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?