Steve Wildman
James H. Quello Professor of Telecommunications Studies
Director, Quello Center for Telecommunication Management and Law Michigan State Univeristy
Do traditional media find an optimal balance between keeping print revenue and operating an online newspaper? From an economist’s view with a focus on newspapers that have an online edition, Steve Wildman first poses a question of how to cover the cost of adding a new section to a newspaper.
Based on Wildman’s print profitability model, newspapers with a large subscription base have to appeal to more content sections, each of which has a smaller number of readers, to compensate for marginal costs (e.g. distribution, printing costs). Conversely, if a newspaper’s subscription base is small, then it should aim to maximize the number of readers of each section while they are not able to afford a large number of sections on the paper.
Wildman further developed a corresponding online model, which differs from the print model only in marginal cost of distribution. Unlike the print edition that sends out all content to all readers, the online edition delivers content only to people who actually read it.
Since the online edition can cover content without the burden of marginal costs, Wildman suggests newspapers may have complimentary content online and make the access contingent on print subscription. In this way, the online edition will add extra value to the print subscribers.
From an economist’s view with a focus on newspapers that have an online edition, Wildman posed questions on moving news content online: “What informs the decision on how much news is affordable to print? What do we do with regard to the possibility putting on the website?”
Wildman identified basic variables of the profitability model: circulation, fixed and variable costs, and revenue from subscribers and advertisers.
How to cover the cost of adding a section to content? Sell more circulation, or, if circulation remains constant, revenue has to be gained by maximizing the number of people who read the new section.
“If your subscriber base is small, it has to appeal to the larger fraction of the audience; if your subscriber base is large, you have to appeal to a smaller fraction of the audience,” Wildman said.
Newspapers may consider having complimentary content online and make them available contingent on the print subscription. Thus, the contingent access can build the price in the print subscription by adding extra value to the print subscribers.
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