Business Model for the Digital Newspapers - Case Study Example

Integrated case study Chapter ment of the problem New York Times was trying to create its pay wall for the last several years. The organization started its first attempt to introduce pay wall in 1996. To introduce the new system the organization has done lots of experiments over the years. But still the organization continued with its experimental policies. But all the experimental polices have attracted criticism from the different parts of the industry. Here in this case the problem statement is if pay wall is a successful long term solution for The Times or it is a makeshift arrangement to improve the declining business situations of the company. The problem statement is significantly appropriate for the paper. During the course of this case one thing is significantly clear i.e. newspaper industry was going through turmoil. A major shift was necessary. Different technological advancements were putting the future of the printed newspapers in danger. Revenue of The Times as well as the whole industry was declining significantly. It brought about urgency in the newspaper industry. Pay wall was a result of that urgency only. But unfortunately, the new concept of pay wall was not free from criticism. Among all the other newspapers The Times was most proactive as far as the introduction of the pay wall is concerned. It created lots of speculations. People in the industry have raised lots of questions regarding the pay wall and its contribution to the industry. People are confused regarding the future growth perspective of the idea. Some people are considering it as the death nail for the printed newspaper. The people are significantly confused related how the new idea can impact the editorial process and the content of the traditional newspaper. Research aims and objectives Research objectives are significantly important for any paper. All the objectives and aims guide whole research paper. The research objectives and aims for this paper are significantly clear. Aims of this research are to evaluate the future growth perspective of the pay wall system. The research will focus towards the system very closely it will focus towards the different trends of the newly appointed idea by The Times. The main aim of this research paper is to analyse the effectiveness of the pay wall system. This research paper will focus how the new system can impact the future of the traditional newspaper. In simple terms the research paper will analyze whether the new approach can be detrimental for the traditional newspaper or not. This research will check the permanency of this new system of pay wall. This research will enlighten about the sustainability of this new concept introduced by The Times. There are lots of confusions related with the permanency of the system. This paper will help to reduce those confusions. The new concept has significant loop holes or criticisms. The research paper will focus whether the organization should continue with its new idea in spite of criticism from different parts of the industry. The research objectives are significantly appropriate with the nature of the case study. Structure of the rest of the report It is significantly important to follow a consolidated structure for conducting a critical evaluation. Consolidated approach towards a paper is significantly effective for the successful completion of a report. During the course of this report consolidated structure will be followed. It will include description of the case situation where background of the case, identified problems and relevant issues will be there. After that problem statement, plan of analysis will follow. It will include literature review and proposed plan of analysis and sources of data. The paper will also include analysis and findings, which will assess the current position. At the end of the paper different alternative ideas or solutions will be provided and the paper will also focus upon a best fit solution. Some recommendations are also going to be provided at the end of the report. All the above way will provide a free flow of work as far as the report is concerned. With the help of this structure all the detailed aspects related with the case will be covered. This step by step approach will help to get a desired outcome out of this work and it can make this report suitable and appropriate with the expectation. Chapter 2 Description of the situation Pay wall was launched in the year 2011 in Canada. During this period of time traditional newspapers were struggling to make profitability in the online domain and they were eagerly waiting for the public response related with the pay wall. There were lots of apprehensions related with the pay wall. But by the end of December 2011, subscribers of The Times grew significantly and it reached up to 390000. It was considered to be a great success by the company. During that period of time New York Times won 106 Pulitzer Prize. Although the organization was getting reward for the good journalism but it was facing considerable pressure as well. Revenue of the organization was declining significantly. In 2010 it was $ 2393 million. In 2011 it became $ 2323 million. Operating profit of the organization was also declining at that point of time. In 2011 the organization conceded operating loss of $ 40 million. Subscription of the company also declined considerably. Advertising revenue of the organization was down by staggering 6% in comparison to 2010. Under this severe pressure the organization sold its regional media groups in $ 143 million. It shows that the organization was under severe pressure to reduce its operating expenses. The whole newspaper industry was feeling the pressure. It was not at all an isolated incident with The New York Times. Newspaper circulation both for the weekdays and weekend declined significantly. Different traditional sources of the newspaper revenue generation were also failing to earn money in the industry. On the other hand costs related with the production, editorial staffs and distribution were same and there were very little scopes to reduce those costs. This had made the situation more vulnerable for the whole newspaper industry as well as for The New York Times. Then the industry and the organization were impacted by the digital disruption. It was a new challenge for the whole industry. During that period of time the newspaper industry clearly struggled to compete with internet. Different experts were