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Lately, many of the newspaper moguls have been postulating that they will be soon charging for content. The question is why they’re talking about it and not just doing it. Is it to prepare (scare) customers? Is it because billing systems aren’t ready? Is there any other reason?
Lately, many of the newspaper moguls have been postulating that they will be soon charging for content . The question is why they’re talking about it and not just doing it. Is it to prepare (scare) customers? Is it because billing systems aren’t ready? Is there any other reason? Looking at the New York Times trial of paid subscriptions some years back provide some answers. Based on a variety of publicly available data and analysis of this, we can determine what would happen to a newspaper that starts charging. Just as importantly, we can examine what happens to the competitors to that newspaper. In short, this presents itself as a classic game theory problem for analysis. Crunching the numbers, we get a table that looks like this: | | | Player 2 | | | | Free | Subscription | | Player 1 | Free | $0 | $0 | $1.2mm | -$615k | Subscription | -$615k | $1.2mm | $36k | $36k | Player 1 is one newspaper that is considering the change. Player 2 is an aggregate of all remaining newspapers. In each cell, the first number represents the payoff that Player 1 receives for each month and second number corresponds to the payoff for Player 2. What we see is that the best “total” payoffs occur if both Players 1 and 2 start subscription model. Translating this to real life, that would indicate that you would need all newspapers to charge. However, if both are charging and Player 2 decides to give away its content for free, its payoff increases to $1.2mm, whereas Player 1’s payoff drops to a LOSS of $615k. Player 1’s only response is to also return to a free model. This is a classic Prisoner’s Dilemma . All the newspapers can do now, is tell all their COMPETITORS what they’re doing, in the hope that they’ll understand the ramifications and charge as well. The first mover (to a paid model) will be hurt, so the incentive is there for all papers to collude and start charging at the same time. This would explain all the announcements being made about charging. What’s missing is the kill option, which would be an option for Player 1 to execute if Player 2 decided to return to a free model. Just the threat of having that option there is enough to ensure that all players build a paid model. |
