Archive for the ‘Economics’ Category

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Bold step as New York Times charges for content

July 10, 2009

NYT BuildingGreat news that the New York Times is to start consider charging for content.  Somebody has to be the first to go, and after Murdoch’s recent revelation that he is considering this for The Times and The Sun in the UK, it sounds like a monumental shift is taking place.

The price mentioned by the NYT  is low.  At $5 per month to begin with, it is around ten pence per day in sterling terms.  Who could deny that is good value?  The big question is just how elastic demand for quality newspaper content will be.  In other words, how much will this price – albeit a very low one – negatively impact demand?

It sounds reasonable to argue the quality of reader will be superior under a payment model.  It will not include people landing on the page unintentionally, for example.  It will also likely drive up the readers’ “propensity to buy”, since it will be possible to be more targeted with ads (using reader information) and readers will be generally more affluent – all good stuff for advertisers.  This is an experiment well worth undertaking, and the economic knowledge gained might be so valuable as to outweigh the cost of being the first mover.  Let’s hope so.

One concern is with Journalism Online, the organisation that has established itself with the laudable aim of creating a single pay platform for all online newspapers.  This is a very powerful idea, but surely the best way to deliver it would be through a non-for-profit body owned collectively by the newspapers themselves, and perhaps representing also the interests of readers.

That said, until such a group is formed (happy to be corrected if this has already been done), Journalism Online is showing the way, and for that, they ought to be congratulated.

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Gladwell vs. Anderson – my kind of fight

July 1, 2009

I like Malcolm Gladwell, but never more than this week, after reading his critique of Chris Anderson’s new book Free: the future of a radical price.  These two journalistic heavyweights have had a public debate that I will try and sum up in two lines:

Anderson: there is one iron law of the information economy – in the end, all information will be free

Gladwell: if there is a law of the internet age, it is that there are no iron laws – and the notion that everything can be free is wrong

In a book review in The New Yorker, Gladwell eloquently and satisfyingly pulls apart Anderson’s arguments.  So far, Anderson seems unable to fight back.  His response, posted this week at wired.com, is weak.

Reading Gladwell’s article and Anderson’s response is worth doing, if only to see how one-sided this argument is.  But I wanted to draw out a slightly different conclusion from Anderson’s argument – and one that perhaps hints at the solution to the problems caused by the free web.

I can’t read Free, as I am not a book reviewer [and it’s not published until next week].  However, back in 2007, Anderson wrote a precursor to his book – an article in The World in 2008 (published by The Economist), entitled “Freeconomics: there really is such a thing as a free lunch” [subscription required].

I was pretty inspired, as I liked Anderson’s general theorising in his 2006 book The Long Tail and figured, here’s a guy not afraid to look at things in a new way.  But the difficulty was, as I read, it became clear his article was full of non-sequiturs.  Here’s one:

“The cost of storing or transmitting a kilobyte of data really is now too cheap to meter” therefore the transmission of data is/will be free

Contrary to Anderson’s conclusion, it struck me that the anomaly here is not the falling cost of data transmission, but our present inability to measure tiny quantities of value, or cash.  You could call it the problem of quantum finance.  To follow a quantum physics parallel, the idea is that every cash payment really consists of tiny financial quanta.  That is not so weird, as that is how money works – we call them cents, or pence – but the problem is that we need smaller units.  We need financial quanta.

Today, we only have the means to measure financial quanta when they stack up into great amounts (like dollars or pounds).  But if we can develop a system for measuring financial quanta practically, that is when the economy of information will begin to function properly.

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Journalists and bloggers could both benefit from e-readers

May 4, 2009

I just finished reading this great TechCrunch op-ed written by MG Siegler. He believes newspapers, such as the New York Times, that pin their hopes on large-screen e-readers, prove that they have not grasped the challenges posed by the internet.

Part of his argument is based on the immediacy of online news, and he says:

It’s not the “paper” part of newspaper that’s the problem, it’s the “news.” As in, newspapers are way too slow at delivering it in the age of the Internet.

This is a good point and he goes on to suggest online news is the solution, but e-readers are not. I am not so sure it follows that e-readers cannot be part of the solution. After all, with the right connectivity they could  become a very attractive way of browsing the net, including newspaper websites and blogs.

But this all skirts round the real problem of commercial sustainability in news organisations. MG suggests that:

…there is something to be said for good journalism, but that is being done online as well — and can be viewed for free.

