Nick comes to the defence of TimesSelect

by Mathew on October 20, 2007 · 5 comments

Never one to miss an opportunity to be contrarian — although Andrew “I Hate The Internet” Keen has stolen much of his Prophet of Doom act — Nick Carr has a post about the New York Times’ subscription service, TimesSelect, in which he dismisses criticism of the venture as the misguided rantings of “free content” ideologues like Jeff Jarvis.

Carr refers to a Financial Times piece about a study by Matthew Gentzkow, in which the economist looked at the competition between the Washington Post print edition and Web edition. As the FT column describes it, Gentzkow analyzed the readership data from both the print edition and the website and came to some conclusions about how much one cannibalized the other. Says the FT:

“[Gentzkow] found that people who had access to fast internet connections were, other things being equal, less likely to read the print edition. He found reasons to believe this was specifically because of access to washingtonpost.com, not to the Internet in general.”

What are the reasons he found to believe this? I read (or tried to read) the entire paper online, and I still don’t know, in part because of sentences like this one:

“Both reduced-form OLS regressions and a structural model without heterogeneity suggest that the print and online editions of the Post are strong complements.”

And that was in the early part of the paper, where Gentzkow was summarizing his findings — before he got to the part with the long calculus-type formulas and algorithms. At one point, the economist says that according to his research on the levels of substitution between the two products:

“Removing the [news website] from the market entirely would increase readership of [the newsaper] by 27,000 readers per day, or 1.5 per cent.”

He therefore concludes that the Post has lost $5.5-million in newspaper revenue as a result of providing its news online for free. Does that make any sense? It might to an economist, but I would argue his thesis fails the reasonability test. If the washingtonpost.com website were to disappear or be locked behind a pay wall tomorrow, does anyone really think that 27,000 people would suddenly go out and start reading the paper edition?

Gentzkow clearly does. I think they would be more likely to just go elsewhere for their news, such as Google News or Yahoo News or MSNBC or CNN. It might be tempting — and make for a much simpler business case — to argue that a product like the Post competes primarily with its own website, and vice versa, but I don’t think that is the way things work.

A pay wall for the Post or the Times or any other paper simply blocks people out who then go elsewhere (my friend Rob Hyndman has more on that angle). That’s not a religious view, as Nick would like to portray it — in fact, I would argue that it’s a lot more “rational” than Gentzkow’s analysis. And I’m pleased to see that Fred Wilson appears to agree with me.

  • http://www.roughtype.com Nick

    A pay wall for the Post or the Times or any other paper simply blocks people out who then go elsewhere

    This is, simply, an overstatement. You assume that all the news and comments that newspapers publish are fungible. That may, sadly, be the world the web will ultimately create, but it is not the world we have today.

    What the research shows is that readers often value a particular newspaper, so if they can’t get the stories online they will be more likely to purchase the print edition (or vice versa).

    I find it odd that you, a newspaper writer, are so quick to assume that your own work is a fungible commodity. Perhaps you should give yourself – and your colleagues – more credit.

    Nick

  • Mathew

    An overstatement it might be, Nick, but not much of one I don’t think — and certainly no more of an overstatement than Gentzkow’s assertion that 27,000 people would suddenly start buying newspapers if a particular website were closed off to them.

    As for the fungible part, I give my colleagues plenty of credit — in the fungibility sweepstakes, they stack up with the best of them — but wishing that news content wasn’t fungible won’t make it so.

  • http://joeduck.wordpress.com Joe Duck

    … wishing that news content wasn’t fungible won’t make it so.

    Indeed it will not, though I’m not clear I understand Nick’s worries here. Simply from a *news* perspective wouldn’t it be nice to have basic news come from many places and be a broadly practiced and fungible commodity item, while quality Op/Ed would move off of page x in the paper and onto the front page of good blogs like Nick’s or this one? Yes we’d have cut out the capital intensive mega-publishers, but do they even invite you guys to their BBQs?

  • Mathew

    A fair point, Joe.

  • http://drumsnwhistles.com/ Karoli

    The underlying thesis to which Nick refers is flawed, because it assumes that online readers of the Washington Post are the same population as those who would otherwise subscribe.

    Before newspapers were online, readers were limited to their local and/or regional newspapers. Bringing newspapers online means opening the audience to a global group of readers, whether those newspapers are national, regional or local. That global group won’t necessarily pay to subscribe, but if offered the opportunity to read what the NY Times, or Washington Post has to say at the source, would certainly do so and in the process, add to the revenue stream by virtue of their visit. These are NEW readers, readers who would not otherwise subscribe or contribute to the revenues of the paper.

    BTW, the only paid online news subscription I have ever had is to the NY Times crosswords because I am an addict…and they’re still behind that paywall. However, I feel justified in that subscription because NY Times crosswords are the hardest crosswords ever. It’s an educational expense. :)

Older post:

Newer post: