A lot of people have said that they wished that the New York Times’ new pricing system was more about offering more value for people who do pay rather than putting barriers in the way of people who don’t pay. Those remarks immediately made me think of Amazon Prime.
Amazon Prime subscribers pay $80 a year in exchange for “free” two day shipping on every Prime-eligible item they purchase from Amazon.com. It is, essentially, a loyalty program that you have to pay to join. I’m certain it exerts a powerful influence on the buying habits of subscribers. If a subscriber buys something from a site other than Amazon.com, they’re likely to pay more for shipping, receive the item later, or both. Plus, they’ve already got the sunk cost of the Prime membership on their mind. When they go to other sites, they probably think, “Shouldn’t I look for this on Amazon.com first to see if I can use my Prime membership?”
I always wonder how many Amazon Prime subscribers buy enough stuff over the course of the year to make the $80 they spend on their Prime membership a good deal. My guess is what they’re really buying is the ability to make impulse purchases without worrying about whether they should have waited to group items for free shipping, which in turn leads them to spend even more money with Amazon.com. Amazon.com further benefits from Prime because it encourages third party sellers who use the site to turn their fulfillment operation over to them as well so that their merchandise can be eligible for Prime shipping.
One of the core values at O’Reilly is to create more value than you capture. The fact that Prime benefits Amazon.com in many ways has nothing to do with why people pay for it — they pay for it because it delivers value to them. What can the New York Times offer that creates more value than it captures?
Clearly the New York Times would argue that their articles and blog posts deliver value well beyond their subscription fee. Unfortunately, they have lowered the perceived value of their product by providing free access to their articles for years, and more importantly, close substitutes for what the New York Times offers remain freely available.
Anyway, my plan was to make this a really awesome post with a suggestion for the New York Times that would save the paper and revolutionize online journalism. Unfortunately, great ideas elude me. I even sat and thought about what service I would gladly pay for from the New York Times, and I couldn’t come up with anything. Maybe I’m just happy I don’t work for a news site.
March 21, 2011 at 9:13 am
The Amazon Prime of journalism would be one or more of three things: 1. Advance access to content — get the scoop two hours before the rest of the world; 2. Additional content (e.g. longer versions or articles, or reporters explaining news judgment issues); 3. A private discussion area in which reporters participated.
March 21, 2011 at 10:37 am
WRT Amazon Prime, I use it for work (mostly). I suspect a lot of desktop support/IT hardware people do likewise.
March 21, 2011 at 12:21 pm
There’s a startup called Kachingle (http://kachingle.com) which is pursuing this idea–one subscription to support as many websites as you choose, with payouts to sites based on your actual monthly browsing activity. Extremely simple to use for site owners and readers.
Note that I may be biased as I was previously the technical marketing lead for Kachingle.
March 21, 2011 at 2:18 pm
NYT reminds me of Netflix in some ways – remember when netflix gave free access to streaming to existing rental customers? First it was one hour for each dollar you spent on your plan, then it was unlimited hours for unlimited rental plans only, and just recently they finally unleashed a ‘streaming only’ plan that is only a couple of bucks cheaper than the one-at-a-time rental plan. The NYT now has a plan that is free for subscribers, and it is now cheaper to subscribe to the paper (even just Sunday) than to the online offerings for access to the same stuff. I wonder if they are experimenting the same way Netflix did with their online access, waiting to see if it takes off among their subscribers (who after all are their most valuable customers) before deciding how to really price it.
I would argue that dropping off a hunk of paper at my house just so I can get online is unnecessary, but as lazlo hollyfeld once said “well, they make the rules.” Note that advertising dollars are largely contingent on subscription rates, so by making the paper a cheaper way to get online they have a good shot at making some money back on ad rates if the technorati decide to subscribe to the paper instead.
March 21, 2011 at 7:00 pm
It is not necessarily clear to me that anything like the kind of income streams formerly available to newspapers will remain available to them in the future. I think that’s a problem to be solved, but it might not get solved by having existing newspaper organizations find some way to get more money from readers.
I still find it hard to believe that the NYT can make money selling its $1 physical newspaper which it has to print and distribute, but can’t make money giving away its online newspaper. Both are full of ads and I would be very surprised if the profit margin for one copy of the physical paper is more than the amount the ads bring in.
Anyway, sometimes profitability for a given sector has rested on market power and de facto monopolies and high entrance costs, and when they go away, sometimes so do the high profits. Provided that access to the underlying product is as good or better, that is creative destruction at work. I’m sure farmers in 1850 would think it a tragedy that food is so cheap today.
March 21, 2011 at 8:48 pm
I live in the middle of nowhere and here it is Wal-mart or Amazon prime. I think they lose a lot of money shipping in 2 days to somewhere that the US post office considers “overnight” to be 2 days.
March 21, 2011 at 10:49 pm
don’t forget that Amazon prime is a family membership …. so it’s not just one person that gets it … but up to 5 I think.
March 22, 2011 at 12:51 pm
I think the rates are very different for online and print. In 2007 (I know, ages ago) the NYT made 10 times the revenue from print advertising that they did from online advertising, even with only 10% of their audience taking the paper. I think that’s why this is probably a reasonable price structure to them (even if it isn’t to us) – if you get the Sunday paper in order to get the online access for free, they make a lot more money off of you.
March 22, 2011 at 4:48 pm
The network subscription model (one sub, many websites, rev sharing) has been common in the online porn industry for 15+ years.
March 23, 2011 at 1:02 am
The ad rates for print are much, much higher than those for online. Subscriptions do not pay for distribution costs; it is an offset at best. The only reason newspapers don’t give the dead-tree bundle away for free is that audited distribution numbers are based on actual sales (the advertisers care about–and pay based upon–those distribution numbers).
Getting scoops are useless; remember that we’re in the age of twitter, so a paper’s “first post” will never beat that 140-char tweet out of the gate, ever. They need to give that one up.
There are two things they can do:
1) Be better than everyone else (the ‘suck less’ scenario), or 2) Cover stuff no one else will, or can
Number 2 is easy: go hyper-local, such as covering high school sports, city council meetings, community events, etc. NYT can’t really do that, so how about covering the stuff that is ignored? Turn this book (http://www.projectcensored.org/store) into a one-sheet flier due to lack of content.
Number 1 can be easier if they go for more in-depth coverage. How to suck less? All other news orgs simply report the facts (or read the press-release).
Tell me WHY I should care about a story. Tell me HOW it affects me. Let me know WHAT questions are left to be answered. Put it in historical context. What non-obvious subjects does this story relate to? Get off your dead a–, do some research and tell me if the subject is LYING, omitting something or simply misinformed.
Good luck, though. We’re fighting 200 years of tradition and FUD.
March 29, 2011 at 12:08 pm
Sorry for the editing in that! I didn’t actually want to be a condescending tool and call you by your first name repeatedly.