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April 18, 2005

More On Internet Pricing

Last week I blogged on click fraud and wrote that I believed the problem was caused by performance-based pricing. Recently another pricing issue has come to the forefront, primarily by means of Jay Rosen’s intelligent blog, Press Think.

I read Press Think regularly and assign it as required reading in the Media Ethics class I teach at the New School University. I think Rosen is a brilliant thinker about journalism even though he gave me an F in blogging in February when he believed I didn’t accurately reflect his views about why the New York Times bought About.com. I let it pass because I know better than to get in a pissing match with someone as smart as he is. His April 14 blog entry titled “Q & A with Bill Grueskin, Managing Editor of the Wall Street Journal Online” was one of his best and I urge you to read it if you are interested in issues about pricing for content on the Internet.
Rosen writes, “The rumblings are growing louder. They suggest that the New York Times will soon start charging for its online edition, or at least for parts of the site...Every time I hear one of these reports--and I get them a lot--it is accompanied by news of an internal struggle at the New York Times Company over the future of the online edition, which is also about the soul of the journalism-to-come: free or paid or a mixed republic?

A major factor in those debates is the success the Wall Street Journal has had with its paying-customers-only policy for the online service. Figures released today show that WSJ.com subscribers are at 731,000, or 5.2% above the same quarter last year. That means the Journal's online edition has a paid list larger than paid print circulation at all but six newspapers in the U.S. (A subscription costs $79 a year, or $39 if you already subscribe to the Journal on paper.) Meanwhile, traffic keeps growing. Total usage this quarter--the number of subscribers coming to the site each day--is up 20 percent over last year.”

He goes on in his interview with Grueskin to ask, “Cory Doctorow of Boing Boing has written: ‘why not charge money for the news (which lots of people want to pay for!) and give away the history (which relatively few people want to buy)?’ He quotes Dan Gillmor:
One of these days, a newspaper currently charging a premium for access to its article archives will do something bold: It will open the archives to the public -- free of charge but with keyword-based advertising at the margins.

I predict that the result will pleasantly surprise the bean-counters. There'll be a huge increase in traffic at first, once people realize they can read their local history without paying a fee. Eventually, though not instantly, the revenues will greatly exceed what the paper had been earning under the old system. Meanwhile, the expenses to run it will drop.

And, perhaps most important, the newspaper will have boosted its long-term place in the community. It will be seen, more than ever, as the authoritative place to go for some kinds of news and information -- because it will have become an information bedrock in this too-transient culture. (See also PressThink, Jan 28.)”

So the gauntlet is thrown down—pay for new or old content or should new or old content be free? It seems to me this is a pretty straightforward case of competitive pricing strategy and has little to do with journalism or the silly notion that “information wants to be free.” It wants to be free for freeloaders but not for those who create information.

There are some bloggers (information providers) who give it away free, but most of them I know of have day jobs (Rosen at NYU, Jeff Jarvis is president and creative director of Conde Nast’s Advance.net, Glen Reynolds of Instapundit is a law professor at the University of Tennessee, e.g.). Others pine for advertising (Daily Kos, Gawker, Wonkette, e.g.). However, individual bloggers don’t have the kind of huge traffic the New York Times’ Web site or the Wall Journal’s Web site have. So the problem is how should newspapers and magazines charge for content.

I think the Wall Street Journal is doing it right—charging more for non-subscribers than non-subscribers. I think $79 a year ($6.58 a month) seems about right as does $39 ($3.35 a month), which means it generates about $43 million a year in online subscription revenue—enough hire several journalists. The WSJ can get away with charging because it has a unique, premium brand. Consumers have always paid more for premium brands--that’s the whole point of advertising--and consumers will continue to pay premiums on the Internet for high-quality content. I think its price of $2.95 for an article over a month old is about right too. But “right” is not the correct concept—“competitive” is. The New York Times also charges $2.95 for articles more than a month old.

I think the Times should start charging the same as the Wall Street Journal does—the WSJ has set the pricing precedent, so follow suit. Initially, the price increase will cut down traffic, which will reduce ad revenue, but as in the magazine business, advertisers prefer magazines that charge for subscriptions over books that are free because when people pay for content, they pay more attention to it and are more likely to read more of it. Also, advertisers would prefer a subscription model because the demos would be better—more upscale.

What I think the Times would discover is that articles on business might not get generate much income (few would prefer the NYT’s business coverage of that of the WSJ—brand preference, not necessarily a content preference), but that the NYT’s coverage and criticism of the arts, music, theater, dance, architecture, and books would generate significant revenue. In other words, people will pay for the best coverage and thinking on specific topics. If I were positioning the Times, I would let the WSJ have the business and economics niche and claim the NY local political news, arts, books, etc. as my niches—do what you do best. Let the New York Post have the gossip niche with its Page Six.

I would then make a deal with Atlantic magazine, The New Yorker, and the New York Review of Books to combine their Web sites with the New York Times Magazine and charge $120 a year for Web subscriptions to the combined site and $4.95 for articles over a year old. Advertisers would drool over the demos of this elitist Web content and they would pay high CPMs. The Times would have been a lot better off buying Atlantic and the New York Review of Books and even the Paris Review than About.com—more compatible content and demos.
If the NY Times doesn’t start charging subscription fees they will slowly lose its newspaper (or dinosaur blog) circulation to its Web site. The newspaper will inevitably lose circulation, but slower if it charges subscription fees for Web content. It can make up for lower ad revenue on its Web site because of reduced traffic with higher CPMs and with subscription revenue. It better make the change soon, too, because the longer it waits, the more furious online readers will become.

However, I suspect that the egos of those in charge at the NYT will not allow it to copy what the WSJ is doing. They are good at old fashioned newspapering; however, they need to bone up on marketing, differentiation, pricing strategy, and best Web pricing practices—and soon.

Posted by Charles Warner at April 18, 2005 02:43 AM

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Terry at April 22, 2005 06:07 PM writes:

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