Tuesday, August 31, 2010

News vs coffee: It’s still about value, not price

We often confuse cost with value when thinking about what people will pay for. There’s a crucial, oft-neglected distinction, and recognizing that reality is central to determining the future of paid media.

Years ago we made a useful analogy about paying for a cup of coffee vs paying for a newspaper. I used it first, as nearly as I can tell, in a 1996 strategic plan for digital publishing at McClatchy:

... at the end of WWII a cup of coffee and a newspaper each cost about the same -- let’s say 10 or 15 cents; today a cup of coffee can fetch $3.00, while a newspaper at most costs 50 cents. The essential difference is that the coffee sellers learned to give their customers choices --  you can go to any espresso stand in any airport in America and order a double tall decaf skinny latté. They added value to their basic product.

The distinction between pricey coffee and cheap news is more nuanced than that, of course. In addition to offering choices, coffee houses created a cultural dimension to enjoying their product; think about the way Starbucks adapted the concept of the “third place” as a profitable niche between your home and office. 

Coffee itself is a commodity, and nearly any cup will serve the utilitarian purpose of spreading caffeine through your system. The same is often true of news: pretty much any source can give you basic facts and headlines about most things. Coffee houses overcome the commodity problem by offering not only many choices but also sociability, relaxation and a sense of community. They’ve created coffee snobs who can discern the difference between the tang of Kona roast and the smoothness of a nice Sumatran. (I know this; I am one). They’ve made coffee a broader and richer experience than simply an injection of caffeine. 

News companies haven’t done nearly as well, although there are some important exceptions. Almost any news consumer can tell the difference between the products of the New York Times and those of Fox News, and many choose which to consume precisely because of that. For a Fox News customer, the NYT is *not* a commodity replacement, and vice versa.

Others are trying hard. I’ve worked some with the Civil Beat organization in Honolulu, a membership (subscription) digital news service. They’ve picked their target carefully: in-depth, local civic news. They foster community through f2f meetings for members only, by focusing on coverage others aren’t providing (especially investigations and analysis), by maintaining easily accessible archives to help bring context to coverage, and much more.

Huffington Post is recognized as a leader in applying “virtual goods,” theory to its community, applying lessons learned from online gaming. You can earn digital merit badges based on levels of participation that in turn confer some status benefits on the HuffPo site. I’m sure others are doing similar (and I hope more meaningful) experiments. I wrote about the concept possibilities for virtual goods in news communities a while back; see Why is a Facebook beer worth more than your news story?

I was reminded to revisit all these ideas this morning when I saw “The Oatmeal” illustrated post about people who pay for all kinds of things but flinch at 99¢ apps for their phone. The same was true about shareware, a system where you downloaded and used software for free but were asked to voluntarily pay something to defray costs and support the programmers. (The general failure of the shareware system helped ruin my faith in peoples’ inherent willingness to do the right thing).

Have a look at The Oatmeal’s commentary, one panel of which is used above. Then think about the same argument relating to news, and whether there are ways to make it something other than a free commodity, something with enough value to attract paying customers.

Posted via email from edge & flow

1 comment:

  1. I don't think the general failure of the shareware system was the result of the failure of peoples’ inherent willingness to do the right thing, I think it was the rise of Open Source right on its heels that did Shareware in. Why pay for something even voluntarily if theres a FREE version that's even better?

    I mean if you're the type that actually pays for Shareware, then the altruistic draw of Open Source must be hard to resist.

    So what's key about this? Well at the same time that internet publishing was on the rise, it was being powered by all this nifty new free stuff -- Linux, Apapche, MySQL, Perl -- and so they contributed to the news culture. "Information wants to be free" was not a slogan for news and Journalism, it was a slogan coined by the OSS crowd referencing not only software, but raw information.

    But now all that Free has seeped into the Journalism world and while I'm still not sure if that's good or bad all together, it's gonna be a bitch to change it.