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The NYT’s Planned Ad-Free Paywall Will be a Double-Edged Sword

June 20, 2016, 11:00 PM UTC

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Earlier this month, New York Times CEO Mark Thompson said the company was considering a new online subscription that would have no advertising. Now, the Times chief executive has confirmed in a speech at the Cannes Lions advertising festival that the paper is planning to roll out such an option soon.

But going ad free could turn out to be a double-edged sword for the Times.

As he did in his earlier speech, Thompson described the effort as being driven by the need to get readers to pay for high-quality journalism. Readers need to understand that “the journalism they enjoy costs real money and needs to be paid for,” he said at Cannes, according to the Wall Street Journal.

Thompson didn’t provide any details about the price of the new ad-free subscription, or any sense of when it would debut. But it’s clear that the New York Times CEO sees it as a way to charge readers something approaching full freight for the paper’s journalism, something that even the existing $9.99 per month paywall doesn’t come close to doing.

The Times chief executive also said at the Interactive Advertising Bureau forum, when he originally mentioned the ad-free tier, that the Times may cut off readers who use ad-blocking software from seeing any of the newspaper’s content. And if it wants its new higher-priced subscription plan to work, it may very well have to implement such a block, because right now users with ad blockers are effectively already getting an ad-free newspaper at the existing price.

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The biggest challenge for the Times in implementing such a plan, however, is that it significantly escalates the war against ad blockers, but in return for a potential payoff that seems likely to be anemic at best. And it could create a kind of Hobson’s choice for readers, one in which they have to either take it or leave it.

Anecdotally at least, many Times subscribers believe that they should already be getting digital content without any ads. After all, the way they see it, they are already paying the Times a hefty sum every month for its journalism—and while a print subscription includes ads, digital content should arguably cost less. So some proportion of these subscribers are unlikely to volunteer for a new higher-priced subscription just because Mark Thompson says they should.

Then there are the users who already use ad-blocking software to read the Times. Will the newspaper’s demand for more money convince some of them to pay a higher price? Perhaps. But some will choose to simply continue using their ad blockers—and if the newspaper implements a hard wall for users of such software, some proportion of these readers may cancel their subscriptions altogether.

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Finally, there’s the issue of advertising. Although the advertising business is a problematic one for newspapers like the Times—not only because of ad-blocking, but because advertisers are deserting traditional publications for digital platforms like Facebook—the company still relies heavily on ad revenue. Subscriptions aren’t enough, and likely won’t be unless the Times jacks the price up for the new ad-free tier to unheard of levels (which creates its own problems).

And what happens if lots of readers sign up for this new ad-free subscription tier? They instantly become worthless to any advertiser who works with the Times. And these are likely to be the hard-core readers, the ones who are theoretically worth the most to advertisers.

Until now, the Times has been having its cake and eating it too. It has been pulling in hundreds of millions of dollars a year in subscription revenue, but also getting the benefit of advertising revenue based on all of those readers. But to the extent that the Times is successful in convincing its readers to pay for the new higher-priced paywall, it will be giving up some potentially lucrative advertising revenue. That double-edged sword is a sharp one.