Two-Cent Doughnuts Breed Decades Of Bad Blood: It's Not So Easy Going From Free To Paid
from the tough-to-shake-it dept
One of the things we regularly hear from people who are apparently allergic to any business model that leverages free to make more money elsewhere, is that content creators have to change their business model, stop giving stuff away for free, and start charging. This is seen in lots of places, including the mad dash by many newspapers to try putting up paywalls on their news. We've long argued that doing so can really piss off readers, not just because of the cost, but because taking something that was once free and making it now cost money often changes how people look at the product itself.The folks over at Planet Money have yet another brilliant podcast where they give an amazing example of this, showing how the impact can be incredibly long lasting as well. It's the story of why so many US veterans hate the Red Cross. Apparently, for a period of time during World War II, the Red Cross stopped giving doughnuts away to service members for free, and started charging $0.02 per doughnut. And, to this day -- seventy years later, many WWII veterans (and many who came after them) have a distaste for the Red Cross, and nothing will shake it.
The whole podcast is worth listening to, as it actually explains why the Red Cross did this (apparently, it didn't want to, but officials put pressure on them when the US entered WWII, because Allied soldiers paid for their snacks, and were annoyed that the Americans were getting free doughnuts). And for decades now, the Red Cross has tried to make up for this -- often showing up at places where veterans are with tons of free doughnuts -- but to little avail.
The program works through a few theories on why this simple change has resulted in so much animosity. They conclude that it was much more than just a "price" change, but a "category change."
Chalk it up to something called categorical change, says Uri Simonsohn, a University of Pennsylvania business professor. Price changes, people can adjust to. But this was different.That is, these are things that people, inherently, don't think they should be charged for. Switching those things from free to fee isn't just about the price, but about the concept itself. Now, some will argue that this doesn't necessarily apply to things like newspaper paywalls, since people are already used to paying for newspapers. But, I do wonder if that's really true -- especially for the younger generation. They're not defining a newspaper website as a newspaper website, but rather as "information online." And, to them, that information is free. Period. It's going to be pretty damn difficult to get over that "category shift."
"Imagine, for Thanksgiving, you go to your parents' for dinner and after a nice dinner they say, 'That's going to be $10 per person,' " Simonsohn says. "You would be upset."
The problem isn't the price — $10 for a good turkey dinner might not be such a bad deal — but that you're being charged in the first place. It changes the relationship. For the veterans, the Red Cross went from being a little like Mom, to being the corner store
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Filed Under: doughnuts, economics, free, red cross, veterans
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paywalls
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There are just some sorts of things that pure abstract theoretical free-market economic modeling says should be easy, but which turn out to be very, very hard due to human psychology. I guess they are both just examples of that, maybe?
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Give a new customer some product for free, get them used to the arrangement after a few tastes and then start charging once you've got your hook.
It's a pretty proven, versatile model.
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Re: paywalls
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Paywalls
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"In theory, there is no difference between theory and practice. But in practice, there is." -Yogi Berra
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Re: Re: paywalls
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Re: Paywalls
I think this is an important point. To me, there is no substantial difference between a free-but-you-have-to-sign-up site and a pay site. The only difference is in the price.
If I have to sign up, it puts an emotional distance between me and the site. It makes me value the site less.
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If the newpapers don't like it, put up a paywall and watch how fast the eyeball prints disappear. Other than local news, there is nothing on the net I want that either I can't find elsewhere or if it's a paywall, I didn't need to read that bad.
Some of the sites allow you to read the first page but not the second. When I hit that, I don't return and I don't stay. News like music is no longer worth the money being demanded to see.
Another is registration to comment. If I have to register to provide the site with commentary that will increase it's worth, it's not worth it to me to give up that privacy. Torrentfreak is a fine example of a site I used to read and comment at and now just read the articles since Discus is now the middleman for comments. I'll discuss the articles somewhere else and Torrentfreak doesn't get the benefit of that.
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Competing with free
I think this actually goes nicely with the idea that if a company can't compete with free, it can't compete at all. When a company sees its product going to consumers for free, it believes that it can't compete because it doesn't see revenue from that particular product anymore; it doesn't realize that it needs to adapt and monetize through other channels because its main product, by being free of charge, is now in a different market category in some senses.
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A friend of mine that people will always pay for journalism. They'll either support the papers directly or they'll just have to pay indirectly through higher taxes for greater corruption.
Do you know what's been going down at the local zoning board meeting? Do you know what your mayor is doing? Maybe they're going to put a freeway right through your house and you'll miss the meetings when you can go to protest.
I have no sympathy for you. You could have supported a local paper but you're being so darn snotty about it.
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Sorry, but people will pay for news
But face it. Advertising sucks and its rate of return is getting suckier. Even Big Search can't make it work as people are paying less and less for the ads.
So something is going to pay for it and no amount of singing kumbaya with your fans is going to do it.
