The Internet is a dollar store
It appears some people haven't figured this out yet, but the Internet is a dollar store, the kind you see tucked into the corners of shopping malls about to be demolished. In dollar stores, everything is a buck. So why not buy it? It's just a buck!
The Internet is not a Tiffany, the kind of store you see in the best locations in shopping malls that have not yet become dated monstrosities about to be demolished. In a Tiffany store you pay too much for a hunk of metal because the brand name behind the metal adds cache to the product.
I'm writing this because today we hear from Bloomberg News that The New York Times is considering charging $5 a month for access to stories on its Web site. Is the fee reasonable? For the quality of the Times' writing and reporting, you bet it is.
But it's still too much, and it's bad business. The success of the iTunes store, and the iPhone app store, shows how easy it is to get people to pay a small amount for a downloadable product. It's a lesson worth learning. And with the cost of distributing each incremental copy of a digital good being close to zero, there is no reason at all to overcharge for products.
There are contrary views. One analysis shows that $0.99 iPhone apps are no more popular than more expensive apps. But especially for companies trying to convert customers who have to date paid nothing for the service (the New York Times content is free), the logic of charging as little as possible, as opposed to as much as possible, makes more sense.
The old joke's punch line, "Yeah, but we make it up in volume," is no laughing matter on the Net. This is a model that is known to work. You want your price point to be so low that people don't think about it. $5 a month is $60 a year, real money for most people. $1? Far fewer people experience the payment of a dollar as an actual transaction. People will pay trinket prices for online goods without thinking about it. And especially when you're selling content that you want as many people as possible to see, wouldn't you rather collect a little money from a lot of people, than a fair price from just a few?
Rafe Needleman writes about start-ups, new technologies, and Web 2.0 products, as editor of CNET's Webware. E-mail Rafe. 
Even if every 3 out of 4 users decided 5 bucks a month was too much, thats still 2.5 million users paying 5 a month, or 12.5 million, which is <still> more than what NYT would make by charging a dollar a month.
I can get noncontroversial events online, and see no purpose for their hit pieces, opinion-as-fact, and mouthpiecing, so what purpose do they serve?
To be fair, the local rags do serve a hell of a purpose that blogs and Internet sites cannot
- they go around sniffing for news full-time, and have the resources to cover a large regional area.
- they also have the means to dig a bit deeper into a story, to tease it out, and discover more than what's on the surface
- they finally have the luxury of time. TV and Online, attention spans are short, and time is of the essence... this often means that stories found there are initially wrong, incomplete, and disjointed. The daily paper has the luxury of waiting a bit to see what develops, which in turn gives them the ability to present news articles that are a lot more complete, coherent, and factually correct than blogs and TV can.
You hear that, Google?
"wouldn't you rather collect a little money from a lot of people, than a fair price from just a few? "
Not necessarily. There are many hidden costs, including the costs of getting the money (credit card take is very high for small amounts), bandwidth charges, capital for servers, and *support costs*. How many people lose their passwords, or can't log in, or need help for some reason? Even with electronic support instead of phone support, for $1, the instant someone needs help, you've taken a bath. Apple needs those $25 gift cards to make their approach work.
At best, the volume approach works only when there is a mass-market audience. If everyone wants it, great. But if you're trying to market a monthly newsletter for Lithuanian immigrants to NYC, the bargain-basement approach won't do it. Free or near-free is no substitute for that fair price.
You miss out on something: Premium content.
If the item is considered to be better than the norm, and considered to be worth the extra, people will pay it. Otherwise, The Wall Street Journal, BMW, and Apple would have gone out of business a very long time ago.
Another example is the company I work for. Warranties for our products are routinely set at 25-30 years (yes, YEARS), and we sell them for more than our competitors per-unit. Why? Because we produce the greenest and most efficient products in the industry, where these two factors are absolute king. In spite of hard times all around, we're still selling like crazy, even moreso after a cheaper competitor recently had to recall 450,000+ of its units. Our sales department has a backlog waiting list that sits at just under a year, and that's in spite of recent production expansions.
So it's not all about the benjamins... instead it goes back to the basic economic equation of value vs. price.
The on-line text only business model is ALOT cheaper than print, yet they still can't support their overhead? They need to be thinking more about a better ad model then, not shutting the door on traffic.
I would suggest to ALL old press franchises to set up 24 hour 'cable style' video channels. That way they can run higher rate 'TV' ads and as they are on-line can expand to as many channels as they please... without paying the kind of TV license fees needed to broadcats live to air.
Anything short of 'adapting' to new media is just being LAZY!
After all, I could go to the Washington Post or the International Herald Tribune and get similar content for free, no? Plus, everything from the wire services (AP, Reuters, etc.) is free, right? Average Joe Consumer isn't going to see much difference between the AP and the NYT. They will look at two articles about the same topic as being nearly identical.
Let's face it. Journalism has been commodified to the point where it's a freebie. I like our local restaurant reviewer (Michael Bauer of the SF Chronicle), but SF restaurant reviews are indeed a commodity: they're really only valid for six months (frequent senior management changes at local restaurants basically expire reviews in months).
I know some local journalists would detest this opinion, but I don't need Pulitzer-quality writing for restaurant reviews. Restaurant reviews are a mass-market commodity. I'm not paying for commodity journalism.
The "we will make it up on volume" stance isn't convincing for online journalism. It's reasonable for books, CDs, DVDs, though.
- Is Reuters going to cover news on zoning changes to your neighborhood that would allow a new apartment complex to be built down the street from you?
- Does the AP have a section on proposed sales tax increases being debated at the local city council?
