Should News Paywalls Demand Less in Poorer Countries?

The case for variable pricing

CAIRO—Consumers have made peace with the fact that some things cost more in certain places. A cup of black coffee at a Cairo McDonald’s costs less than the same stimulant at a McDonald’s in Manhattan. A night at the Four Seasons Hotel in Damascus costs $445, while in Maui it’ll set you back nearly $1,000.

I wonder, then, whether online news organizations must charge the same amount for their product in every nook of the earth, and whether globally scattered news audiences would tolerate variable pricing. It seems unreasonable that someone in Burundi be asked to pay the same price for a product as a consumer in Singapore. Shouldn’t the cost of online news also vary in these countries?

Discussions of news paywalls have generated impassioned debates about whether they will work, but rarely do these discussions take place in any global context. I’m not convinced that news organizations attempting to erect paywalls should adopt a one-price-fits-the-world strategy.

The reason news organizations might consider some form of globally variable pricing is not necessarily because they need to demonstrate greater corporate social responsibility, although that would be nice, but rather because if they could set prices in such a way that would not offend those asked to pay higher subscription fees, it could boost their bottom line. Movie theaters don’t give student discounts because they want to reward pursuit of an education, but because the sheer number of student tickets they sell brings in more money than if they asked full price.

Variable pricing doesn’t work for all products in all scenarios. Middle-aged moviegoers might be at ease with students catching a break at the box office, but they’re not OK with being asked to pay more because, simply, they look like they can spend more. This strategy, called “dynamic pricing,” has been tested by some online retailers, and the masses don’t like it.

But when pricing is set for groups in different financial situations in different parts of the world, there’s often not a huge outcry. The International Communication Association (ICA) is an academic organization to which I’ve belonged in the past, and their membership fees are based on whether a registrant comes from a developed, less developed, or least developed nation. Would-be members in third-tier countries like Yemen and Haiti pay half of those in first-tier nations, like the U.S. and Japan, while those in tier two pay something in between.

ICA is a nonprofit outfit reducing financial impediments to its membership, but couldn’t The New York Times adopt a similar system? Online subscribers in Denmark might pay the full fee each month (so far unannounced but likely $14-$20), while customers in Hungary or Turkey would pay maybe $9, and readers in Bangladesh and Ghana $6. Far from angering subscribers in Copenhagen and Chicago, this system might actually gain the Times some extra moral capital, as well as potentially yield more revenue.

Selling an online newspaper subscription for $72 a year to someone in Ghana is still a big net gain for an online newspaper. With virtually no variable costs, the annual expense of servicing one online subscriber to The Wall Street Journal in 2006 was reported at around $0.85, and it may be less now.

One of the challenges facing online news organizations courting subscribers is the need to balance their subscription prices with customers’ evaluation of so-called “search costs”—the price in time and labor one must forfeit in order to find a better deal for a product or obtain the product for free. Online readers of The Wall Street Journal could piece together each day’s newspaper for free by locating blogs, discussion boards, and other sites that violate copyright laws and republish individual articles. A one-year online subscription to The Wall Street Journal Europe, however, costs $103, and many readers feel that the search costs involved in trying to obtain that publication’s content for free are not worth it.

A small business owner in Budapest, though, might feel that $20 a month for The New York Times online is less attractive than the search costs involved in tracking down a handful of interesting articles each week. But a price of $9 a month might be worth it for his time saved.

In blueprinting its online paywall, The New York Times is likely focusing on what readers in New York, Orlando, and Houston will pay, giving less thought to millions of readers outside the U.S. They should proceed with caution, though. “As with anything powerful, prices must be handled with care,” wrote Eduardo Porter in The Price of Everything, noting also that, “Moving people requires a price.” Yes it does, and asking the same price for online news from every person everywhere might not move the most customers. Porter is also on the editorial board of The New York Times. His colleagues should read his book.

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Justin D. Martin is a journalism professor at Northwestern University in Qatar. Follow him on Twitter: @Justin_D_Martin Tags: , , , ,