My Take on the NY Times Pay Wall
A few weeks ago, the New York Times announced that they would start charging readers for online content in early 2011, and since then the million-dollar question has been: will it work? Will readers fork over the cash to keep reading the Times, or will they go elsewhere?
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.
So, should the New York Times give up? The trick with anchoring is that although we are not willing to pay more for the same thing, we are willing to pay more for different things. What this means is that one approach that the New York Times could take is to present us with a new experience so that we don’t associate it with the previous anchor, and are open to new pricing.
Let me explain. 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.
It’s a strategy that Starbucks founder Howard Shultz put to good effect. Before he came along, consumers were used to paying much less for coffee from spots like Dunkin’ Donuts. So to incite us to shell out more for his coffee, he worked hard to separate Starbucks from other coffee shops. He designed it to feel like a continental coffeehouse, putting in showcases with croissants, displaying french presses, and coming up with exotic drink and size names. He redefined the coffee experience, and by doing so, convinced us to pay more.
The Times could try to take on a similar approach …
Irrationally Yours,
Dan
The Upside of Irrationality, explores some positive and some negative ways that irrationality plays out in our lives.
As a subscriber to the NY Times paper edition, I’m covered.
But I know one new thing that they should offer after all these years of being snooty: comic strips! Have off-beat ones. Have comics from other countries, in languages besides English!
I know this makes too much sense for them to do, but I can try, can’t I?
The real question is: What can they offer that really is new and not only new for them? The German publisher Axel Springer is experimenting with this approach, they made a “multimedia magazine” instead of normal articles. Time will tell if users are really willing to pay for it…
It’s amazing how well big business often screws this one up. I have no doubt the Times will take a beating for this, and continue being a success despite it because of the good journalism they do — however, you’re exactly right, Dan, they need to offer something new and then eventually discontinue the “free service” for an approach like this to work.
Personally, I’d like to see the paid-subscription route take off in online journalism, and hopefully open up opportunities for other smaller (and maybe more niche) topics that are often covered by bloggers.
I feel like some of the primary ways that bloggers go about getting subsistence — affiliate programs etc. — are inherently sleezy, but perhaps the nature of the game since a person has to pay bills.
New York Times online has never been entirely free — you have to register to read it, which is very annoying if it’s not your usual newspaper.
another strategy they may employ is to offer less popular portions,blogs etc for free and have a subscription price for the full access. This may entertain the current readers, but later employ the “you always want what you can’t have” phiolsophy.
This happens in virtual worlds too. “Country Story,” a online farm game, has a feature where players can buy “trees” which produce digital fruit (which can be then be sold). A few weeks ago they introduced some new features that made the trees much more difficult to buy- instead of just paying for them, players had to collect some hard-to-find objects.
The players flipped. The message boards were filled with complaints and “Change it back or I’ll quit” treats. The response was so harsh that the game company dropped the new feature almost overnight.
As angry as everybody was, I bet that if the trees had been hard to buy from the beginning, no one would have complained.
I cannot help myself. Starbucks has horrible coffee. It’s in Australia, but failing because it looks like McDonalds to Australians but costs more and has horrible coffee. I feel that the world is a worse place knowing people are fooled by the faux-european feel of Starbucks.
There is a fun web game here where you mess around with the fugures involved in a paywall.
You decide how much you will charge. How many users you will lose etc and you end up workign out how much the paywall earns you.
http://www.niemanlab.org/2010/01/play-paywall-the-new-web-game-sweeping-the-newspaper-industry/
Dan,
This is my first comment and I love “predictably irrational” totally cool. I thought about and started circling myself.
I’m on board with your idea. Give me added value. Perhaps paid subscribers could have more access to dialog with reporters or staff via chat or video conference.
One reason people follow us is we give them value. Check out: “Why others follow.” People follow first because of value.
http://leadershipfreak.wordpress.com/2010/01/28/why-others-follow/
Thanks,
Leadership Freak,
Dan Rockwell
If using an example in the book Predictably Irrational for an 8th grade science fair project….any idea on which idea in the book to use to test people to see if throwing in a decoy alters your decision making??
Dan suggests that the NYT should provide a new reading experience to make the “anchored” fee readers forget and willing to pay more. Isn’t the cooperation with Apple and the iPAD trying to achieve exactly this? I remember that a few weeks back, when Mr Jobs announced the iPAD, he used the NYT as an example of a new newspaper reading experience (looks like a paper but plays video and so on).
It would be interesting if the NYT worked some variants into the mix to suit certain personalities.
