Today is the breathlessly anticipated day Apple will unveil its tablet, and part of the buzz focuses on how much newspapers might charge for downloads to the device. Last week, the New York Times announced it will charge readers for unlimited access to its web site.
These two things are probably not a coincidence. Last week I argued The Times is trying to limit the loss of print readers and make itself more competitive in online ad markets.
But subscription revenue will still be welcome. The Times must figure out a reasonable price for access to its web site. The newspaper must also set prices for delivering its news via electronic readers such as the Kindle and the new tablet.
The key is to focus on channels for delivering the news and advertising. Journalists are fond of saying content is king, but that is not correct. Readers also value convenient or speedy access to the news, and both characteristics can easily be more important than content.
The web channel
There is justifiable skepticism about how many readers will pay for access on the web, but not because readers have somehow been trained to expect free news.
Many readers already pay for access to news, and other content, on the web. They just don’t pay The Times and other news producers.
Readers instead pay an Internet Service Provider, or cellular provider, for access to the web and the news sites there. These readers will sensibly view any charge the Times imposes as a disproportionate increase in the price of access.
Say you pay $30 a month for access to the entire web. Even a $5 monthly fee for the Times seems like a very large price increase.
The web also offers numerous alternative sources for many of the stories covered by the Times. A large number of substitutes always means there will be competition to provide those substitutes at the lowest possible price.
That is why The Times has said it will not cut off free access its web site, but instead will continue allowing everyone to read a limited number of articles. That is also why the Times has been careful to reassure print subscribers that they will not pay the new fee for unlimited access.
The e-reader channel
One way The Times and other newspapers might solve the problem of competition is by finding a channel with less competition. This means there has to be a way to limit the number of news sources found in the delivery channel.
Apple apparently plans to do just that by charging publishers for access to its e-reader – newspapers will set their own price and give Apple 30 percent of the revenue.
Will this work? Yes, but only if two conditions are met.
First, readers have to decide the tablet has characteristics -- such as mobility, convenience, and status – that make it preferable to the web for delivering The Times.
Second, Apple and its wireless provider have to set a price for general access to the web and other digital content that is low enough to avoid the problem of readers thinking the Times is again charging a disproportionate amount.
One analogy is broadcasting and cable. When cable first came along, there was skepticism that anyone would pay for access to easily available broadcasts from their local stations.
But cable offered a much larger range of programs, and people were willing to pay for the local broadcast as part of this larger bundle of information.
Apps and games on Apple’s e-reader might play a similar role luring readers away from the web.
However, news from the Times in this analogy becomes a premium product, like HBO. But news is far less entertaining so prices will still be limited.
The other problem is that Apple, not the Times, owns the channel and will therefore charge the Times as much as possible for access. This is likely to become a real point of contention if the tablet takes off. The Times and other publishers are therefore likely to also maintain relationships with Amazon's Kindle and other e-readers.
The print channel
So, the only delivery channel controlled by the Times is print. That is another reason I believe plans to charge for access are partly an effort to stem the loss of print readers.
But the reliance on advertising revenue in the channel where newspapers have always had the most control over reader pricing is also a reminder that advertising will continue to be the most important revenue source.
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