But how long can good journalism carry on being viewed for free? This point is brought into stark contrast by this line:

But books are fundamentally different from newspapers. There isn’t a free online equivalent to books, like the newspapers have to contend with in blogs.

This, I think, sums up the current problem with journalism. This statement assumes authors of books are unique and valuable in a way that journalists are not.

The task at hand for the traditional media is to remind people of the value of good journalism – as something that has to be paid for. Good journalists deliver value because of the access they gain, the training they receive to write clearly, capture information through interview and investigation, and know the laws surrounding defamation and libel.

In fact, many of the best blogs are attached to media websites and written by professional journalists. And many of the best independent bloggers have learned the skills of the journalist, and earn money from their blogs through the blunt tool of advertising. The smart solution for newspapers and blogs will ultimately be the same – getting paid for what you do by charging the people who benefit from your work.

E-readers such as the big-screen-Kindle will be part of the solution, by helping broaden the appeal of online journalism and blogging alike.

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The end of newspapers

May 2, 2009

The debate rages on – how to save printed newspapers.  Try googling the terms “newspaper”, “death” and “internet”, and you receive 10 million results.

So why is this such big news?  Are we facing the death of news?  Hardly. We are swamped by more news today than ever, and are blessed with digital ways to track issues and filter for our interests.  For news junkies, things have never been better.

It seems that it is not the public good that news confers that is at stake, but rather the newspapers themselves. Why is there such a strong urge among newspapers to back the status quo and stick with print?  After all, surely the smart money is on the first news gathering organisations to make a break and start doing things radically differently.

The Guardian’s recent decision to release its API might come to be seen as a game-changer, but most of the messages we hear are about “saving” newspapers.  Here are five reasons printed newspapers are dead meat, and why they won’t tell you about it:

1) Once people stop reading printed papers, they won’t go back

It happened to me, it’s gradually happening to my colleagues who work in PR and deal with newspapers every day, and it’ll happen to us all eventually.  You can get the same information from the newspaper’s website, so why would you bother with the paper?  It’s more convenient, I hear you cry.  Well, that brings me to the second point:

2) The technology that will allow us to read electronic papers is still in its infancy

You can buy a subscription to the NY Times for the Kindle*.  It’s updated daily over Wifi and costs 50 cents a day.  This does not even begin to tell you how slick, cheap and flexible e-readers will be in a decade’s time.  Before long, you will be able to read something that feels lots like a newspaper, based on flexible, textured e-paper and programmable full colour e-ink.  Think the Daily Prophet in Harry Potter and you’re getting close.

3) People buy news, not newspapers

It so happens that since the invention of the printing press, the best/cheapest way to obtain news was via a newspaper.  But this is by the by, based on the technology that there was.  Technology has moved on, and so will consumers.  Thanks to simple platforms like Twitter and RSS, I read news from hundreds of different places each week, based on subjects that interest me, headlines that grab me, and recommendations from people I trust. Newspapers are limiting – imagine going into a restaurant and being offered only set meals instead of a flexible menu.  You would not be happy – so why are you happy with newspapers?

4) Demographics are against newspapers

Research shows again and again that young people get information from the internet, not newspapers.  That’s all you need to know to tell you that newspaper circulations are going to fall off a cliff.  The death of newspapers is not the problem – it’s the death of the newspaper readers that will come to haunt traditionalist newspaper men and women.

5) The picture we have is skewed by vested interests

However bad the situation for newspapers looks, the truth is far worse.  The “save the newspaper” lobby – i.e. the newspapers themselves – is desperate to keep the idea of the printed newspaper alive.  Why?  There are the people.  As in any walk of life, the establishment is old and has become stuck in its ways.  Newspapers are no different – in the UK, one of the most interesting papers to watch is the Daily Telegraph, as it embraces electronic media.  It is no surprise that the editor Will Lewis is only 40 this year.

Then there are the financial investments in the print works. Large print machinery is amortized by the hour.  That’s part of the reason it costs so much more to run a short print run than a long one – because the time it takes to set the printer up literally cost money. If the print machinery is amortized according to a 20-year schedule, they had better be used profitably for the full 20 years.  Welcome to newspaper world – The Guardian installed its berliner presses on a 25-year schedule in 2005.  So they have an interest worth millions of pounds in pushing for printed papers lasting until 2030.

