Re: "Bill makes all the important decisions here."

Mike Masnick (
Sun, 18 Jan 1998 12:47:19 -0500

At 01:43 PM 1/15/98 -0800, I Find Karma wrote:
>> Slate, Microsoft's online periodical, is planning a move to a
>> subscription-based business model, at somewhere between $20 to $30 a
>> pop. "We don't believe that the advertising-only approach is
>> sustainable for us," says Slate's publisher. Slate joins a growing
>> number of publications that have found it impossible to generate
>> enough revenue through Web-based advertising alone -- the Wall Street
>> Journal is the most successful of the bunch, largely on the strength
>> of its print reputation and the content differentiation available in
>> the online version. "If you have something that isn't available
>> somewhere else, that's how you assign value," says a Time New Media
>> spokesman. Slate's original plan was to charge $19.95 a year for the
>> weekly e-publication, but its publisher now says the price could be a
>> bit higher, based on the number of top-notch writers it hopes to hire.
>> Other publications experimenting with subscription pricing include The
>> Economist, Business Week and The New York Times has been
>> charging overseas users for access to its electronic version, and
>> eventually plans to charge everyone for online access. (Broadcasting
>> & Cable 5 Jan 98)
>Much as I like Slate, I feel spoiled. I cannot bring myself to pay for
>it, even at a mere $30 a pop. Just like I still cannot bring myself to
>pay for the New York Times online. I think it's a psychological problem
>more than an economic one: after 10+ years on the Internet, I still
>expect not to pay for things unless the value added is very clear.

Actually, I think it is an economic problem as well. I think most of this
charging for content nonsense is an economic problem and will fail because
the people behind them do not understand the basic economics of the
information they are trying to sell.

Economics 101: Price charged to the consumer should equal the marginal
cost of the good (cost to make an additional unit of the good); also known
as P=MC. Yes? Good. A public good is a situation where a good is both
non-depletable and non-excludable. A good that is non-depletable and
non-excludable has a marginal cost of zero because it does not cost the
producer anything more to produce it for the marginal user. Therefore, the
price to the consumer should be zero, if there is economic efficiency
(brought about by competition).

So, in situations dealing with content on the internet (often, though not
always) you are dealing with these sorts of goods. Economically speaking,
the cost should be zero. So, Adam, your psychological reaction meshes with
your economic reaction.

The theory is, of course, a lot more complicated than that, and you can
look at it much more indepthly, but those are the basics. Now, the WSJ is
doing very well charging for their information. Why does that work? The
WSJ offers time-critical information to viewers who really can't get that
type of important information anywhere else. Thus, there is no real
competition to the Wall Street Journal's info, and therefore, they can make
it excludable, and charge a price and make money. The information that you
get out of Slate, and even the NYTimes isn't so time critical and important
that you can't get the important stuff elsewhere, and therefore, it feels
economically wrong to pay for it (as a consumer).

Oh well. Delving into the "dismal science". I apologize. Feel free to
attack this now. Or to ask for clarifications. Or, to add more to it. As
a theory, it's still got some kinks to be worked out.