Newspaper Tries Going From Free To Paid

from the good-luck-with-that... dept

Tue, Nov 25th 2008 12:44am — Mike Masnick

A few weeks back, I wrote how, economically speaking, online news has no choice but to go free over time. It's basically the same argument we've made with other versions of digital content. It's an infinite good, and there's enough competition out there that prices will get pushed to zero (which has already happened in a lot of cases). Some people took offense to this, claiming that I was wrong. The main arguments are twofold: (1) there are some online newspapers that have been able to charge and (2) free newspapers have no value and shouldn't be produced.

Let's take the second critique first. It is a complaint we've heard before, and shows a fundamental confusion over the difference between value and price, which definitely comes into play in the news business. Value is only one component of price, playing into the demand part of the equation. But, price isn't determined by demand alone. It's the intersection of supply and demand -- and if supply is infinite, then pricing pressure will drive the price to zero. That does not mean the content has no value. It can be very valuable. But that doesn't change what the price is going to be for one simple reason: some competitors will figure out how to exploit the infinite nature of the content as free, and other will find it difficult to keep up unless they do the same.

And, of course, that leads us to the first critique: that there are some newspapers that have been able to charge and seem to be doing well. Again, this is one we've discussed at length, in the past. These sorts of changes don't happen overnight, but for the most part we've seen more and more newspapers move from paid models to free models (even the NY Times realized the math didn't make sense to keep a paid version online), recognizing that even if the paid version was something of a cash cow, growth was very slow (or negative), as people were moving to free online news that was "good enough." It's the classic "innovator's dilemma." Other models for revenue are growing much faster than trying to force people to pay for news, and it's nearly impossible to get a younger generation to ever agree to pay for news. It's just doesn't make sense.

With that said, it's a bit surprising to find out that one newspaper is trying to go in the other direction. Bluffton Today, considered one of the more innovative newspaper experiments -- combining a free newspaper with citizen journalism -- has decided to try switching to a paid model. The paper itself will have a paid subscription, as will an electronic version of the paper. Its website will remain free, but that appears to be more limited than the paper itself. It will be an interesting experiment to watch, but if I had to bet, I'd say that the paper will find it difficult to get enough paying subscribers to survive, unless it comes up with something else in its business model.

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Filed Under: economics, free, newspapers, paid

11 Comments

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Albert, 25 Nov 2008 @ 1:55am

Newspaper Tries Going From Free To Paid
I agree with most of what you said, nevertheless you missed an important point: Newspapers are making more money due to advertisements than from the price the newspaper is old.
They could give it for free as long as they have enough advertisements no matter if they are on line newspapers or traditional ones,
Kind Regards,
Albert
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Reader, 25 Nov 2008 @ 5:28am

You can successfully charge for infinite content
www.newscientist.com is a paid publication - and it's prices keep increasing. Seems to be doing quite well, too.

It's got a paper magazine sub attached to the web site, which has some articles behind a login and the seem to have no trouble at all in getting people to pay for it.
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- Anonymous Coward, 25 Nov 2008 @ 6:34am
  
  Re: You can successfully charge for infinite content
  A magazine is NOT news! News is typically just reporting on what's NEW. Magazines don't go out to print as often as newspapers! They typically are bound better, have better paper, look better, etc because they are in depth examinations of SOMETHING. I love magazines that examine science and pay for them because good magazine publishers go the extra mile and get in depth with subjects. News just constantly reports on things happening right now and doesn't dig in or have many editors digging through it before it gets out there. News is brittany spears cutting her hair today! A magazine article would probably go into depth of the history of baldness and what they foresee for the future in hairstyles.
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jonnyq, 25 Nov 2008 @ 6:14am

I do think that websites can justify a subscription model for certain types of content and usually not at a high price. But after reading the article, I agree that this paper's model is doomed.

If they were charging for immediate access to popular reporters and columnists that would be something. Or if they charged for access to a large video archive, that might work, too. But not this one.
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Parker, 25 Nov 2008 @ 9:46am

I think that what is interesting to note is that even the print versions of some newspapers are moving to free, realizing that
Metro news is one example that comes to mind here in Toronto (though I think it is also distributed elsewhere).

