You Can't Raise The Price For News If You Don't Actually Add Value
from the let's-try-this-again dept
It's no secret that plenty of folks tend to confuse price and value, falsely thinking that if price = $0 then it means that the value is also 0. That's not true at all, as we've discussed multiple times. But, there's a flip side to that discussion that many in the news business seem to be struggling with as well: they believe that if they raise the price of their product, then by that very same equation, they've somehow increased the value, and people will suddenly pay for the news. Except... that's obviously a fallacy. Just because you raise the price on something it doesn't mean that people will suddenly pay.Yet, Stephen Brill's new operation is based on this very premise. The fine folks at NPR's Planet Money spoke to Brill about his new venture, but what was frustrating was that they didn't directly challenge a number of his highly questionable assertions. They did bring on someone afterwards who disagreed with Brill, but it could have been a lot more powerful. For example, Brill claims that readers have always paid for a share of the news -- while the truth is subscribers usually barely (if at all) covered the costs of printing/delivering the physical paper, but not for the reporting itself. Brill claims that the decision by newspapers to go online was "group suicide," but neglects to note that almost everyone (with a very few exceptions) who tried to charge online -- including Brill himself -- found that people just didn't want to pay. It wasn't "group suicide," it was economic survival to recognize that charging wasn't working. He also claims that giving away content for free online is why newspapers are in trouble, which is shown as wrong later in the program, when it's pointed out that most newspapers are still profitable -- but the real problem was how much debt the papers took out. It's not about getting readers to pay, it's about how screwed up management has been.
Brill also seems to totally misunderstand iTunes, saying that it works because it's simple and cheap, so his Journalism Online project will be that way too. He leaves out the key point of why iTunes worked: the iPod. People wanted to fill up their iPods and iTunes made that easy. But in the case of news, there are already lots of other options that are easier and more efficient.
Yet, at the same time, folks like Alan Mutter (who will be on the "news" panel at The Free Summit), are suggesting that newspapers should raise their prices. But, again, this seems to be mistaking price for value, assuming that if you just raise the price, people are more than willing to pay.
Instead, the opposite seems to be true. Mark Potts recently pointed out how the online price of the Wall Street Journal (usually held up as the example of online news people will pay for) has gone up so much that he's reconsidered subscribing. Every time they raise the price, it just becomes an increasingly questionable expense, for no added value.
In contrast, however, Potts points to the Cedar Rapids Gazette in Iowa, who unlike most of these other papers, actually does seem focused on actually providing more value, not just talking about how everyone should value the paper, or nostalgically reminiscing about the "good old days" before there was competition. Instead, the paper has absolutely everyone talking and thinking about ways to really become the central hub for everyone in their community. They recognize that they can't rest on their laurels and be the voice of the community because there's no one else. Instead, they know they need to work at it, embrace new technologies, and actually strive to provide a better solution than what else is out there. That's a paper that's focused on value first, rather than complaining about price. Who knows if it will work, but it's a much better strategy than just focusing on price, like so many others.
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Filed Under: business models, journalism, news, price, stephen brill, value
Companies: journalism online
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erm...
But thank you captain obvious...
but that aint going to stop anybody welcome to a capitalist society, enjoy getting reamed
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Re: erm...
Yup. Seems obvious to you and me, but apparently not to a significant number of journalists and newspaper execs...
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You pay for Advertising
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Re: You pay for Advertising
Really? You seem to be skipping over the fact that the way to attract *advertisers* is to first attract readers. If you can't attract readers, the advertisers don't care. So I'd argue that it's very much about attracting readers.
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Re: Re: You pay for Advertising
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Re: Re: Re: You pay for Advertising
Sure they do. If there's nobody reading your stuff, nobody sees their ads.
That's how ad prices are set - by how many eyes/ears are exposed to your presentation. That's why newspapers care about circulation, and why radio/TV stations care about ratings. Those numbers are directly proportional to the amount of attention you're getting. The higher those numbers are, the more you can charge for adspace/airtime.
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Planet Money losing its way
Sadly, it seems Planet Money, once a paragon of explanation and investigation in the economic space, is now a defender of status quo, or whatever counted for status quo 5 years ago.
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NYT and the goose with golden eggs
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Re: NYT and the goose with golden eggs
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Use The Boston Globe's Model
There's only one problem.
The Globe will be out of business on Friday May 1 unless they meet a requirement by the parent company, the NY Times, to reduce expenses by $20MM.
