Economics Personal Technology

It’s a la carte by any other name

Are newspapers selling “a paper” … or are they selling “news and entertainment”? A similar question (selling conveyance or transportation?) could have been posed to carriage makers when the horseless carriage was new technology.

Tonight in class, a student reported on his case study of, and, in passing, mentioned as a similar site (one helping writers and artists make money on their craft).

Just so happens that RedPaper had been mentioned in the Seattle Times today in an article on micropayments.

So I felt the need to explore. Synchronicity and all of that.

Makes sense to me
Being able to buy content “a la carte” at a reasonable price makes sense to me.

I can remember finding high-priced (a la carte) articles online from magazines like Harvard Business Review, back when the time cost for a dial-up download was already extravagant.

One digital article should not cost as much as one printed issue of the magazine! When was the last time you went to a restaurant (or a drive-thru) and the entree alone cost as much as the “bundle”?

When I’m doing research and find a newspaper that has a subscription model for archived content, I am constantly amazed at the pricing model. And wish I had a way to determine if they were actually selling the service.

Take the Atlanta Journal-Constitution. If you want one story or 10, it’s $5.95 (24 hours access). So I don’t read “old” news about my home state.

If I could read the story for 25 cents or less, I’d be likely to buy, assuming it’s one that I couldn’t find elsewhere on the Net. But six bucks? Get real!

Bits of books
TidBITS, a resource long-known to the Macintosh community, has recently launched a micro-publishing service. For $5, you can buy a short how-to ebook dealing with the latest Macintosh operating system, Panther.

I bought one of the first two released, just after I bought Panther. Since then, Adam has sent me two e-mails telling me that I can download an updated version (now v1.1). Pretty cool — and the author has probably netted more from this book than a “full-featured” computer book retailing for $30 (or more).

This seems to validate some points made by Scott McCloud as he presents the case for micropayments in the form of Bitpass.

Psychology of choice
Critics of micropayments insist that the “cost” associated with choice (is article A worth 10-cents?) is too burdensome. Huh? Have these guys ever eaten at a restaurant other than fixed price?

The arguments against micropayments also embody either-or thinking … either metered pricing (micropayments) or flat-rate model (subscription). According to Andrew Odlyzko (a technologist), consumers will always pick the (more expensive) flat-rate model. He bases this assertion on telephone service and AOL’s move to flat rate pricing. [How much of AOL’s action was a response to competition?]

Why should the Atlanta Journal-Constitution site be either subscription or micro?

That doesn’t match real-world pricing for newspapers, which are sold a la carte in the newsstand and by subscription when delivered.

Nor does it match pricing in something as mundane as Krispy Kreme donuts! I can buy one or a dozen — and if I buy a dozen, the cost per unit is lower. A la carte or bundle, I decide, not Krispy Kreme.

It was not until the advent of the Net that mere mortals (not just those connected to Lexis-Nexus) could technically buy Just One Story!

Are newspapers selling “a paper” … or are they selling “news and entertainment”? A similar question (selling conveyance or transportation?) could have been posed to carriage makers when the horseless carriage was new technology.

I have no freedom when it comes to Dish Network. Our service provides 100 channels. We watch fewer than a half-dozen regularly. Lately, I’ve been wondering what kind of micro scheme might be fashioned to bring Farscape back — I’ve started leaning towards Jakob Nielsen’s philosophy that (paraphrased) “he who pays, rules the content.”

And on the Net I’ve become accustomed to “ruling” a lot.

Economics of bundling
Through bundled pricing, I have to buy (well, rent) far more TV programming than I could consume, should I want to (even with Replay!). For me, the signal to noise ratio has taken a decided turn for the worse; nevertheless, to access one or two programs that I like, I had to upgrade from 50 channels to 100.

This pricing model is wrong when the good is not being consumed by everyone (like fire departments and police stations).

This pricing model is wrong when the good is not atoms but bits (a digital TV signal, stored on a local hard drive, played back on the consumer’s schedule). The “record” as a bundle of songs is an artifact of music industry marketing and fixed media distribution.

I do not expect corporations to voluntarily embrace a concept that sounds a death knell for bundling. Bundled-only pricing exists because these markets are not free — buyers and sellers do not have balanced power. (Guess who has the most? The one that sets the price.)

Only competition — in the form of a la carte options offered by upstarts — can balance the market. Apple, the prototypical underdog, launched an a la carte service for songs, not the established music industry. Who will step up to the plate for TV?

Legitimate barrier
Yes, transaction costs can be (and have been) an inhibitor to a la carte payments for information.

That’s why the equivalent of a debit or phone card would be useful, as would an accounting model that allows a customer to “run a tab” for a period (a day, a week, a month) and only then let accounting get into the game.

Sunday, I bought nine songs from iTunes. One-at-a-time. I didn’t realize that I could have a virtual shopping cart and then pay for all at once. I hope that Apple has some kind of “bundle before accounting gets into the act” system, else I just cost them a lot in transactions fees. (Cost me, actually, as I’m a stockholder.)

Tonight, I “consumed” a 10-minute real story called Geek Love using BitPass. It was marvelous.

Neither of these purchases would have been feasible five years ago — not just because of transaction costs but because of bandwidth scarcity.

Systems like RedPaper and BitPass give us an opportunity to find out if the opponents of economic choice are correct or if they are mired in an atom-based economic model.


Essays on digital economics

By Kathy E. Gill

Digital evangelist, speaker, writer, educator. Transplanted Southerner; teach newbies to ride motorcycles! @kegill

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