But here’s a fact: as circulations drop, the profitability of printing newspapers drops too.  At some point, the cost of printing the paper will become larger than the cost of not using the print presses – and that’s the day the newspapers will die.

* UPDATE  (07/05/2009): Amazon have launched Kindle DX – makes my point even more valid ;)

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The economics of the ad-funded web

March 28, 2009

Why should we have to pay for information and services we receive over the internet?  I have never had to pay before now for things like Facebook, Gmail or Twitter.  I can use Spotify for free.  I have not bought a newspaper for years, but can still read The Times and The Guardian every day.

Right?

Well, I am quickly coming round to the view that this is not nearly as simple an argument as people make it sound.  I think we may have this one wrong.

Here is a confession: I would rather pay £10 a month to use Spotify without adverts.  Why?  Partly this is aesthetic – I just don’t want my playlists interrupted by sponsors’ messages.  But there is also an economic angle – since I am unlikely to buy  many CDs ever again, Spotify will save me much more than £10 a month.  So why on earth would I complain about paying for such a brilliant service?

Yet people feel very strongly about this – why should we pay for something when we got it for free before now?  The truth is, there is no such thing as a free service.  We pay for the services we value, one way or another.  In the main, these services are ad-funded, meaning that some brand is actually paying for its delivery.  They are not doing this for free.  Every time you buy that brand, you just paid for the so-called “free” service too.

What’s wrong with this?  Two things.  If I am a consumer of the brand in question, but not the net service, why should I fund both? Better I pay for what I use.

Secondly, this approach is inefficient. The way to ensure consumers get the best deal is to have price transparency and competition.  If a net service is ad-funded, we have no way of knowing whether the brand is striking a good deal or not.  The problem for consumers here is that, if the brand pays more than it needed to advertise, the only losers are that brand’s consumers, who end up paying more.  And the only winners from this are the owners of the “free” service. The money is flowing from my wallet into their bank account.

I’d rather just pay for what I use, thanks.

(Hat tip to my friend @masoke who got me thinking about this via a 140-chars argument on Twitter!)

Update: Someone pointed out this all-encompassing “how to” on getting paid for online content, and it cited an excerpt from the brilliant Time magazine article on micropayments for newspapers that got me started in the first place: “One of history’s ironies is that hypertext — an embedded Web link that refers you to another page or site — had been invented by Ted Nelson in the early 1960s with the goal of enabling micropayments for content. He wanted to make sure that the people who created good stuff got rewarded for it. In his vision, all links on a page would facilitate the accrual of small, automatic payments for whatever content was accessed.”  He got it!

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The basis of moral decisions

March 24, 2009

Best I mention first off – this blog won’t be all about morality, though it may feature from time to time. This blog will meander but is likely to include stuff about economics, science, marketing, social media and communications, as well as things that are, well, just funny, in my opinion. And this – my opinion – will likely feature heavily too (if I know myself).

So with that said, let me get to the subject of this post.  I was discussing recently with a great friend the subject of how we make moral judgments, when I was reminded of a brilliant piece of work last year by a team of neuroscientists in the US.  These scientists were looking for a scientific explanation for moral judgments, and designed an experiment where they measured the brain activity of various subjects while they were asked to make moral decisions.

They posed a classic dilemma: you discover a train is hurtling down a track and will kill five people who are in the train’s path further down the track. In the first scenario, you are offered the choice to pull a lever that makes the train reroute to a different track, where there is one person on the track. In other words, you can act to save five people by killing one. As brutal as it sounds, most people end up agreeing they would pull the lever. The neuroscientists analysed brain activity as people made this calculated judgment.

In the second scenario, you are offered the same choice – to save the five by killing one – but this time you have to push someone under the train, slowing it down so it stops before reaching the five. Most people, when offered this choice, feel that they should not intervene, even though the outcome is identical (in terms of lives saved and lost, anyway).

The experimenters examined which parts of the brain were being used to make this decision, and found one area that came alive with electrical signals when they made the decision whether to push someone under the train.  In other words, in most cases some brain function seems to have overruled our calculated view that one death to save five is better than five to save one.

The quite comforting conclusion is that, while we are able to make calculated moral decisions even where they involve purposefully killing someone, we seem to have evolved to not want to do things like push other people under trains.  Thus backing up my deep optimism towards human nature.