Similarly, most cities have free weekly magazines/papers that primarily talk about local events/arts/news. I don't see why this kind of model couldn't be expanded to a daily publication, supported by advertising.
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Anonymous Coward, 25 Nov 2008 @ 10:12am

You need to rethink your Economics
There you go AGAIN!!!! You need to stop, your logic is good, but your PREMISE is WRONG. The "supply" is not infinite, in fact the only time you are dealing with "infinite supply" is when you are dealing with inputs. No product that requires resources (time, expertise, wisdon, knowlege, paper, plastic, metal, electricity, etc...) is an infinite good. It is a flawwed premise that there can be any "inifite supply" of a finished good or service. Other than bad ideas and opinions, those are plentiful and they are not in demand.

What do newspapers supply? Answer: New Stories. Customers receive value from the news stories when a few conditions occur, (1) the news is relevent to them, (2) the news is timely, (3) the news in delivered in such a way that the cusotmer can use it (it must be presented in a format they customer can use, and it must be comprehendible(sp)).

Newspapers must focus on delivering exclusive news content (exclusive interviews, trusted - or at least entertaining opinions, local angles on global issues, etc..) These are the sort of things that are not in "infinite supply".

Information may be infinite but the ability to collect, present, and localize that information is very much a "scarce good".
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- DanC, 25 Nov 2008 @ 2:00pm
  
  Re: You need to rethink your Economics
  The "supply" is not infinite, in fact the only time you are dealing with "infinite supply" is when you are dealing with inputs. No product that requires resources (time, expertise, wisdon, knowlege, paper, plastic, metal, electricity, etc...) is an infinite good.
  
  The supply is infinite, but the creation of that supply is not. The work required to create something and the finished product are two different things.
  
  Information may be infinite but the ability to collect, present, and localize that information is very much a "scarce good".
  
  No one said anything to the contrary. However, everything you cited as scarce goods are used to create the final product. And in the case of digital goods, that product is not scarce.
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- Mike (profile), 25 Nov 2008 @ 7:23pm
  
  Re: You need to rethink your Economics
  There you go AGAIN!!!! You need to stop, your logic is good, but your PREMISE is WRONG. The "supply" is not infinite, in fact the only time you are dealing with "infinite supply" is when you are dealing with inputs. No product that requires resources (time, expertise, wisdon, knowlege, paper, plastic, metal, electricity, etc...) is an infinite good. It is a flawwed premise that there can be any "inifite supply" of a finished good or service. Other than bad ideas and opinions, those are plentiful and they are not in demand.
  
  Actually, as Dan noted, my premise is entirely correct. It is yours that is incorrect.
  
  You are correct in naming a variety of other scarce goods, but the final product: the digital copy of the story is infinite.
  
  But that's great. Having scarcities you can charge for (such as the ones you listed) are a great business model.
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Andrew D. Todd, 26 Nov 2008 @ 11:36am

The Modern Bush Telegraph Is Better.
I live in a small college town, Morgantown, WV. There is an apartment complex nearby, The District, which caters to the kind of undergraduates who would otherwise be living in dormitories. Well, some months ago, there was a shootout between two rival gangs of drug dealers, one from New York and Philadelphia, the other from Baltimore and Washington. One of the rascals got killed, and several got shot, but no innocent bystanders were hurt, thankfully. The coverage in the local newspaper, the Dominion Post, was fairly uninformative, because it was essentially the police report, and the police weren't saying anything which might interfere with the prosecution of the case. So I did a Google search and found lots of blog traffic, mostly between worried parents, ie. "my Jenny says this, and your Megan says that, and their Brenda says the other thing." I was able to get a fairly good idea of what had happened, and why drug dealers had been able to move into the apartment complex.
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pat donovan, 26 Nov 2008 @ 6:53pm

free news
that is my opinion, and for a moderate price, it can be yours also.

I don't get paid to watch TV... so i don't. I use the remnants of radio for weather and traffic reports...

Yuo want solid info... or at least sometying that suits your basis...
you'll pay for it, cheerfully.

content providers in the 5000 website multiverse?
I'll beleive it when you don't get swarmed under
on ANY of the social sites.

pat
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Robert Ivan, 30 Nov 2008 @ 11:35am

craig newmark will pay!
In a recent interview in the LA Times, Craigslist founder Craig Newmark said he would be willing to pay for quality news content.

If your news site offers a competitive advantage and the best way to protect it and generate revenue to sustain it is with a pay model, I have no problem with that.
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