You Can't Raise The Price For News If You Don't Actually Add Value

from the let's-try-this-again dept

Wed, Apr 29th 2009 11:37pm — Mike Masnick

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

21 Comments

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Anonymous Coward, 30 Apr 2009 @ 12:19am

Prices have been going up on EVERYTHING and value down on everything for as long as I can remember. So whats so new about this?
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Noc, 30 Apr 2009 @ 1:21am

erm...
I only read the topic and like the first few lines....

But thank you captain obvious...

but that aint going to stop anybody welcome to a capitalist society, enjoy getting reamed
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Mike (profile), 30 Apr 2009 @ 1:24am

Re: erm...
But thank you captain obvious...

Yup. Seems obvious to you and me, but apparently not to a significant number of journalists and newspaper execs...
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Stephen, 30 Apr 2009 @ 2:06am

You pay for Advertising
Indirectly, we pay for advertising. If there was no advertising, the companies advertising would have less expenses, so the good would (in an alternative, pure capitalism universe) cost less, so we could then afford to pay a price for news that was appropriate for the cost of producing it. The problem is that the people paying for the products being advertised are not the ones buying the newspaper all the time. I also hate the indirect payment approach (how all internet content works), because that way the content is geared to attract advertisers, rather than readers. But its difficult to change now.
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Mike (profile), 30 Apr 2009 @ 2:09am

Re: You pay for Advertising
because that way the content is geared to attract advertisers, rather than reader

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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John Proffitt, 30 Apr 2009 @ 2:21am

Planet Money losing its way
You nailed Planet Money on this one. I was so disappointed to hear that episode this week -- they were so clearly cheering for old-style media journalism that they couldn't press Brill with even a few very basic questions.

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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Jersey Joe, 30 Apr 2009 @ 3:41am

NYT and the goose with golden eggs
I have the impression that such things as fables and Grimm's Tales are no longer taught in the early school classes. That would explain why their fundamental precepts are so generally ignored. Case in point, the New York Times. They have gradually but relentlessly strangled their goose that laid golden eggs by driving readers away. In NYC competing newspapers sell for a fraction of the Times' $1.50 issue. They raised the price every year, even as newsstand sales dropped in direct proportion to the price increase. I have no doubt they will continue to do so until they finally go out of business. Their financial collapse has been avoided only by temporary measures such as selling off the ownership of their new skyscraper. Some observers are predicting they will fail no later than 2010. Based on recent history, that will be signaled by a price increase to $1.75 or even $2.00. I, for one, stopped buying the Sunday Edition years ago when it reached $3.50. what is it now, $5 bucks??
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Barnicle, 30 Apr 2009 @ 4:14am

Use The Boston Globe's Model
The failing Boston Globe announced a price increase recently, doubling the price of its daily and Sunday papers. The increases take effect on Monday, May 4.

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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Matt, 30 Apr 2009 @ 4:15am

well
patent companies and service providers (cell, internet) can easily be exchanged for news as well.
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EdK, 30 Apr 2009 @ 4:41am

On price (in general)
Price, as the intersection of supply and demand, is about resource (capital) allocation. If your product provides value people will pay for it. That is, the will allocate resources to you.

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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Haywood, 30 Apr 2009 @ 5:02am

For me it really is about price
When the newspaper was $125 a year I bought it. I didn't always read it, but it was a tradition to always get one. Then price creep set in and it soon cost $200 per year. At that price we are talking roughly half the cost of my internet connection. The paper simply doesn't offer anywhere near 1/2 the value of the DSL, so it had to go.
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CleverName, 30 Apr 2009 @ 5:47am

Re: NYT and the goose with golden eggs
In addition, they might have more traffic to their website if there were no registration. What is the point to that anyway, all it does is annoy their visitors.
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KGWagner (profile), 30 Apr 2009 @ 7:13am

Limited adspace online
"...the truth is subscribers usually barely (if at all) covered the costs of printing/delivering the physical paper, but not for the reporting itself."

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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Stray Dog (profile), 30 Apr 2009 @ 7:27am

there goes another buggy whip
the name of the game is PROGRESS and newspapers just can't keep up anymore
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neil, 30 Apr 2009 @ 7:58am

Re: Re: You pay for Advertising
advertisers don't care if you have readers. they don't need people to read your stuff they need people to read theirs. now yes they assume that if they are grouped in with your stuff then they also get read but they really have no proof of that.
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Anonymous Coward, 30 Apr 2009 @ 8:05am

Re: Limited adspace online
just a thought if papers are gone in the future what happens to the kids who made cash delivering them. i mean i know in the death of one industry people still find work to do. but i wounder what it will be. i guess they could try to go into the spam business.
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KGWagner (profile), 30 Apr 2009 @ 8:20am

Re: Re: Re: You pay for Advertising
"advertisers don't care if you have readers. they don't need people to read your stuff they need people to read theirs."
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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Aaron Martin-Colby (profile), 30 Apr 2009 @ 11:16am

Anecdotal
I think the Wall Street Journal's acceptance exceeds the bounds of one anecdote.

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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cram, 30 Apr 2009 @ 6:36pm

"...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."

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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Michael, 1 May 2009 @ 8:46am

added value
We figured out how to include, the Susan Boyle video, Obama's Irish Song, (he is Irish, according to the words) a video on how to make perfect gravy, a news clip on the dangers of flourescent light bulbs and the Opera Mini operating system ... all included with your morning newspaper, without breaking the cariers back. Want to see for yourself ... try the keyword links: boyle, obama,kraft42, global1, or jar22 at frapple.com How difficult is it for a newspaper to include direct keyword links in print ... readers just LOVE hunting! How about a 20 Minute Tony Robbins Seminar, Keyword: Ted1
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J Gruszynski, 1 May 2009 @ 9:36am

Price and Value are NOT locked at the hip
I'm shocked that people can be so ignorant that the headline isn't trivially understood to be true. It is trivially true, by the way.
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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