From Read Write Web today

At a time when the online world is continually seen as a more trusted source of news, mainstream media outlets find themselves forced into the position of becoming more and more open to keep their readers coming back. Removing "paid subscription" requirements that prevented everyday users from accessing content was one of the first cracks in the walled gardens. Opening APIs to other developers has been gaining favor. And now, another trend is coming to light: incorporating third-party content to supplement the original content the sites are offering. Today, the Gray Lady joined those ranks as the The New York Times launched Times Extra, a view of its front page supplemented with content from other news sources and blogs.

This probably isn’t the first story you’ve seen like this.  The New York Times has become the darling of “new media” advocates by doing everything those advocates suggest.  Social Features, Aggregation, Opening their content up, and now sending people away with links.  You’d think the Times would be rolling in money at this point.

But here’s the thing: The New York Times continues to lose money.

In fact, just a few weeks ago the blogosphere was abuzz about the Times having almost no working capital left.  Their Ad Revenue decreased by 13.7% last quarter alone, circulation rates are plummeting and while their online business is growing (6.7% in the last quarter) it’s not growing fast enough to compensate for the erosion of their print business (it only delivers 12.4% of total revenue).

At this point the counter argument is usually “That may be true, but what choice do they have?  Paper circulation is in a death spiral and walled garden web sites just don’t work”

Ok, answer me this: If that’s true, why is the stodgy old Wall Street Journal not losing readers at all (their circulation growth was flat last quarter)?  Why is their ad revenue up by 5.8% (this is last quarter which was before the financial crisis btw)?  Why is their walled garden web site up 137% year-over-year (compared to the New York Times which is only up 37%). 

Now, in fairness the Times does have more unique visitors online but that in itself is a bad thing.  If they already have 15 million unique visitors a month and they can’t make ends meet what’s going to happen when their paper circulation erodes even further?  

Which brings me back around to my point.

You need to judge whether new business methods work based on actual, tangible results.  Not how the blogging community feels about a feature or how cool your tech department thinks it would be to do something.  The New York Times is walking down a road that doesn’t deliver the revenue stream they need to survive and rather than acknowledge that they’re choosing to continue down that same road.  While the Wall Street Journal, with it’s walled garden approach, continues to see revenue rise and circulation hold steady. 

Great user experience doesn’t pay the bills for a company the size of the New York Times and someone there needs to realize that.

One Last Point...I forgot to address an important point above which is the "drudge argument."  This is where people say "the Drudge Report is the most widely read site on the Internet so aggregation is the way of the future."  Two things here: First, aggregation isn't easy (see this post for more on that).  Second, and more important for the New York Times, aggregation works because the aggregator doesn't have a vested interest in any of the available stories.  So Drudge can send someone to the New York Times or Wall Street Journal and not care because he gets his revenue either way.  The New York Times isn't like that.

Let me give you an example.  Say I want to read about the latest news on the U.S. Banking Bailout.  I go to NYTimes.com and see their story and then underneath that a link to the Wall Street Journal's story.  I only have time to read one and I decide the WSJ is better for Financial news so I click that link and never go to the NY Times story.  That scenario is not good for the Times.