The New York Times has just proposed to turn us all into Seinfeld‘s Elaine Benes.
In episode 119 of the classic sitcom, Elaine’s preferred method of contraception is revealed to be the sponge. When the sponge goes off the market, she must come to terms with the fact that whatever stock she had in her possession was it. She could buy no more. This meant whenever a, how should I put it, “prospect,” came along, Elaine had to calculate whether to dip into her diminishing stock or not. That is, she had to assess whether a prospect was “sponge-worthy.”
Last year, one of the most famous economists in the world,Avinash Dixit, released a paper, “An Option Value Model from Seinfeld,” based on this episode (you can download it here). Dixit noticed that, in fact, Elaine faced a fairly complex option value problem — that is, if she chose to use a sponge rather than wait she was giving up an option to use it later. Dixit was able to calculate based on some of Elaine’s fictional behavior precisely what that value was.
The New York Times‘ new pay-wall is asking us to make the same calculation. It will require you to register with the Times, which will then track how many times you click on an article (and presumably read it). You will be limited to 20 articles a month. If you want to read a 21st, then you have to subscribe. On a phone that will set you back $15, on an iPad it will cost $20, and if you want it all, it’s $35 for four weeks. So, unless you have already chosen to subscribe, every click you make involves giving up the option for a free click sometime later that month. I don’t know if you will know how many clicks you have already made (which will make life for you harder than Elaine), but you will now be evaluating whether Paul Krugman is “click-worthy.”
For non-subscribing consumers of the Times, life has gotten more complex. That will result in less consumption. To be sure, this is better than a full paywall, because you can at least consume some content. But each time you want to click through to an article, you will face a cognitive tax: you’ll have to figure out whether you want to read this article now more than you will want to read another, unknown article later. Chances are, you will either come up short of your 20-article limit or readers will start blitzing the site on the 30th or 31st of the month.
But wait: there’s more. If you go to a Times article through Google (or more importantly Google News), you’ll be capped at five free ones per day. It will be interesting to hear what search engines have to say about that.
And there is yet another caveat. The Times sensibly does not want to discourage social media. So links from blogs, Facebook, and Twitter count toward your limit but after that limit is reached, you will still be able to click through these sites and read (unlike the main Times site). Strategically, that creates big incentives for blogs to provide Times links and for readers to go through blogs and social media rather than the main site. (I suspect a new industry replicating the Times pages will emerge, which can’t be good for the company. But this is a problem of trying to have your cake and eat it too.)
This is one version of a classic confusopoly in which the Times is hoping that the cost of the cognitive task will drive more people to become digital subscribers. The Times wants to bifurcate its customers into two clear groups — loyal/deep readers versus temporary ones. Subscribing will cost you a minimum of $195 per annum. Maybe mastering the economic theory of options will be cheaper. (And, as the Nieman Journalism Lab points out, you might be better off subscribing just to the Times Sunday print edition.) In any case, the Times will now have a big incentive to work out how to encourage more deeper readers.
The Times might get more circulation revenue from this but it may have a negative impact on ad revenue. Loyal readers spend more of their attention at the Times, giving the paper a valuable set of eyeballs to sell to advertisers. But its new pay scheme will lose the eyeballs of less “deep” readers. Put simply, the Times is scaling back its ad inventory in the hope of making its audience more valuable to advertisers. That seems to have paid off for the Financial Times, which recently instituted the full paywall scheme, but it exists in a different media market. For the Times it is still a gamble, and it will be interesting to see how advertisers react.
Finally, if you think Dixit was alone in his foray into Seinfeldnomics, think again. Here is a site that goes through economic principles episode by episode.