NY Times Execs Think People Will Pay $20 To $30 Per Month For The iPad Edition Of The NY Times

from the let-me-introduce-you-to-newsday dept

Wow. Doesn't the NY Times have some of the world's most famous and accomplished economists writing for them at times? You would think that, at some point, as they tried to figure out business model ideas, they would think to actually run some of these ideas by an economist. We've already explained why the NYT's decision to put up a paywall makes little sense from an economic standpoint, but now it's getting even worse. You see, there are still some folks who bizarrely believe that tablet computers -- or, really, just Apple's iPad -- represent the savior for journalism because suddenly people will pay for apps. Already, this suggests a rather tragic misunderstanding of the economics of apps, but apparently it's even worse than that.

Rumors are flying that there's a battle within the NY Times on how to price their app for the iPad. Those on the newspaper side of the house apparently believe that it should be priced at $20 to $30/month to avoid cannibalizing the print product. By the way, if you want a simple tip for how to fail at business, it's to make a decision to avoid cannibalizing your own business. When you do, you've just made it clear that a competitor is going to cannibalize your business for you. The folks on the interactive side of the house think that $10/month makes a lot more sense and believe that pricing it at the $20 to $30 range is suicidal. Of course, if you thought that the management at the NYT's was really crafty, you might believe that this whole story was floated to reset the anchor price, though I have trouble believing that's true.

The problem, of course, is that the NY Times is pricing based not just on trying not to cannibalize the physical product, but without regards to basic economics, and the fact that everyone knows that without a physical product, the costs of the paper actually go down. Yes, of course the costs of all the reporting and editing remain -- no one is denying that. But you no longer have the printing and delivery costs, which are substantial. And reasonable people would expect that, at the very least, the cost of the app will reflect that. Either that, or (more likely), they'll realize that other, more well managed news providers will step in and offer up news for free in order to get the market share that the NY Times once had.

Oh, and one final word for the NY Times. I recognize that you're a better paper, with a much better reputation, than your neighboring competitor, Newsday, but remember what happened when Newsday tried to charge $20+ per month for access to its digital version? It got a grand total of 35 people to sign up. I'm sure more would sign up for a NY Times' app, but how many more?

Filed Under: ipad, paid content, paywalls, pricing, subscirptions
Companies: ny times

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  1. identicon
    Anonymous Coward, 18 Feb 2010 @ 3:53am

    What is the real cost in an e-Distribution model?

    I guess I'm having trouble trying to reconcile the fact that once the news is in e-enabled format and the capital expense for the Content Delivery Network (such as Akamai) is paid, distribution costs get closer to zero as market adoption rises.

    Put another way, once the infrastructure is in place, the cost to add a customer is pennies because the customer is levying "last mile" costs that were typically paid for by the publisher. Because of this, there are fewer costs such as paperboys, ink, paper, and even newspaper bags. Today, all this is amortized into the print operation. Where does this money go under the new model? Is it reinvested into the product?

    Is the $30 a month subscription fee based on a business model that anticipates 35 paying customers? Then it's possible that $30 is too low.

    Personally, I'll wait to hear for more compelling offers from other news outlets. If this is the best NYTimes can come up with, it's abysmal.

    Another looming threat to NYTimes:
    CableTV and even local news outlets are already better suited for iPad distribution because they already have, and can offer more compelling multimedia, video, and pizza coupons that provide more value above what the current market rate of $1.99 a week the WSJ charges.

    I hope that folks in traditional paper such as the WSJ expand their online offering. I watched a video article from Walt Mossberg this weekend that would be compelling enough to open my wallet a little more and be a better fit for this model. Yes, if more columnists like Walt Mossberg talk about their area of expertise in a candid fashion may be worth more than $1.99 a week.

    However, NYTimes hasn't even begun down that path with their regular online offerings.

    Again, the main problem I have is in trying to justify the perceived "value" that commentators like Ewan claim to exist, yet fail to apply the very idea that distribution costs fall dramatically. There's little evidence that the actual product wouldn't expand beyond the current status quo.

    Keep up the good work, WSJ!

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