The New York Times (NYT), perhaps bowing to criticism, but more likely seeing the error in their online revenue model has chosen to make the online version of its publication free. Rupert Murdoch has reportedly been toying with the idea of doing the same with the Wall Street Journal. Does this mark the ‘tipping point’ for the pay for access model some online publications have been experimenting with?
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_09_28_TimesFree.mp3
| Signup now for PowerOptions free 14-day trial |
Despite amassing nearly a quarter of a million subscribers, the New York Times decided to tear down their wall. New York Times online Vice President and site manager Vivian L. Schiller stated in the Times, “Our projections for growth on that paid subscriber base were low, compared to the growth of online advertising.”
| Signup now for PowerOptionsApplied 30-day risk free trial |
It can be safely reasoned there is more money in online advertising with the numbers free content drives than in the paid subscription model for the Times. Will this be equally true for the Wall Street Journal, one of the few major holdouts in the pay-for-content model?
Last week, Rupert Murdoch stated he was leaning towards dropping the paid subscription model for the site. However, the Wall Street Journal has seen a greater number of online subscriptions than the New York Times. Around one million subscribers shell out $99 a year for the online publication or $49 if they already subscribe to the print version.
News Corp. (NWS) feels site traffic could be bumped to nearly 30 million, which would allow for ad rates to more than offset the $30 million they rake in annually from online subscriptions. Advertisers presumably would pay a great deal to reach 30 million largely affluent and sophisticated readers.
An often overlooked aside to this revenue model is browser add-on technology. Right now, for free, Firefox users can visit adblockplus.org and download software, which virtually eliminates all online advertising. This is in essence the TiVo of the online experience.
It is, however, unlikely users will widely adopt such technology unless ads become interferingly ubiquitous and annoying. Presumably content providers will find a way to beat whatever technology is derived to combat their ad exposure.
Looking at this News from an Option Trading Perspective:
The stock price for the Times and, if they adopt the free model, the Wall Street Journal may rise due to the prospect of increased revenue generation. However, there are a lot of variables in this equation and choosing to purchase either News Corp. or the New York Times on this information alone would be a great risk.
Having said that, this is a good chance to show how an option investor can quickly identify trades (in real time) when they receive information or when they believed they have discovered stock price inefficiency.
For the sake of this example, we will look at potential covered call trades on the New York Times, News Corporation, and the Gannett Company (GCI). These three competitors will give an investor who is bullish on print media a good palette of options to choose from.
Potential trades:
All of the following trades have either 50, in the case of the November trades, or 113, in the case of the January trades, days until expiration. All of these trades were found in less than 2 minutes using the powerful suite of option search tools found exclusively at www.poweropt.com.
| Covered Call Search | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Symbol | Stock Price |
OPTION | Strike Info |
Option Bid |
Net Debit |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NYT | 19.44 (+0.19) | NYTAX | 08 JAN 22.5 (113) | $0.60 | 18.84 | 3.1 | 3.2 | 19.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NYT | 19.44 (+0.19) | NYTAD | 08 JAN 20.0 (113) | $1.40 | 18.04 | 7.2 | 7.8 | 10.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NYT | 19.44 (+0.19) | NYTKD | 07 NOV 20.0 (50) | $0.95 | 18.49 | 4.9 | 5.1 | 8.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GCI | 44.61 (-0.25) | GCIAI | 08 JAN 45.0 (113) | $2.50 | 42.11 | 5.6 | 5.9 | 6.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NWS | 23.38 (-0.13) | NWSAX | 08 JAN 22.5 (113) | $1.90 | 21.48 | 8.1 | 4.7 | 4.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GCI | 44.61 (-0.25) | GCIKI | 07 NOV 45.0 (50) | $1.65 | 42.96 | 3.7 | 3.8 | 4.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NYT | 19.44 (+0.19) | NYTAW | 08 JAN 17.5 (113) | $2.60 | 16.84 | 13.4 | 3.9 | 3.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Competitors:
Competitors for NYT include: Dow Jones & Co. Inc. (DJ), Gannett Co., Inc. (GCI), and Tribune Co. (TRB).
Competitors for GCI include: Dow Jones & Co. Inc. (DJ), McClatchy Co. (MNI), Tribune Co. (TRB), Belo Corp. (BLC), GateHouse Media Inc. (GHS), Lee Enterprises Inc. (LEE), Media General Inc. (MEG), New York Times Co. Class A (NYT), and E.W. Scripps Co. Class A (SSP).
Competitors for NWS include: Time Warner Inc. (TWX), Walt Disney Co. (DIS), and Bertelsmann AG (private).
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.
[tags] Rupert Murdoch, Bertelsmann AG, BLC, Belo Corp., DIS, Disney (The Walt) Co., DJ, Dow Jones & Co. Inc., GCI, Gannett Co. Inc, GHS, GateHouse Media Inc., LEE, Lee Enterprises Inc., MEG, Media General Inc., MNI, McClatchy Co. (The), NWS, News Corp. Ltd. (The) Class B, NYT, New York Times Co. Class A, SSP, E.W. Scripps Co. Class A, TRB, Tribune Co., TWX, Time Warner Inc., covered call investment strategy, investment strategy, poweroptions [/tags]