People Making Money Online

Two years ago, when The New York Times’ Gerry Marzorati spoke at the Berkeley School of Journalism, “the newspaper was in free fall. I remember people volunteering to give you money,” Michael Pollan recalled.

Last night, when Marzorati, now the Times’ Assistant Managing Editor for New Products and Strategies, gave a talk at Berkeley about “Making the Online Times Pay,” the mood was much more optimistic. Marzorati told Pollan and Mark Danner, who jointly moderated the talk, that he was confident the Times’ new metered paywall system would be a success, and might even bring in enough revenue to enable the Times to expand.

But he was much less sanguine about the future of publications that cannot rely, as the Times and a few other publications do, on an elite readership.

“The audience for The New York Times — which is an affluent, well-educated audience — that audience will pay for premium information,” Marzorati said. (“Of course, advertisers want to reach that audience, too,” he noted later.)

“That has implications for other sections of society, other cohorts, that I think are going to increasingly get less clear, less concise, less thorough journalism.” It’s a national problem, he suggested. “We are living in a country where we are having inequality of all sorts, and one of the inequalities that is growing is the inequality between the really well informed and the not-well informed,” Marzorati said.

The print-and-ink news devices of the past served readers, rich or poor, with the same content in the same format. Not so with the iPad.

Asked at an event on Monday whether “the iPad is the solution” for the future of newspapers, Marzorati replied, “I think these devices are good for The New York Times and the Wall Street Journal and the Financial Times and The Economist and the New Yorker. Whether it’s actually going to mean we’re going to have a better-informed society because of these devices, I’m not at all sure.”

“The most affluent parts of the culture are better informed than they’ve ever been,” he noted. “They understand how to navigate the terrain, and they can get tremendous amounts of information. The public which used to get their nightly news from the nightly network broadcast and Time and Newsweek, are they better informed now? No. I think they’re misinformed to an extent that would have been unimaginable in the 60s.”

“Someone who used to watch the network news because that was available is now watching Glenn Beck, and that person is not informed.”

But the extent to which individual news outlets can affect that situation, he noted Tuesday, is questionable. “I think it is a problem for our civic culture,” he said. “It’s not one the Times itself can really change.”

Marzorati didn’t add many details on Tuesday about the Times’ planned implementation of its metered paywall — which is “is in the final testing phase” and expected to “launch shortly,” per Times Company CEO Janet Robinson — although he did say that the paper might charge an additional fee, even to print subscribers, for full access to the Times across multiple platforms.

“If you are someone who only uses the Times occasionally and comes through search, you’ll continue to do that. You’ll continue to go to the homepage as many times as you want,” he noted. But “for someone who is having an online equivalent of the deep, immersive experience of reading the print version, if you’re reading many stories beginning to end, day in and day out, you will eventually get a notice that if you want to continue the experience, you are going to have to pay.”

The idea is to leverage the loyalty — and goodwill — of dedicated Times readers. “This isn’t going to  be a panacea or a silver bullet,” Marzorati noted. “There’s a feeling that the people — what we know about those people — these people will be willing to pay to subscribe.”

Danner asked Marzorati about the Times’ paywall plan in light of polling statistics suggesting that only 18 percent of people who currently read a newspaper would be willing to pay to read it online.

“Obviously, we have seen the numbers,” Marzorati replied. “We just think the Times is different. We don’t think the Times is the Detroit Free Press, the Chicago Tribune. We think we have a connection with our readership which is different.”

The difference, he clarified, is that Freep and Trib readers may not be as willing or able as Times readers to pay a premium price for premium news. And that “is a gigantic problem, and the implications are going to play out in ways we don’t even know yet. I think, in particular, in state capitals, the falloff of covering state houses is going to be terrible.”

Marzorati also noted that one of the reasons the Times has been able to weather the news industry crisis as well as it has is that, instead of being dependent on local advertising dollars, it was able to get national advertising — including luxury advertising.

And the paywall, he said, shouldn’t hurt the paper’s advertising revenues. “We understand that the aggregate large number [of viewers] will come down. That’s just the price you pay for asking people to pay the price. Whether advertisers will care — I think not. I think a) there will be enough people who continue to use the website immersively, and b) there is also a propensity among advertisers to value someone paying for the product more than getting the product for free. They get information about users that they would not get otherwise, and they feel that that person has a deeper attachment to the product.”

