Behavioral Economist Dan Ariely Explains The Problem With The NY Times Paywall

from the anchored dept

David alerts us to behavioral economist Dan Ariely's take on the NY Times' plan for a paywall, noting that people are unlikely to pay for what they've been able to get for free in the past:
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....

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.
Indeed. It's a point that we've tried to make in the past as well. It's nearly impossible to successfully charge for something that was once free, but it's absolutely possible to charge for something new, something scarce, that is separate from (or perhaps enhanced by) the free stuff. That's why we had hoped the NY Times would be smart enough to set up a business model around offering something else of value, rather than just a paywall, but it chose to go in the other direction.

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  1. icon
    Hulser (profile), 15 Feb 2010 @ 7:40am

    Re: What could be offered

    The NYTimes is in the business of delivering NEWS

    Right, but the problem facing the NY Times is that the psychological price that most people give to news is $0.00. In fact, this is nothing new. When you used to pay a quarter for a newspaper, that quarter was not paying for the newspaper. It was all of the ads in the newspaper that were subsidizing the newspaper. So, actually it was quite easy for people to go from "news is mostly free" to "news is free".

    So, should the NY Times sell popsicles? The answer is...well, they need to sell something that is scarce. It's not a matter of the subjective opinion of Mike or any particular person on what the NYT should do. It's an objective observation that they need to do something given the current environment.

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