The cost of giving it away

I am one of a declining number that likes to read a Sunday newspaper.

Recession notwithstanding, I am also one of those people that tends to struggle more in terms of time than money.

Therefore, I generally only have time to read one newspaper a week. The choice of newspaper is effectively zero-sum. I choose one newspaper; the others miss out.

I’ve deviated from that choice in recent weeks. Whereas I used to pick the Observer without fail, a lazy Sunday prompted me to give the Sunday Times a go.

And I enjoyed it. So much that I bought both newspapers again the following week. With time constraints restored, substantial amounts were left unread.

I therefore need to make a choice between the two titles.

And my choice is likely to be dictated by the quality of their websites. Both the Observer and Times offer the majority of their content online in an ad-supported free access model.

But rather than an excellent website causing me to buy the print edition, an excellent website may cause me to forego the print edition.

While print and online may complement, they also duplicate and cannibalise content.

If I am paying for a premium model, I want the greatest improvement in utility to justify that.

This example points to a problem with the Freenium model that I have.

It doesn’t work in perfect competition.

It works for companies like Flickr because Flickr stores my photos and logs my activity. Utility and the cost of switching increase the more I participate.

Newspapers don’t reward relationships (aside from getting the answer to the previous days crossword). So in each transaction, the additional utility in the premium model needs to be justified both against the free version and the competition.

Where (premium, competitive) newspapers are of equal quality, hikes in utility are dictated by the quality of the (free) website.

An inferior website equals a greater hike.

And so the loser in the pitch for my pocket may be that which has invested the most in their website.

Does this mean newspapers need to sabotage their websites in order to increase the value of their premium products? Such as bringing back walled gardens or keeping the best content offline? Henry Blodget thinks so.

Me? Newspapers aren’t my forte so I will resist the urge to speculate. But it raises an interesting question about their ongoing viability in a converged world.

sk

Image credit: http://www.flickr.com/photos/flavio_ferrari/

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