And news is much different from doughnuts during WWII. The doughnuts were an act of charity and 2 cents didn't even pay for their real cost. When those veterans came home, they quickly got with the program. They either coughed up the real cost of the doughnuts or the bakery went out of business.
The same is true for newspapers. If the kids don't pay for journalism, they'll get nothing. No charity drive is going to bring back the Rocky Mountain News or any of the papers that are gone. The kids can cop any attitude they want, but it's not going to make magic things happen.
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Honestly, as someone who paid nothing for their college education, I was strongly opposed to raising fees for following generations dramatically, and having student loans leave young people with a mountain of debt before they've done a day of work. But now it's basically accepted.
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I don't think the analogy with your education works, though, because while you may be personally opposed to increasing tuition fees, (leaving aside the subsidy of public universities through taxes) it's the current students who are paying for it, and they usually only need to pay for four years anyway, so they seem to be more pliant about it anyway. These veterans though were being served donuts through their service and beyond...until the price increased from zero.
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For all he knows the person he replied to didn't get much use from the local paper anyway and only gave them pageviews because it was free.
This is what it sounds like to me, but I know better than to think I can magically know the situation on so little detail.
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/myonedoughnut
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/jingo-sarc
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Re: Sorry, but people will pay for news
http://www.techdirt.com/articles/20120422/17372618598/sen-harry-reid-postal-service-must-be- saved-because-seniors-love-junk-mail.shtml
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Re: Sorry, but people will pay for news
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NetFlix
They didn't JUST raise the price, they changed the deal which IMO caused a category shift.
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Re: Sorry, but people will pay for news
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Second, you have a chance to have other people respect your opinion a little more. Sure, some people can have anonymous posts and they take advantage of it. But how many people take all anonymous posts seriously? While we have a number of people that have good points to make (anonymous or otherwise) we have a fair number of trolls that come in to spout off their nonsense of the day. But Mike doesn't charge for those details and that's the fairly awesome part. He allows you to make your own choice. Do you want to be a contributor? Do you want to just have a sign in to track your posts? Do you just want to rant? All is at your fingertips with very little in regards to an emotional cost.
The other good thing is that the news for technology is pretty damn good. So if I decide to use this for my own news show, I don't have to worry about Techdirt trying to say I stole their news. Think about this. Techdirt is the new press and he's made it damn easy for others to relate issues on obscure aspects of technology and constitutional issues.
So it's great that Techdirt does this. I'm more than happy to try to give what I can in time or money to a site that respects all of their contributors (yes, even the trolls that try to detract from the conversation) far more than trying to pigeonhole people that aren't paying them.
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Re: Sorry, but people will pay for news
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Re: Sorry, but people will pay for news
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Once you kill the market, you kill it. Congrats to everyone for their hard work.
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Old King, Two Sons
who should rule. Instead he gave one son the job of handing out
punishment to the people and the other to give rewards.
With the rule they had to switch roles every year.
At the end of the first year when the nice king started punishing people the townspeople went to the good king and said.
We love you nice king! Your brother was nice and now he acts
cruel. Can you get rid of him for us?
I always thought the point was.
People just won't accept nice to mean.
Apparently, it does not compute.
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Anyways, my pet peeve against the Red Cross is their history of trademark bullying against people using crosses to represent first aid kits or hospitals. I'm not aware of anything else that can be well rendered in a 8x8 sprite that conveys the meaning 'medical' as well as that.
Then again, some of the fault must lie with the trademark office for not revoking it due to being a genericised trademark (something which the trademark office is notorious for not doing).
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Two-Cent Doughnuts Breed Decades Of Bad Blood
He said that the change had been due to a Pentagon ruling, passed down because the International Red Cross was not an American organization.
I suspect the decision may have also been related to the question of provisioning combatants, so that Red Cross access to prison camps might not be compromised.
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The Red Cross hating started long before WWII
The Red Cross used to do some good things, but as the article mentioned, they changed models. They could have stood up for principles, but they didn't.
Every article worth reading on charitable giving that I've seen has recommended taking a look at the percentage of donations that actually make it to the intended recipients. The Red Cross has always been somewhere in the neighborhood of 50%. That's a lot of overhead.
If you really want your donations to be effective, then you have to look at the religious sponsored organizations. Last I checked, the Big Three are Catholic Relief Services http://crs.org/ (Catholic Charities in the USA), Lutheran World Relief http://lwr.org/ and Mennonite Relief http://www.mcc.org/. Again, last I checked, they all averaged about 97% of donations going directly to its intended purpose - overhead is very low. If those don't fit your world-view, then ask at your own church, or start your own that can hit a 2.5% overhead rate. Feel free. Then you can complain about what a terrible job these three are doing.
Now Red Cross fills a very important function - they are usually the first to arrive after a disaster, but after a week or two, the other three groups are in there providing longer term support. And Red Cross leaves. But being ready to be there first carries some overhead cost, and that does justify SOME of the extra overhead. I'm not ready to absolve them of greed quite yet, though. Let's give it another hundred years and see how they are doing, shall we?