- Will the IHT report on recent charges of corruption at your local police chief's office?
...didn't think so. ;)
Does the NYT cover news on zoning changes to my neighborhood that would allow a new apartment complex to be built down the street from me? No, no it doesn't.
Does the NYT have a section on proposed sales tax increases being debated at my local city council? No. I doubt it does for a couple hundred million Americans.
Will the IHT report on recent charges of corruption at my local police chief's office? Well, they might, if the corruption is a grand enough scale. Will the NYT report on the same topic if it isn't of similar scale? Probably not.
All this stuff that doesn't show up in the NYT is online for free from my local paper.
I have several free local news sources that cover the local stuff. Things like zoning changes, proposed sales tax increases, local government corruption charges, high school sports scores, police blotter, etc.
I never said that AP/Reuters/whatever will be covering my local news. They will basically duplicate what the NYT pumps out.
Something like text messaging plans could also work. Imagine, charging 10 cents an article. People wouldn't bat an eye at paying that, even though it ads up. So you get a subscription- 500 articles for $5/mo. Or Unlimited articles for $10/mo. Theres your money, newspapers.
Apple is pretty much unique in high-tech industry because they control their ecosystem end-to-end (hardware, software, services). They use software, services, and content to drive sales of their high-margin hardware. Not even Microsoft can create that ecosystem. Microsoft and other businesses need to find a different business model to stay afloat, but they cannot think that they are Apple.
Microsoft would get sued out of existence if they tried a business model like Apple. Pray that Apple doesn't grow too big or else they are going to fall under the same heavy antitrust regulations as MS.
Going from $0 to $5 is way too big a jump for most people and is likely to push people away.
And those people WILL find another home very easily since it is online. Another newspaper is just a few keystrokes away.
Charging $1 (or $0.99) is a much better idea because it lowers the threshold significantly.
Perceived price always wins over actual price.
While $1 is only 4 less, $1 is much more disposable than $5 in most peoples minds. (and 0.99 even more so, which is why it exists as a popular pricing method)
Considering that this is PER MONTH, it will push a lot of people away, it is too high for internet services.
Having it at $1 would pull more people in.
You could also do specials, such as $5 for 6 months (1 month free), or $10 for a year. (2 free)
These things are proven to pull people in.
I'd certainly pay $5 for 6 months so i wouldn't have to be bothered by it every month.
And with the free month thrown in, it would make me respect them even more by giving me a discounted price for being a subscriber.
But going entirely paid-for is a bad idea.
You could have a basic summary of an article (the intro, 10-20% of the article, first few paragraphs), then have a link to subscribe to read more detailed articles.
At least in this way, you will still have people browsing the site instead of mentally blacklisting it.
Exclusively paid-for services don't work well on the internet, especially when the price is fairly high.
The only ones that seem to work well are MMOs. (but the market for MMOs is entirely different to written print, the content is interactive in MMOs whereas the only interactivity in news lies in comments.)
Not too long ago, the NY Times Online used to allow access to their most popular columns only to subscribers. They changed that policy because not enough people wanted to pay for it -- regardless of the subject, integrity, or popularity of the columnist.
They can go ahead and charge that $1 a month if they like. I suspect many will sign up. But, not as many as they would hope. Maybe enough revenue will be generated to justify the policy. But, they run the risk of becoming a niche product from the once ubiquitous and world renown news organization of generations past.
There have been times in the past where I've tried to look something up, and encountered a page asking me to register (not even at cost to me) in order to view the article. I hit 'back' and went to look for another source.
Would I pay for news? Sure, if I absolutely needed to know something, and couldn't get it anywhere else for free. But in this day and age, it rarely happens.
I'm not even willing to create a free account online to read an article or journal entry...not to mention give someone my credit card number, even if it's just a penny per month!
It's just not worth it.
--1$, 5$, 10$ per month (arrived at based on the number of newsworthy news that one would read per month, based on his/her area(s) of interest and based on the stats of popular, known and unnoticed news that NYT generates every month
-- Based on the readership of such news across various news sources online (which can be gathered as its all plain data and comscore/AC Neilsen kinda firms can track to that level) there could be a labelling of news every month (post facto) on what is popular news and what is not and deduct from the prepaid balance based on this popularity.
Sure, this is a complex system but also one that is fair and truely representative of the value of the content decided in a democratized fashion.
- Ashwin
J. Burroughs. Averican naturalist
When you buy an app in the APP STORE on your iPhone, you don't spend several minutes entering your name, address, and credit card number. Instead, all you enter is your iTunes password and you're done! The phone maintains your email address for the other half of your login, and the App Store itself maintains the rest of your information for making a purchase.
No matter what the price is, the bottom line is that Apple has made it as EASY to buy something as reaching into your pocket for some change.
Websites like the NYT who are looking to sell premium content need to do two things. First, they need to figure out how to make it as easy as Apple does. Second, they need to stop trying so hard to force people into buying long-term memberships that they simply don't want. Sell your service a month at a time and sell it cheap.
How many websites have you seen where they wanted $12.99 for a month, but just $49.99 for an entire year? That doesn't make me think that the yearly cost is a bargain... it just pisses me off and makes me think that you don't know how many customers you're steering away with such stupid pricing. I might have joined for a month or two at $3.99, but there's no way I'm gonna pay $50.00 for a year.
good baby ,Refueling
- by yekong September 22, 2009 6:26 PM PDT
- A man can fail many times, but he isn't a failure until he begins to blame somebody else.
- Like this Reply to this comment
-
(33 Comments)J. Burroughs. Averican naturalist tiffany jewelryTiffany 1837