Besides, he noted: “Remember the main place to advertise is the homepage, and the homepage will be available for free.”

The criterion for judging the success of the paywall, he said, is whether it will allow the Times to grow and expand its coverage. “We know we will survive, and that we will survive very much like we are now. But the challenge for us is how to grow as a business — which is to say, increasingly make profits the size of which we can then plow back and invest in the organization.”

“Obviously, if we were able to get a sizable percentage of the people who use the site in one way or another to pay for the site, that allows for all kinds of growth.”

And that growth will include global expansion. “We’re going to be building a kind of mini website for India,” Marzorati noted. India “is an enormous newspaper-reading culture that is only now beginning to transition online, and we want to be there and we want to have a product that not only appeals to Indians, but also Indians in the diaspora who might want information about India from a product that they are now using here.” So “we’re plowing money into that.”

For the Times, he said, “growth is about figuring out interesting ways to invest and do more different kinds of journalism.” And for now, the ability to grow is a goal along with growth itself. “We would just like to have that kind of mindset. “

There’s a new gazillionaire in town. Online gaming firm Gazillion Entertainment has hired John Needham, former head of Cryptic Studios, as its new chief executive as the company enters a new stage of its development of massively multiplayer online games.

San Mateo, Calif.-based Gazillion is one of the highest-profile video game start-ups, since it has raised a lot of money ($60 million in its last round alone) and has multiple studios making very ambitious games. Under Needham, the company will complete its shift to a new business model in response to major changes in the way consumers play online games. That’s a wrenching shift, but it’s a necessary one in the face of the disruption happening in the industry.

Needham said in an interview that the company is in the process of converting all of its major games to the free-to-play business model, where users start playing a game for free and pay real money for virtual goods such as decorations or better weapons. That model took off first in Asia and is now sweeping through everything from iPhone games to massively multiplayer online games such as the high-quality games Gazillion makes.

“Free-to-play is gaining a foothold here,” Needham (pictured) said. “That is where the secret sauce is for the industry.”

Needham has been a leader in games since 2001, when he became senior vice president of business development and operations at Sony Online Entertainment. He left Sony in 2008 to become chief executive of Cryptic Studios, an MMO publisher in Los Gatos, Calif. There, he helped publish the Champions Online game, which wasn’t a big success at first but did better after its shift to free-to-play games. He sold the company to Atari and led the launch of the company’s Star Trek Online game, which had mixed results but which Needham says was profitable.

At Gazillion, Needham will have his hands full, because the company is one of the most ambitious in the game business, with three major studios focusing on high-quality online games. David Brevik, a former Blizzard executive, became No. 2 at Gazillion in January, and Needham says he looks forward to working with him. Gazillion has more than 200 employees.

Rob Hutter, former CEO and now chairman, said he welcomes Needham to the new job. Under Hutter, the company has gone through some twists and turns, acquiring studios and shutting one down. Gazillion’s first studio was Slipgate Ironworks, an MMO developer founded by Doom co-creator John Romero. But Gazillion shuttered the game and laid off its staff. Romero left to run his own Facebook games studio, Loot Drop.

The company’s NetDevil studio in Louisville, Colo., also worked on a work-for-hire game for Lego, dubbed Lego Universe. After Lego Universe launched, NetDevil laid off some of the team and then transferred the remaining workers to Lego, which assumed responsibility for maintaining it. The remaining team at NetDevil is working on Fortune Online, a real-time strategy game for the web.

Another Gazillion studio, Seattle-based Amazing Society, is working on Marvel Super Hero Squad. That kid-focused online game is expected to launch in the coming months in conjunction with a show on the Cartoon Network. And the last studio is Secret Identity Studios in San Mateo, Calif., which is working on Marvel Universe, an MMO based on Marvel Comics characters.

Investors include Oak Investment Partners, Hearst Interactive Media, Revolution Ventures, Pelion Venture Partners, Founders Fund, Abu Dhabi Media Company and Temasak Holdings.

Rivals include Bigpoint, Riot Games and a variety of other online game companies.

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