have now been revised]

Next week, I’m slated to speak at WAN-IFRA’s 9th International Newsroom Summit in London about my research into how publishers can boost their online revenues, so after reading today’s piece in The Independent by Ian Burrell, I thought I’d do some back-of-the envelope calculations to see if Rupert Murdoch’s paywall strategy might indeed be adding up.

Warning: I’m not privy to the online traffic figures of The Times or The Sunday Times, which are no longer ABCe registered, nor do I know their ARPU or Average Revenue Per User rates, so this is just conjecture using figures I have discussed before.

Times' 20,406,420 monthly unique users in May 2009, according to ABCe figures quoted in Press Gazette. Say they were making £0.20p £0.10p per user per month, mostly from advertising.

That would be 20,406,420 X £0.10p = £2,040,642 per month.

So, say they lost 90 per cent of their users and, say, 50 per cent of their advertisers got cold feet, too:

20,040,642 X 0.10 = 2,040,642 users x (£0.10/ 2) £0.05 = £102,032.10 per month, mostly from advertising.

And say half those users cross the TimesPlus ‘paywall’ by through the £1 daily access fee and the other half opt for the £2 weekly access.

Income from daily access users: 1,020,321 X £1 x 30 days per month = £33,060, 963£1,020,32 per month.

Income from weekly access users: 1,020,321 X £2 X 4 weeks per month= £8,165, 136£2,040,642 per month

Total income would be £102,032.10 + £1,020,321.00 + £2,040,642.00 would be : £3,162,995.10, which is still be up 55% on what the income may have been before the paywall.

And say I’m only half right?

Well, then The Times' online income would be down about a quarter.

So, if you’re looking at Rupert Murdoch’s paywall model from a financial perspective, the strategy looks like it may just be adding up. But, of course, one would have to be privy to the actual numbers to really know for sure.

[Addendum: Robert Andrews alerted me to the uncanny similarity between my calculations and those he did earlier for PaidContentUK ]