writing off the requirements of the newspaper. But the rise of internet did not gone wrong totally. It gave some new opportunities to the newspaper industry. Most of the major newspaper uploaded their news contents online and online market experienced significant traffics of the online readers. According to research report, 123 million people visited the online websites of the newspaper in 2010. It made the transition of off line to online more important and inevitable. New sources of revenue came in front of the newspaper industry. But sources like online advertising were not at all similar to the productivity of the newspaper advertising. Different newspapers were focusing hard towards online. Then during the spring of 2010 iPad came into the market. It created lots of speculations for the newspaper industry. According to survey, 99% iPad users were significantly satisfied with their news reading experiences through their iPads. At that point of time they were not likely to renew their newspaper subscriptions. The Times started its first experiment related with pay wall in 1996 and after two years they stopped it. The organization started its second experiment in 2005. But due to lots of criticisms the second attempt of experiment failed in 2007. Then the idea of Metered system and device specific approach came into the minds of the management. Criticism came from different section of the industry many experts disagreed with the approach and considered it as penalizing the active users. During this period of time the organization was trying to generate extra revenue through Leaky Wall. Pricing strategy for the digital access was divided into three parts. But pundits in the industry were not at all satisfied with the digital pricing strategy of the organization. Then for the promotion the company took a new initiative and partnered with Lincoln. In 2012, this initiative reported 390000 paid subscribers. It was a great success for the company. But this initiative created a new problem for the organization. Web traffic dropped and online advertising revenue declined. Web traffic dropped by 66%. All these experiments done by the Times created lots of speculation across the newspaper industry. Some people were telling it a successful idea and some people were identifying it as a stop gap concept. Lots of questions and issues were arising in the industry. People related with this industry were significantly confused with future of the industry. Chapter 3 Problem statement and plan of analysis The main problem statement for this paper is, if pay wall is a successful long term solution for The Times or it is a makeshift arrangement to improve the declining business situations of the company. But here in this section of the study different problems related with the case will be analyzed with the help of literature review. According to Cox, (2014), the new idea of pay wall has significantly impacted the traditional printed newspaper. The author has stated that with the advent of digital system future of the printed newspaper has become significantly uncertain. People who are attracted towards the technology can easily shift their focus from the printed newspaper. He also has stated that digital newspaper can cannibalize printed subscriptions. The author has categorically stated that digital newspaper has gained significant popularity within very short time span. Here the author has talked about a new concept of cannibalization. This concept talks about how an idea related with a particular product of an organization can reduce the potentiality of other products. The author also stated that some organizations use this concept intentionally to shift focus to another brand. He has categorically stated that cannibalization always cannot be successful. According to the author it is a pretty risky concept which can backfire to the organizations (Cox, 2014, pp. 78-79). According to Barclay (2012), business model for the digital newspaper should be focused on the four aspects those aspects are customer interface, value creation process, financial perspective and the value proposition of business. The author has categorically stated that a proper combination of all these four aspects can make one idea significantly successful. All these four building blocks of the model are significantly interrelated with each other. Absences of any of these four building blocks can results into the failure of a business related idea. This model provides significant information related with the some critical business situations. According to the author the model is significantly effective for analyzing any business situation. With the help of this model the author has tried to make some point. He has given significant importance towards the customer orientation and business profitability. The author has stated that with the help of this model different complex question related with the perspective of customers and the organizations can be answered. (Source: Barclay, 2012). According to Bacher (2007), contingency is significantly important for handing the business dynamics. The author has categorically stated that in the modern day business there is no fix way to organize a business. Business situations are ever-changing. Changes are inevitable in the current business scenario. According to author it is significantly important for every organization to prepare for the contingency situation. According to the author failing to do so, organizations can lose their productivity and profitability. He also added this theory can make one organization more flexible in nature. With the help of this theory organization can be prepared for any kind of uncertain situations. This theory also measures the effectiveness of any business decision. It can measure whether the business related decisions are for the long term basis or the decision is a temporary makeshift arrangement (Bacher, 2007, pp. 78-81). Chapter 4 Analysis and findings Here in this case study one thing is clear that introduction of the digital newspaper by The Times has certainly endangered the future of the printed newspaper. Even subscription related with the printed version of The Times has declined significantly. With the advent of this new idea of digitalization, traditional market for the newspaper struggled a lot. Circulation of the printed newspaper declined. Digital subscription has significantly cannibalized the printed newspaper. When the organization experimented with the pay wall for the second time, digital