History Lesson: Newspapers Haven't Charged For News In 180 Years
from the get-it-straight dept
It’s been said here before, but Jay Rosen points us to a post at NewsFuturist that points out that newspapers haven’t charged for content in 180 years. Before that, subscribers paid the full freight — but since then, subscriptions have always been less than the cost of producing the physical paper and the cost of delivery. The actual reporting has been paid for by advertising, not subscriptions, for nearly two centuries. And there’s a pretty basic economic reason for this, and it’s the same one we’ve been making for years, but is nicely summed up here:
The price of a product in a competitive market falls to the marginal cost of creating and delivering one more unit.
For printed newspapers, the marginal cost was a little more paper and ink, maybe an extra block on the delivery route. Subscription fees never accounted for the fixed costs of producing the content: the building, staff, printing press, etc. That share of costs has long been paid by advertising and diluted by economies of scale.
The same economic forces apply online. And because the marginal cost of bits is nearly zero, the appropriate price becomes too small to bother tracking. Free is the result.
In fact, the principle of marginal-cost pricing is even stronger in the Internet economy because there are very low barriers to entry and nowhere near the startup costs of print. And the marginal costs such as bandwidth and storage decline every month.
Those who ignore the rule of marginal-cost pricing and try to charge users for content in a competitive market will be undercut by more efficient competitors who stick with free. They’ll also face an endless fight against piracy, because economics says the product should be free and technology makes it easy to duplicate and spread.
The thing that seems the most difficult for some to get is that last paragraph. When we talk about the reasons why it doesn’t make sense to charge for the content itself, all we’re pointing out is that if you do it, you’ll fail. All you’ve done is open up an opportunity for someone else. We’re not saying “information should be free.” Should has nothing to do with it. It’s will be free, because the economics drive it there, and as much as you don’t like it, or don’t like the implications of it, it doesn’t change that it’s what is happening. So, you either learn how to embrace it (as many are doing, quite successfully) or you die.