Monday, August 10, 2009

Economists on pay-per-view online print news

Tyler Cowen has provided an interesting economist's perspective on the plans of Rupert Murdoch and News Corporation to start charging subscription fees for online news. He doesn't think that it will work, but can recognise that on this occasion the capacity of news proprietors to collude around common business interests will have an impact. He does think that public service media will come into their own as providers of free, quality news content.

This time around plausibly all the major newspapers will follow suit and charge for their content as well. It's like one of those Lester Telser/George Bittlingmayer models except now we are at the point where the major players realize they are all below their average cost curves permanently and they are not willing to incur losses indefinitely. Since we've not yet been in an all-charging equilibrium, we don't know what the price will be. What does the NYT business model look like at $50 a year for access, with price breaks for India?

In that equilibrium does any newspaper gain from defecting and moving back to p = 0? Is there a stable core to the game? Isn't Murdoch simply signaling that all the newspapers ought to collude?

Won't NPR, and, be the big winner?

I'm not saying the Murdoch move is going to "work." I am saying that if the game has no core the idea of charging for content will not go away.

Joshua Gans is also thinking about the issue at Core Economics. Key point here is that that "producing news involves high fixed costs and low marginal costs.".

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