paid subscriber grew significantly. It became 227000. It shows that how the new idea failed to prevent cannibalization. Because the base of the viewership was same but day by day people were tilting towards the digital newspaper. At that point of time people were feeling more comfortable in reading newspaper through online. The concept of pay wall was so restricted that the organization was forced to withdraw it in 2007. This step taken by the organization categorically articulated that the concept of pay wall is a makeshift arrangement which has tried to prevent the cannibalization but failed (Ihlström & Henfridsson, 2005, pp. 172-192). With the rise in the internet the organization tried to upload all their contents online in the expectation of the good revenue but it did not matched the expectations as the revenues earned from the online advertising could not able to match the revenues of the printed newspaper. It shows that the idea of the revenue generation through online was less effective. In 2010 iPad came into the market. It made the situation worst for the organization. Cannibalization continued, previously people who used to subscribe the printed version of The Times, stopped subscribing it. According to a research, 99% of the iPad owner did not feel interested any more towards the printed newspaper. All the above facts and figures are clearly indicating that pay wall is a makeshift arrangement for the organization to improve the declining business situation of the organization. As far as the value creation is concerned the new concept of The Times has significant limitations. With the introduction of the pay wall the organization has tried to restrict the facilities of the readers (Francois, 2010, pp. 360-372). In their Metered system the organization fixed an upper limit of the number of articles. According to that system, the viewers were allowed to visit and check only 20 articles without costs. This decision was certainly a limitation of the pay wall as far as the value creation is concerned. With the help of this strategy the organization tried to get best possible revenue from its loyal readers. But actually the pay wall was penalizing the active readers of The Times. It was not at all suitable for the customer value creation. As far as the customer interface is concerned pay wall has not able to impact in the positive way either. The organization came up with Leaky Wall. This idea was to accommodate users of the traffic generators from the different social networking sites or the search engines. But the idea created lots of confusions related with the availability of the free contents in the website. This confusion is not at all suitable for customer interface. Customer interface is a significantly important factor (Schmitt, 2010, pp. 90-92). It is utterly important for the success of any new idea but unfortunately the idea of Leaky Wall did make the situation complex for the company. It shows with the Leaky Wall the organization did not able to communicate with their customers properly. The organization tried to give significant focus towards the promotion. To achieve this, the organization partnered with Lincoln. As far as the financial profitability is concerned the organization was somewhat successful in this aspect and it added 390000 paid subscribers. Almost 70% of the printed newspaper subscriber registered in this new initiative as it was free for them. But this decision of partnering with Lincoln was not free from risks. Website traffic and online revenue of the organization dropped significantly. This has neutralised the profitability that the organization gained out of the strategic partnership with Lincoln. The above picture is clearly articulating that the organization may have added 390000 paid subscribers into their kitty, but after the introduction of the pay wall. Viewership and web traffic dropped significantly. It is not at all a good sign for The Times. Print advertising revenue of the organization declined by the 7.8%. It is being observed that with the help of pay wall the organization has not able to create all-round value proposition for them. The company has not able to introduce proper value creation; it has created lots of confusions as far as the customer interface is concerned and in case of financial model it has able to add some paid subscribers in the digital domain but it has made loss in the domain of print and online advertising. Consolidated value proposition is utterly important for any permanent solution (Barnes, Blake & Pinder, 2009, pp. 67-71). But here in this case the organization has only tried to improve its own value proposition and during the course of that it has neglected or ignored value creation and customer interface. All the required building blocks for a good value proposition have not been achieved properly with the help of pay wall. The new idea of pay wall is seriously lacking inter relationship between all the building blocks of the model. That is why it is more of a makeshift kind of arrangement for the organization not a permanent solution. It is easily can be analyzed that with the help of this kind of make shift decision the organization can mange business situation temporarily but for the long run this kind decision cannot be productive at all. Here in this case the organization has tried to manage its contingencies with the help of pay wall. But unfortunately the strategy has significant limitations. The strategy has failed to address the core issue for the company. The whole newspaper industry as well as The Times was going through significant turbulence. All the performance indicators and financial indicators for the company were declining (Punie, Burgelman & Bogdanowicz, 2002, pp. 35-42). During this period the organization could have come up with a more full proof plan to manage its contingency but the organization came with pay wall. The strategy was not at all equipped enough to address all the difficulties. With the help of this strategy the organization has succeeded to gain something but on the way of that the organization also lost many things. In other words the strategy of pay wall made the situation more complex. For the sake of earning revenue through online the organization has lost subscription of the printed newspaper. It created significant pressure on the website of the company. Revenue from the print advertising also declined due to the strategy. All the above discussions are clearly indicating that the idea of pay wall was not