I can't wait for that rag to go down and take millions of Pinch Sulzberger's money with it.
If there's ever been a definition of arrogance, elitism and just plain stupidity, its name is Sulzberger.
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well
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On price (in general)
The problem is companies (newspapers) tend to focus on the demand and cost side, rather than the supply or value side.
This behavior is the death rattle of ANY industry.
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For me it really is about price
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Limited adspace online
This is absolutely true, although it's rarely brought up. My family was involved in The Detroit News both printing and delivering it for many years, and it was common knowledge that the price of the paper was purely to support labor and materials to print the paper and deliver it. In fact, the delivery boys made the most money per issue, at roughly 20%.
It's always been advertisement that paid for the news gathering and the business itself. The problem with going online is that they can't sell as much adspace as they could in the paper. In the paper version, they could easily sell 20 or more pages of ads for each page of content. Online, if you have more than a couple/few ads per webpage, people will either ignore the site and find greener pastures or be driven to install ad blocking software.
If physical newspapers were limited in adspace as much as online news sites are, the Sunday paper would only be 20 or 30 pages, tops. There's no way they could support themselves on so few ads, and so would go out of business, just like we're seeing.
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Re: Limited adspace online
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there goes another buggy whip
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Anecdotal
I also think that their price is the least of their worries. I suspect that their sales have been doing so well because of the financial crisis bringing out armchair economists.
But after this whole fustercluck blows over, people might be tired of financial news to the point that their subscription numbers will just collapse. The same criticism goes to The Economist.
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In some cases, price=0 or tending to zero means value also follows the same route. So you are falsely asserting it's not true at all...because it is true in many cases.
"Except... that's obviously a fallacy. Just because you raise the price on something it doesn't mean that people will suddenly pay."
Fallacy? What world do you live in, Mike? Prices of goods keep changing all the time, all over the world - most of the time with no added value. How can you possibly say people won't suddenly pay if prices are higher? People certainly will, if they want it so bad.
Why, even iTunes has hiked the prices of its songs though they haven't added any value, but people are still buying! And Apple knows fully well that there is no letup in demand.
"People wanted to fill up their iPods and iTunes made that easy."
You are cluctching at straws here. Apple is doing a great job of destroying your "give away infinite free, sell scarcity" theory. And you are having difficulties accepting it - because if everyone starts buying infinite goods, you'll be out of business.
After all, how difficult to fill up an iPod without the help of iTunes? Surely there's more to the success of the iPod and iTunes than your statement.
"But in the case of news, there are already lots of other options that are easier and more efficient."
Why, the same can be said of iTunes - there are tons of options, including Pirate Bay, which are easy and efficient and best of all, free.
iTunes is a success not because it is the easiest or most convenient option, but because Apple has very carefully marketed it a particular group of people who love its products and who are willing to -gasp!- pay for infinite goods.
"...are suggesting that newspapers should raise their prices. But, again, this seems to be mistaking price for value, assuming that if you just raise the price, people are more than willing to pay."
I think you're missing the wood for the trees here. The printed newspaper is fast losing its value in the minds of the consumer, which means he's gonna throw it out even if you drop it free of cost at his doorstep.
"Instead, the opposite seems to be true."
Of course it "seems" to be true to you, because that's what you like to believe and that's what you wish would happen. This is just the word of one man, Mark Potts, against tens of thousands of other subscribers. And iun typical hyperbolic fashion you are already pronouncing it to be a largescale movement.
"That's a paper that's focused on value first, rather than complaining about price. Who knows if it will work, but it's a much better strategy than just focusing on price, like so many others."
They're focused on value, they are not whining about price, they are embracing new technologies....but even Mike Masnick, the lord of free, is not sure if it will work. Good god, how else is a paper to survive!
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added value
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Price and Value are NOT locked at the hip
And likely another shocker to some: brand is not value but only a promise of value - promises are often made without the ability to fulfill the promise, and promises made often are broken. Brand is a promise of value but not a guarantee of value.
Most people who assume price is value is really saying that price is a trustworthy brand. But because brand is only a promise, you should not assume value from price, for this reason also.
All of this should be trivial and obvious, but then again I recently had a disagreement with a Wall Street type with a Harvard MBA who was quite certain that "price" is precisely and always the same as "value". And this guy has a thriving business editorial blog telling people BS like this. Talking to people like him, it's hardly surprising that Wall Street went into a death spiral and mainstream economists didn't see it coming.
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