More on business models.

This time Henry Blodget of Silicon Alley Insider offers a business model to the New York Times which comprises cutting costs by 40%, raising the price of the print subscription and introducing an online subscription. It’s an interesting read.

3. Explore Charging An Online Subscription Fee

Before you scream that we just don’t get it, that online subscriptions don’t work, let’s agree on a few things:

Some people consider NYT content worth paying for (approx 850,000 print subs)

Offering the content online for free reduces the incentive to pay for it

Online unit ad rates are (and will be) under pressure because of a massive glut of online inventory (including at NYTimes.com)

The Wall Street Journal’s online hybrid subscription business is working superbly (for many smart reasons, which we’ll discuss below)

The NYT is as important and beloved a news source for many subscribers and other readers as the WSJ is.

Now, let’s also agree on what would happen if the New York Times suddenly started charging, say, $80 a year for an online subscription AND kept 100% of its online content behind a paid firewall.

Traffic to NYTimes would plummet by as much as 90%. But…

A meaningful number of regular NYTimes.com readers would eventually stop yelling and sign up for a subscription. Not all. Not most. But some.

NYTimes online ad inventory would immediately become more scarce and, therefore, more valuable. NYT readers would see fewer “Ancestry.com” and Google performance ads. The margin on ad sales and serving would go up. Advertising on NYTimes.com would once again become a premium, prestigious experience.

NYT would be able to charge more for online ads shown to subscribers because it would have better demographic information.

And, now, an important point. We are NOT proposing that the NYT put 100% of its content behind a firewall and sacrifice traffic from search engines, third-party sites, and other web distribution sources. On the contrary: We are proposing that the New York Times do what the Wall Street Journal does, which is run a hybrid subscription-free business:

Many news stories are available for free at WSJ.com every day. So much so that the site’s direct, non-subscriber traffic is meaningful and impressive.

ALL of the WSJ’s content is indexed by, and available through, Google and other search engines. Most people don’t understand this, but it is critically important. The WSJ’s paid content is NOT hidden behind a firewall. It is available for free, all over the web, on a story by story basis.

Many sites have deals with the WSJ where they can link to WSJ’s content and have their readers read it for free. This encourages bloggers and other publications to include the WSJ in the conversation economy.

The only WSJ content that web searchers and readers CANNOT access are the full navigation pages of WSJ.com. Put differently, only subscribers can read The Wall Street Journal. Non-subscribers have to settle for reading the occasional Wall Street Journal story when they happen to encounter it.