Behavioral Economist Dan Ariely Explains The Problem With The NY Times Paywall
from the anchored dept
David alerts us to behavioral economist Dan Ariely's take on the NY Times' plan for a paywall, noting that people are unlikely to pay for what they've been able to get for free in the past:The main problem of this approach is that over the years of free access, the New York Times has trained its readers for years that the right price (or the Anchor) is $0 -- and since this is the starting point it is very hard to change it....Indeed. It's a point that we've tried to make in the past as well. It's nearly impossible to successfully charge for something that was once free, but it's absolutely possible to charge for something new, something scarce, that is separate from (or perhaps enhanced by) the free stuff. That's why we had hoped the NY Times would be smart enough to set up a business model around offering something else of value, rather than just a paywall, but it chose to go in the other direction.
Because we're not very good at figuring out what we are willing to pay for different products and services, the initial prices that new products are presented with can have a long term effect on how much we are willing to pay for them. We basically can't figure out how much pleasure the New York Times gives us in terms of $ -- so we go back and pay the same price we have paid before. This means that getting people to pay for something that was free for a long time will be very challenging, but it also means that if the New York Times were to offer some new service at the same time that they start charging, they might be more likely to pull it off.
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Filed Under: anchor prices, behavioral economics, dan ariely, economics, paywalls, value
Companies: ny times
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What could be offered
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Right, but the problem facing the NY Times is that the psychological price that most people give to news is $0.00. In fact, this is nothing new. When you used to pay a quarter for a newspaper, that quarter was not paying for the newspaper. It was all of the ads in the newspaper that were subsidizing the newspaper. So, actually it was quite easy for people to go from "news is mostly free" to "news is free".
So, should the NY Times sell popsicles? The answer is...well, they need to sell something that is scarce. It's not a matter of the subjective opinion of Mike or any particular person on what the NYT should do. It's an objective observation that they need to do something given the current environment.
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Correction it was paying for the physical piece of paper with printing on it. It was not paying for the news - that (as you correctly state) was paid by advertising.
If you think about it that is the only logical way to operate - as it matches the cost that is proportional to circulation with the revenue that is also proportional to circulation.
Advertising and news gathering are less tightly tied to circulation and therefore make a better pairing.
It is also a matter of perceived fairness. The public knows that the marginal cost per view of the website is miniscule and therefore they think that any increase in price is unfair. (of course they might have accepted a non -zero price to start with - but that is another story.)
The public thinks that paying for bottled water is fair (see comments below) because they can see that each bottle has some costs associated with it.
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-- Car analogy ahead--
It would be like if Toyota took the Camry, called it a Lexus but didn't add any new features, and still charged 15,000 more. It's the same thing, but now it costs more. Where's the additional value?
That's the hurdle that the NYT is facing. How do you convince people to pay for the exact same thing that they used to get for free? The hurdle is extra high in this case because there are other "free" sources of news out there.
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With the right connections, they could even offer special deals on tickets to shows and events, or even coupon codes for shopping online at other retailers.
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They could make their RSS feed part of the pay service.
Consumer: "Fine, I'll just go to a site that offers an RSS feed for free."
Offering customers instant updates, article previews, corrections, status updates, breaking news, and editorial columns. Becoming a member could afford people an opportunity to post comments to news stories and get discounts on their regular dead-tree format circulation.
For the things like breaking news, I think there's no way that they would/should put this behind the paywall. There's just too much emphasis on breaking a story in the news world. Can you image a scenario where the NYT breaks a huge story, but it's only available to paid subscribers? Every other news agency would jump all over the story and publish their own versions. And no one would know that it was the NYT that broke the story.
What I think the NYT might have a chance with it stuff that would be valuable to the hard core fan. Maybe the discounts to the physical newspaper. But they've tried stuff like that in the past -- newsroom tours and access to back archives -- and that didn't work either.
With the right connections, they could even offer special deals on tickets to shows and events, or even coupon codes for shopping online at other retailers.
Special promotions and coupons are just forms of advertising and no advertiser is going to want to lock up their ads behind a payway.
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I would happily sign up pay for a 3 year subscription if it came with a free e-reader that would automatically sink up to the newspaper each morning via a WiFi or 3G Connection. Hell the New York Times could offer other paid papers on their e-reader for a cut of the action.
I like the idea of kindle but do not like the price and lack of usability in my 3G dead zone.
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People don't realize that a $20 filter attached to their local water supply is the same thing that's in the bottle.
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Nope, wrong
Nope, wrong. That is not the primary reason people buy bottled water. They buy it for CONVENIENCE. They get known, good, filtered water IN A BOTTLE that is reclosable, easy to carry, and cheap. Can you do all this yourself? Sure. But when you can just buy it for .10 a bottle, have 20 or 30 of them ready to go at any time, just grab and go, that factor outweighs any "quality" issues or "I can do that myself."
Who thought sticking water in a bottle with a screw top would be worth so much? Certainly not people like Big Media and their luddite ilk (shills, TAM, etc) with their buggy whip mentality. And this is why they have missed the boat on digital media, file sharing, and the internet.
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from pepsi-co i can buy
a bottle of water, carbonation, and syrup = pepsi
a bottle of water and carbonation = aquafina sparkling
a bottle of water = aquafina
Maybe selling individual sections of the paper?
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Two all beef patties...
I am sure that McDonalds corporate brand includes the concept that meals are inexpensive.
But I can't get out of my head the early 1970s ad campaign about "burger, fries, and coke... and change back for your dollar."
That's my anchor - and Mickey D's did such a good job of putting it into my head, everything else seems expensive to me.
NYTimes: you are in the same boat now too.
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Subscription to Washington Post
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Foolishness...
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