EDITOR'S note:

The New York Times has said it would start charging regular online readers beginning in 2011.

What implications will the Times' decision have for newspaper publishers and other providers of free online content? Peter S. Fader, a marketing professor at Wharton, weighs in on how these developments could reshape publishing.

Q: Is the paper doing the right thing?

A: Yes and no.

They're doing the right thing by finally admitting that, yes, they need to have people paying for content. They're doing the right thing by going about this on their own. They're doing the right thing by being somewhat flexible about how many stories readers can see before they have to pay, and so on. They're doing the right thing by giving people unlimited access through news aggregators and search engines.

But there are some negatives as well. By announcing that they're going to do this, but being completely vague about the pricing, about the specific timing, about the name of it, about what kind of content is or isn't covered - that's a terrible mistake.

Another problem is that they're focusing so much on the negative.

It's interesting that what The New York Times is doing here is largely identical to what The Wall Street Journal has done - and The Wall Street Journal has succeeded with it.

But what we keep hearing about is, "Oh my goodness, I'm going to hit a wall after I read a few articles."

The Times should be emphasizing the good stuff, the things that readers will be able to do that they couldn't have done otherwise - some value-added.



Q: A lot of people are probably saying to themselves, "Why should I worry about The Times or other news organizations? I get my news from the Web." I've heard a journalism professor suggest that, "Well, that's a lot like saying, 'I get my produce at the grocery store. Why should I worry about farmers?'"

What do you think about that?

A: That's a great analogy, and of course, a terrible mistake. These content creation organizations such as The Times have a huge role to play.

Even if there's a zillion of them out there, an organization like The Times - they're a tastemaker.

They're not only creating content, but they're also telling us what content we should be paying attention to. We trust them for their ability to shape our interests.

There's a great and sad analogy with what's going on in the music industry, where we all figure the record labels will just go away, because they're not savvy about digital this and that.

But even though they're not very good at being marketers, or very customer-friendly, the labels are wonderful, in the same way, at identifying good artists and basically telling us which ones we should be listening to - and, for the most part, we pay attention to that.

A lot of people go to The New York Times not only to see The New York Times' own unique opinion on things, but just what stories they should be paying attention to in general.



Q: So, what does success look like for The Times in this effort?

A: The Times has hinted at it, in a number of the interviews. They've said they want to maximize revenues. They want to bring in as much as they can for the news, and they don't care whether it's print or on-line or whatever.

That sounds noble, but it's also shortsighted. Yes, indeed, a company wants to make more revenues rather than less - but they don't want to be doing it over a particular quarter, or over a particular year.

They want to be doing it over the lifetime of the customer. So, The New York Times should be setting up this service - and the content that will go through it - in a way that's going to get people to stick around for a long time, and consume for a long time; not just to consume a lot, and then go away.

They should be thinking about success metrics like lifetime value, and the overall discounted value of their base of current customers and the future ones that they've yet to get.

Q: Can they sell that kind of long-term outlook to their shareholders?

A: A few years ago, the answer would have been absolutely not - because, like every other business, they were doing okay.

They could say, "Let's just make more money next quarter than we did this past quarter." But if they want to stay around for a long time, they need to be thinking long term.

They need to be thinking, "How can we delight our customers three, five, 10 years from now?" as opposed to, "How can we squeeze revenues out of them to stay afloat over the next month?"

I do think that The Times is going to be around for a long time. There are certainly plenty of other newspapers that are disappearing - and more will continue to disappear. But The Times brand is a really powerful one.

There's a generational issue - a lot of people who will cling to the old paper copies as long as they can. The Times needs to count on that, instead of panicking and doing things just to try to salvage revenues.



Q: Assuming that the migration of advertising from print to online media continues at current levels, and The Times starts to collect some revenue from its on-line operations, do you think it's possible for them to collect enough revenues to sustain their news gathering infrastructure of correspondents all over the world?

A: No. The ad-based model will never disappear entirely. There'll be a segment of users who will pay more to get it without ads.

What Pandora has done in the music space is a great example, where depending on how much you pay not only controls the amount of content you get, but also whether or not you get ads, or how often you get ads.

So, there'll be a group of people who will pay more to get no ads. There will be a group of people who will pay less because they either don't mind getting the ads - and, dare I say this, some people actually like getting the ads, and it's not a big burden for them.

They can skip past them, or sometimes find them informative.

(Reproduced with permission from China Knowledge@Wharton, http://www.knowledgeatwharton.com.cn. All rights reserved. Shanghai Daily condensed the article.)