Executive Summary
This case study evaluates the market alignment challenge of the New York Times, through the introduction of the paywall platform, as a strategy to stay relevant in the digital marketplace. It evaluates the types of market changes that contributed to the company’s operational problems. In line with this analysis, this case study also shows the customer expectations, market trends, and possible tactical responses that the company could use to overcome its operational challenges.
What was the Market like?
The involvement of Apple in the problems of the NY Times happened in a market that was experiencing an unprecedented decline in subscribers and sales numbers for physical newspapers. The move from traditional to online reading preempted this decline. Consequently, the New York Times was having trouble maintaining its profitability and subscriber base. As a strategic response, it created a paywall for online digital consumers, but this strategy failed because the company had trouble attracting new readers to the new digital platform, and having them pay for reading online content in the first place (Kumar, Anand, Gupta, & Oberholzer-Gee, 2013).
Customer Expectations
The growing trend towards digital media consumption saw customers acclimated to consuming digital content freely. In other words, in a fast-paced world where information moves fast, and people develop and share new content, freely, customers do not see the need for paying for newspapers, which cannot keep up with the fast-paced nature of information flow. Partly, this reason explains why the New York Times started recording declining sales numbers and online traffic a few weeks after setting up its paywall. This outcome alone reveals that the main customer expectation was to consume free digital content (Kumar et al., 2013).
Marketing Trends Influencing the Company
Use of New Media by Customers to Consume Information
According to the case study, customers stopped buying newspapers to get information. Instead, they used digital media to get the same information. This trend meant that traditional media outlets would have fewer subscribers.
Customers Became Browsers, as Opposed to Readers
Traditionally, customers were readers. However, with the development of digital media communications, they became browsers. This trend meant that they were less engaged in the information consumption process. Consequently, it becomes harder for the NY Times to make them pay for the information (Kumar et al., 2013).
Increase in the Number of Substitute Products
The proliferation of online sources of digital communication has increased the number of substitute products in the market. Traditionally, the main substitute products for the New York Times were television, radio, and magazines. However, online digital marketing space has introduced bloggers, vloggers, and social media websites as new information drivers.
Resource Scarcity
Declining profitability of newspaper companies meant that they had fewer resources to sustain their traditional business model. Furthermore, they could not afford more mistakes in the online digital marketing space; otherwise, they would not have any more resources for research and development (Kumar et al., 2013).
Cheaper Forms of Communication
The digital market space has eliminated most of the production costs associated with information distribution. For example, instead of producing physical newspapers (buying paper) and employing workers to distribute them, newspaper companies could simply have their subscribers log on to a website and consume the same content.
Customers Finding Alternative Sources of Advertising
Traditionally, advertisers thronged newspaper companies to advertise their products. However, the advent of new communication channels eliminated the newspaper companies as an intermediary between advertisers and customers. For example, GM and Ford made their websites and advertised their products directly to customers without having to involve newspaper companies. Similarly, Craigslist emerged and “stole” most of the business for classified ads from newspaper companies (Kumar et al., 2013). This trend affected the profitability of the NY Times.
Large Media Companies Dominate the Digital Space
Although new digital content developers are coming up today, the NY Times still has many resources in developing well-researched and professional content (better than smaller competitors can do). This is why such companies continue to dominate the digital marketing space.
Customers Are not Seeing the Need of Paying for Information Anymore
The unwillingness of customers to pay for information could erode the revenue model of digital media advertising because content developers would have trouble looking for ways to generate revenue.
SWOT Analysis of Market Trends
What are the Risks of not addressing each of the Trends?
Failing to address the above-mentioned trends could easily lead to the reduction in sales numbers and the overall reduction in profitability for traditional media companies. For example, an increase in the number of substitute products and the introduction of new forms of advertising could potentially lead to this outcome. Resource scarcity and the failure of customers to recognize the need for paying for information could also decrease the competitiveness of media companies in the global marketing space. Based on these potential risks, the NY Times needs to adopt new strategies for overcoming these challenges.
Tactical Responses to the Opportunities and Strengths Identified in the SWOT Analysis
NY Times needs to exploit the opportunities and strengths identified above by adopting innovative strategies. Some possible proposals appear below
- Provide content freely and focus on advertisement revenue, as opposed to requiring users to pay for information
- Provide Niche Content
- Expand International reach
What are the less desirable Options and why are they not Attractive?
The less desirable options from the above list of proposals are providing niche content and expanding the company’s international outreach. These proposals are unattractive because the NY Times would be entering a new space dominated by other players if it adopts any of the two strategies. For example, it is unlikely that the company would not find new competitors if it provided niche content. Similarly, if it expanded its international outreach, it would find new competition. Therefore, the most desirable strategy is providing content freely and focusing on advertisement revenues.
Conclusion and Recommendations
Part of the mandate of the NY Times is to promote social, political, and economic development. By providing free information, it would be fulfilling this mandate. To maintain a successful revenue model, the company should focus on improving customer traffic to its digital platforms by providing free information. Afterward, it should charge advertisers for marketing on this platform. This would be a new revenue model. Some of the most successful tech companies, such as Google, Facebook, and YouTube have used this strategy successfully.
References
Kumar, V., Anand, B., Gupta, S., & Oberholzer-Gee, F. (2013). The New York Times Paywall. Harvard Business School Case, 512-077.