For instance, a fee-based way to construct one’s own NYT Home Page, for those who already know what news areas they need. For me, it would science, health, national news and NY Region.
For another, it might be fashion and theater.
The real challenge would be to figure a way to follow a community of interest that isn’t already classified by the NYT Home Page.
So, you can read everything free or you can read the stuff you know you want to read (maximizing utility value) or you can read the stuff that you don’t know, but have some reason to believe you would want to know…(maximizing utility value across a broad stream of information).
Or offer semi-anonymous viewing profiles. Say, of the 100 other hedge fund traders who are super-readers, 75 have read this article about Fed interest rates today…or perhaps not necessarily anonymous – here’s 5 articles Tom Friedman read today…
Announce that if you ante, say, $10 a year to get super-reader status, pick your options and pay, say, 10 cents per article read, your annual subscription price is locked in for life (yes, you can keep the razor – we make money selling razor blades).
Make it easy to use and share.
Get 1,000,000 reads a day and you might just have a revenue source. iTunes…er, ITimes.
Just in case you do, NYT, patent it and license it freely…
And I thought I was the snbesile one. Thanks for setting me straight.
I appreciate the simple approach to understanding how people make choices. It’s an eye opener because I normally don’t think that way. On the other hand, something feels a bit off. If it’s a good idea to find out ways to get money from people, it follows that its a good idea to find out how to get anything out of someone through manipulation and trickery. I can’t see this sort of thing holding up when it comes to a loving, trusting relationship (because once someone finds out they’ve been manipulated, all those lovey feelings go down the drain). And since the market is essentially about how we relate to one another, I don’t see how its a good thing to know better ways to manipulate people’s actions in order to get what we want out of them.
Some readers will not pay, and that means the advertising will reach fewer eyes and so they won’t pay.
It won’t work.
Eventually the newspapers will be consolidated and almost everyone except the journalists, graphic artists and a few technical staff will be laid off.
I do pay for one online journal. If the main writer left, I probably would keep my subscription for a couple more years but wouldn’t read it as much. They don’t make a lot of money.
Dan:
Now that the Times is anchored on paying zero for your advice, how are you planning to monitize future consulting?
Krugman is an economist, perhaps the two of you could use his column to devise some experiments that compare response to different models.
I think you’re probably keenly aware that once conditioned in a certain way, people can also be conditioned over time in the opposite direction. Nothing that’s been done in the last 10 years in the “freemium” space can’t be un-done in an equally short time frame.
However (and more importantly) if an advertising, value-proxied business model switches over to a pay model, they certainly don’t need everyone to pay. Usually only a small fraction (somewhere around 1-2%) need to pay a small fee to keep the entire system as profitable as it was before.
Imagine if Facebook were to drop advertising today. If their annual revenues were 500 million and they have 400 million users, they only need about 2% of their user base to fork out $5/mo to pay for the service.
If you can’t get 2% of your users to pay for a service then perhaps it wasn’t all that valuable in the first place.
An interesting potential upside is that your expenses decline dramatically since you no longer have to support the 98% that aren’t paying but still have the same revenues from the 2% that will pay.
The other issue is that people are paying for these “free” services any time they buy a product anyway… there is no free lunch.
I would also argue that most of the “free” models out there have been driven by social proofs and herd behavior rather than by any rational business plans. Twitter is sitting there with a billion dollar valuation and little revenues and they’ve spawned an entire economic ecosystem…
3/26/10 finished book,had a good time,do you use guilt by association in reverse to make your book believable? I have found out that people have many different reasons for making the same decision or a different one.I dont know if you have read these books! THE TRUE BELIEVER,ATLAS SHRUGGED,OUT GROWING THE PAIN,ART OF WAR, THE PRINCE, THE ART OF PROFILING, THE ROAD LESS TRAVELED, and a varity of religious,social,and different types of comedy.
Based on a recent announcement by Murdoch’s The Daily, I fail to understand why newspapers do not price their online services by seeking something from users. Obviously, the advertising model is not going to work in the traditional sense. However, new models of promotion, such as those like Groupon are using, could be applied by newspapers who will have many eyeballs on them. Moreover, I believe a strategy that would work for newspapers is to set the pricing in relation to the level of information that a user is willing to provide, perhaps three tiers. The more detail a user provides about him or herself, the lower the subscription price but the better positioned the newspaper is to offer such a user promotions and products and services that may be most interesting to the user (and thus creating a new form of revenue – the distribution channel for products and services). I am amazed that the newspapers have not gotten creative enough to implement this easy solution.