Sure, the added revenue from digital subscriptions will help stanch the profit losses the News has endured in recent years. But more importantly, pricing home delivery of the Sunday paper (which includes a free digital subscription) cheaper than a digital subscription alone will hopefully increase the paper's subscription numbers. That, in turn, will help sell more print advertising, which is where the real revenue comes in.
It's similar to the model free newspapers use. Giving away print papers bulks up circulation numbers. Advertisers see those numbers and are willing to buy ads that all those eyeballs will see. The Economist illustrates the concept by describing the advent of penny papers:
ON THE MORNING of September 3rd 1833 a new kind of newspaper went on sale on the streets of New York. With its mix of crime reports and human-interest stories, the Sun was intended to appeal to a mass audience, and its publisher, Benjamin Day, made it cheap: at one penny, it was one-sixth of the price of most other papers. The most popular newspaper in America at the time, according to Mitchell Stephens, author of “A History of News”, was New York’s Courier and Enquirer, which sold 4,500 copies a day. Day’s new “penny paper” appealed to people who had not bought newspapers before. Within two years the Sun was selling 15,000 copies a day.
In hindsight this was a turning point because it introduced a new business model to the industry. The Sun’s large circulation attracted advertisers, and the resulting revenue enabled Day to keep the price of the newspaper down and its circulation up. Instead of relying mostly on selling copies, newspapers came to depend mostly on advertising. It was a great deal for all concerned: readers got their news cheap, advertisers could reach a large audience easily and newspapers could afford to employ professional reporters instead of relying on amateurs.
Unfortunately, giving away content online has the opposite effect, since digital advertising isn't anywhere near as profitable as print advertising. If anything, it pulls eyeballs away from the print product, which turns off print advertisers.
David Simon, writing in the Columbia Journalism Review, explains part of why charging for online content is important in today's age:
Content matters. And you must find a way, in the brave new world of digitization, to make people pay for that content. If you do this, you still have a product and there is still an industry, a calling, and a career known as professional journalism. If you do not find a way to make people pay for your product, then you are—if you choose to remain in this line of work—delusional.
In the comments section under Sullivan's column today, some folks have said they will gladly pay for the online news they value here. Others have vowed to leave and never come back.
And that was expected.
But as much as any paper hates to lose readers, history has shown that not charging for content actually hastens a decline in readership faster than charging does.
[The Arkansas Democrat-Gazette] has charged online and its daily circulation has fallen just 3.5 percent in the past decade while U.S. papers overall tumbled 16 percent from 2002 to 2009 alone (when Newspaper Association of America numbers stop). The Wall Street Journal has charged from the beginning and its print circulation has stayed roughly even over the past ten years, while overall circulation, including digital subscriptions has actually risen significantly. The New York Times has already reaped tens of millions of dollars a year in incremental revenue by adding its paywall, and now it seems everybody is jumping on board.