Posted by: structureofnews | November 18, 2010

The Sucker Price?

With an update on 11/19.

Timothy Noah at Slate offers a 12-step program to get 50% off your New York Times subscription price – essentially, threaten to discontinue your subscription,  and they’ll cave quickly.   I’m sure it’ll work – at least for a while.

The reason you can do this is that news organizations – like pretty much every other business out there – practice differential pricing.  We figure out how much you’re willing to pay (or at least we try to figure it out) and charge you as close to that price as possible.  Airlines have made a real science out of this, so two people sitting right next to each other may be paying ticket prices that are  hundreds – or thousands – of dollars apart.  It’s what the entire model of Priceline is built around, with the difference being that passengers, not the airlines, are in the driver’s seat (so to speak).

To some people this sounds vaguely evil – or at least, it makes one person sound like a sucker.  If we’re both getting the same newspaper – or the same airline seat and service – why should we pay different prices?  The answer is that we may well value that product or service very differently, even if we both get the same thing.  News, perhaps, is really important to me.  So I’m willing to pay a premium to make sure I get it.  Maybe you don’t care so much – you’re willing to hunt and peck through the web to find what you need, but you don’t mind paying a small sum for the ease of having it delivered to you.   In effect, I value my time more than you do.

Or perhaps the information really is more valuable to me – I’m a businessman, and I can trade on the information I get in the paper, so it matters to me that I’m assured of a steady delivery.  And you find the stuff in the paper interesting, but not life-changing.  So the telesales person has to cut the price to a level that you’ll accept.

This is basic human behavior.  And also why the endless arguments about free vs. paid aren’t getting us anywhere.  There isn’t a single rule about how people should or shouldn’t behave when it comes to paying; some people will pay because it makes their life easier to have information organized for them.  Others would rather surf and find what they want.  Why do people pay iTunes 99 cents for something they could get for free if they put some effort into it?  Why are they happy to pay more for fair trade coffee that tastes the same as the other stuff?

It’s true that people don’t like it when they find out that they’re paying more than the person next to them for the same thing; nor do they like to feel like they always have to be on guard against price-gouging.  So the actual offer has to be carefully couched.

And it’s important, also, to figure out what people value.  Much of the debate around free vs. paid has centered around individual stories – packets of information – that are, by and large, commodities: This paper’s version of the story isn’t better than that paper’s version.  So if one charges, the other one will get the traffic.  But perhaps readers don’t value the individual stories as much as they do the curation – editing – of the day’s news.  Maybe that’s the service people pay for; not the stories.

This is very well put by Anthony Barnett of OpenDemocracy in an unrelated post that I’ll comment more broadly on later (bolding mine):

When I bought the Guardian app it was the first time I paid for its online content. Of course, I could have read it for free on the web from my phone. But for ease and speed, its app is better. The new ‘form’ has returned me to paying for content online in a way that feels open and not as a barrier. I think this is because I know it is freely available everywhere in the world. I am simply paying for the much more convenient form, assured that it is not closed to any member of the global public who can go on line.

So you can’t assume people won’t pay – any more than you can assume they will.  What you can do is conduct empirical tests and find out.  In the NYT’s case, they clearly realize that some people will pay more than others; the paper presumably has a bottom line that it doesn’t want to sell below, but otherwise it’s prepared to be flexible.

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