HOW MUCH NEWSPAPERS should charge for online access is an on-going question at conferences everywhere. With the rise of online advertising, there's an argument that access should cost nothing.
An academic paper by University of Chicago economist Matthew Gentzkow deserves careful consideration. The research follows from the Scarborough Research surveys of consumers in the Washington, D.C., area compiled between 2000-2003. His conclusions:
- As of 2003, the availability of Washingtonpost.com reduced the Post's daily readership (not circulation) by about 29,000 people -- out of 1.8 million daily readers.
- The circulation loss would have reduced print edition profits by about $6 million a year.
- Taking into account the financial performance of the website, the total impact of adding an online edition was to lower the Post's profits by $20 million per year.
- The Washington Post Co.'s newspaper division generated less than $52m in profits from operations in 2003.
This analysis suggests that through 2003, the Washington Post should have charged $4-$6/month for access to the website because that price that would have prevented the print circulation erosion.
Since 2003, however, increases in online advertising revenues would have changed the picture -- reducing the website's net impact on the company's 2004 profits from $20 million to $2 million. This suggests that for the website, "a zero price is probably not far from the long-run optimum," Gentzkow writes.
Rich Gordon -- "Economist: Online Paper Cuts Print Readership, Profits -- But Not Much"