at all suitable for the permanent solutions. Chapter 5 Proposed solution to problem The organization should come up with more consolidated approach to address the problem. The company has to take care of all the aspects related with its business. It should go for more permanent solution. It has to communicate its strategy more clearly without any scope of confusions. The organization must give significant importance towards the all round value proposition. It should not be self centred at all. The organization must make sure that its new business decision should not cannibalize its traditional business decisions. The Times must be more selective as far as their contingency strategy is concerned. There is a necessity that the company focus more on their traditional operations as customers are more attached with this approach. This in turn would enable the company to maintain the satisfaction level of their customers and simultaneously propose their new technology. The concept of advanced technology might not be appealing even to the employees of the company so it is necessary to communicate the need behind usage of such technology. On the other hand, implementation of this technology into the system would even result into confusion so it is essential to arrange a program whereby all queries related to pay wall can be efficiently solved. It is recommended that the company before incorporating the concept of pay wall throughout the system should organize a training and development program in which different aspects of pay wall would be conveyed to the team members. This technique will not only help to eliminate the confusion related to the new concept but would even encourage team members to adopt the approach efficiently. It is even important that viewers or rather target audience are well aware about the new concept through such training programs or elaborating on the concept with the support of print media. Hence customers should be made aware about the approach as it will reduce the level of restriction that they have towards the new framework based on advanced technology. On the other hand it would even provide a platform to customers on basis of which they can compare between traditional framework and one which operates through the support of advanced technology. There is another problem associated with this new approach as it serves dual purpose it can either be considered as a temporary strategy or it can even be regarded as a long term solution to the problem being faced by newspaper industry. It is recommended that the company should firstly analyze the business environment so as to derive the probable opportunities and threats which might have an impact on the business. The company can even opt for a mid way path on basis of which it can make the pay wall approach a temporary mechanism to initiate high revenue margins and in later phase when it has achieved a financially stable position it can shift back to the traditional printing mechanism. On the contrary the company can even plan to formulate a strategy so as to incorporate both the approaches in their business system. This in turn will help to enhance the satisfaction level of those customers who are highly dependent on advanced technology and even meet needs of customers who are accustomed to dealing with printed newspapers. It is recommended that the company analyzes the degree of simplicity of the pay wall so that customers are able to access it easily without any confusion. The company can even compare the different structures of pay walls so that best approach can be incorporated into the business system. However the most important aspect which is recommended is that the entire mechanism should be simple, well formatted, easily accessible and well understood by the viewers. Amongst all the approaches the best fit solution for the problem identified in the study is to spread awareness amongst the team members and customers in relation to the new technology being adopted by the firm. This would not only encourage the team members to deliver their creative ideas toward this approach but will even make them comfortable in dealing with advanced technology. On the other hand the customers would even feel convenient to use this approach due to being aware about the entire mechanism. The need towards proclaiming the benefits of this new approach is essential as it gives a new dimension to the entire process. Team members not only can analyze the need of this mechanism on basis of the recommended solution but will even extend their support towards this initiative. The major limitation of the study is that various other approaches utilized by the newspaper industry cannot be analyzed appropriately. On the other hand time period for the study even proved to be a critical factor as it has limited the scope for the research study. Even the researcher is not permitted to access confidential data about any newspaper company which restricts proper data to be incorporated in the study. There is a great scope for future research as more data can be collected in relation to the topic from various sources. On the other hand researcher can even analyze the intricacies associated with the pay wall system so as to suggest better mechanism which can be adopted by a company to prevent the adverse effects of the turmoil witnessed in the newspaper industry. References Bacher, C. (2007). Contingency theory. New York: GRIN Verlag. Barclay, A. (2012). Business models for newspapers in a digital world. Retrieved from: http://brage.bibsys.no/xmlui/bitstream/handle/11250/169561/Barclay_2012.pdf?sequence=1. Barnes, C., Blake, H. & Pinder, D. (2009). Creating and delivering your value proposition: managing customer experience for profit. London: Kogan Page Publishers. Cox, J. (2014). Newspapers in transition: American dailies confront the digital age. New York: McFarland. Francois, N. (2010). Where Else Is the Money: A Study of Innovation in Online BusinessModels at Newspapers in Britains 66 Cities. Journalism Practice, 4 (3), pp. 360-372. Ihlström, C., & Henfridsson, O. (2005). Online Newspapers in Scandinavia: A Longitudinal Study of Genre Change and Interdependency. IT & People, 18 (2), pp. 172-192. Punie, Y., Burgelman, J. C., & Bogdanowicz, M. (2002). The Future of Online Media Industries: Scenarios for 2005 and Beyond. IPTS, 64 (1), pp. 35-42. Schmitt, B. (2010). Customer experience management: a revolutionary approach to connecting with your customers. New York: John Wiley & Sons. Read More