Nick Carr makes a valiant attempt at defending
TimesSelect, riffing off Tim
Harford’s column on Saturday. The basic idea is that when online advertising
is in its infancy, it makes sense to charge a subscription rate for website
access. Eventually, when the advertising business picks up, it makes sense to
drop the web subscriptions and go free: that way you maximize your total profits.
If you rush to set the price of the web edition at zero too early, before
online ad sales reach a certain level, you may sacrifice revenues from print
sales and ads without making them up through online ad sales. The better strategy,
explains Gentzcow, would be to charge a fee for access to the online news
(or at least, by implication, some part of it valued by print readers). That
way you dampen the loss of print sales and ads and maximize your overall revenues
and profits. At some point, once online ads sales strengthen sufficiently,
it may then make economic sense to remove the fees for accessing the site.
But what Carr and Harford fail to do is place a value on the headstart that
a website can achieve by going free early. As one of Nick’s commenters says,
In periods of fundamental technological change & discontinuity, leaving
money on the table may well be a smart strategy…
Companies such as Costco or Southwest explicitly leave money on the
table, for example. Sam Walton (whose descendants collectively are now the
richest people in the world) pointedly refused to price the goods at the "going
rate", which a Harvard Business School prof of that time would have considered
stupid…
Larry Ellison, nobody’s fool as a businessman, enunciated it thusly: in early
markets, maximize marketshare, not profits. NY Times should have become the
go-to place for news & views online. They always had the breadth &
depth of content. The fact that they let a whole lot of other sources jump
ahead speaks volumes of their failure of vision.
If they had that vision, it is possible that most respected bloggers (like
you!) would have found it profitable to channel their content through the
NY Times online site, which got, say, 50 million readers a day.
Now that’s what I call a vision. The NYT now has 43
blogs, and it pays for all of them. By contrast, HuffPo
has 1,800 blogs, and pays for a tiny fraction of them. If the NYT had got the
jump on Arianna Huffington by inviting the world’s thought leaders to blog on
its site, it could have a truly unbeatable web presence by now. Instead, it
went the other way, putting all of its opinion content behind a subscriber firewall
where no one could see it, and letting HuffPo and the Guardian steal its march.
Says Fred Wilson:
I have a lot of scars in my back and one of them is the decision we made
at TheStreet.com to charge a subscription while our competitor, MarketWatch,
went with the free ad supported model.
Free is inevitable, and the longer you put off going free, the more you lose
in the long term. The FT is not
there yet but it still has a few weeks before Rupert Murdoch officially
takes control of WSJ.com. In fact, it might have even longer than that, since
Murdoch is now making some weird
noises indeed:
Murdoch said he expected to expand digital editions of the Wall Street Journal
worldwide and launch new "vertical" sites around specific sectors
of interest. He did not elaborate.
I don’t know what this means, but it doesn’t sound like going completely free
to me. "Digital editions" is like the different versions of Vista:
there’s no point in differentiating unless you’re going to charge different
amounts of money for different products. Murdoch should have one price and one
price only for the WSJ online: $0.
But the FT, of course, shows no indication whatsoever that it’s capable of
getting its online act together. When it launched its new business plan, the
whole site was in fact free for about a week, since the software driving the
new model didn’t work. Now the software does work, but it automatically logs
out visitors after half an hour, "for security purposes". Can anybody
give me a single reason why this helps with security? You can’t spend money
on the site, so it’s not as though it’s possible to commandeer somebody else’s
computer and drain their credit card if they’re still logged in.