Oh, and two cents wasn't a discounted price for a doughnut during WWII. During the Depression, farmhand wages were a dollar a week, if cash was involved at all. Let's see, today, that would be a $10 doughnut for a trucker making that mythical $50,000 a year that I see on certain semis. How much do you pay for doughnuts?
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wow, thanks for that pearl of wisdom.
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A lot of websites seem to think that forcing people to register to comment somehow improves the quality of the comments. Well, maybe those websites need to have a look at youtube.
Anyway, I'll focus mostly on the advantages of letting people comment anonymously and without having to register:
- It's way more private when you don't have to register.
One comment here and there won't say much about who you really are, but once somebody can click on your user name and see everything you have ever posted, it becomes a lot easier to find out your real identity (I should know, I do this often for fun and I rarely fail!)
Of course there's always the fact that the website where you comment can save your IP address, but there are alternatives to that: sharing your network with others, using a public network or a neighbor's wifi, using TOR, using a prox or VPN, etc.
I'm not going to post without concern for my privacy when I have no idea what my comments may be used for in the future nor how long they will be stored. Who knows, maybe in 50 years something legal that I post online today will make me go to jail =/
- Registering is a pain.
You often need to provide an e-mail address. You often need to click a confirmation link they send you by e-mail. You need to type a captcha (and if it's the Google captchas, I can only read 1 out of 10 of these and many people have the same complaint). You need to spend 5 minutes finding a user name that isn't completely stupid and isn't already taken by somebody else... It might be worth the hassle when it's a website you want to visit regularly, but it's a pain when you're just stumbling on an article randomly and just feel like posting something insightful this one time.
- It filters out specific types of users and makes discussions biased.
People who care about privacy won't register and thus won't comment. That's a problem when you have an article about privacy, since those who support it the most will be absent from the discussion. Registering also attracts the opposite kind of users: those people who WANT to register so that they can collect "likes" or followers and basically feel like they're getting attention. They're usually idiots who have a popularity complex and they rarely add anything to the discussion; in fact they often repeat what 10 people have already said before them.
Forcing registration can really bias your comment section and even hurt it's quality.
- Finally, registering doesn't work.
It doesn't keep conversations civil. It doesn't root out the idiots who post nothing constructive or insightful. it just doesn't add anything to the quality of the website, so why would I, as a user (and not an attention whore) even want to bother registering so that I can post there?
Maybe if the admins really god rid of all the morons that post on their website I'd be happy to register. But banning people for being stupid isn't popular with admins apparently.
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Music was free to listen since before the Internet existed. You just had to tune your radio. Entire generations grew up knowing music was free to listen and record, this just shifted to the nascent Internet as soon as it was fast enough.
The same with movies and over-the-air TV.
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And if they don't, they don't last.
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Re: paywalls
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Sheesh...where have you been?
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Re: Sorry, but people will pay for news
That explains why people hate paywalls, more than anything else.
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Re: Old King, Two Sons
Guess which one made people hate you the most.
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Re: The Red Cross hating started long before WWII
If you look at the "Quick View", you get:
CANADIAN LUTHERAN WORLD RELIEF
Total revenue: $6,733,891
Expenses: Management and administration: $312,230 (5%)
Expenses: Charitable program $6,051,976 (91%)
Looks good, right? Not so much where you look at the full return.
Right off the bat, the "management expense" ignores the $1,461,838 in salaries it paid out. If you look further at their 2011 return, you see the magic of accounting, where
-Advertising and promotion $ 184,856
-Travel and vehicle expenses $ 292,594
-Licenses, memberships, and dues $ 67,641
-Office supplies and expenses $ 163,810
-Professional and consulting fees $ 39,550
-Education and training for staff and volunteers $ 29,602
all count as "expenditures on charitable programs".
Give me a break. You want to do something good, volunteer in your community. But don't think that the majority of the $100 you send to a charity goes to those in need.
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This is more like the drug dealer tactic...pstt, here, give this a try...i'll even give it to you for free. Once you are hooked on the product they start charging you for it.
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Once you kill the MONARCHY, you kill it. Congrats to everyone for their hard work...
THE KING IS DEAD, LONG LIVE AMERICA... right?
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It's going to be pretty damn difficult to get over that...
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Funny how you shills work. We're in the middle of another recession with some European countries almost completely screwed over and your priority is to demand money for IP-related stuff. You have no sense of priority aside from what benefits copyright holders.
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If TD had required registration, even free registration, to comment, then I would not have commented in the first place, and I would not have developed a relationship with the site. That's what I mean when I say "distance".
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I suggest you give them doughnuts as an apology =D
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They don't think it, they know it and studies also show that those who pirate the most also, as it happens, buy the most. Apart from cd sales, the music industry is expanding, but only the real hardcore pirates and aged relatives buy cd's anymore.
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