Psst, no one has ever sold information

This is one of those posts that is a speculative thought written as fact. That said, it may actually be true. It starts with a conjecture: no one has ever sold information. Well then, how does one explain the payments people make for (physical) newspapers, books, and all manner of other stuff? I am going to contend that what people are paying for and have only ever paid for is delivery (or more broadly, something other than information).

[DDET Read on]

I am writing this in the context of the recent debate regarding micro-payments for newspaper articles. This is something I previously commented on, was a lead story in Time, objected to by others, and discussed here and here. That debate notes that (a) people value information and (b) it is costly to produce that information and so that means people can and surely will fork out to cover information costs. Fair enough except that it doesn’t appear to happen when it should and maybe, as I will argue here, ever.

Let’s start with books. Books represent a collection of information. But in pricing books publishers and booksellers take into account various factors including the quality of paper and binding as well as timeliness — charging more for books closer to the time of release in many cases. So the same information is sold for differing prices depending on how it is delivered. And we see this being expanded to electronic books too. And all this occurs when books can be easily borrowed from others. So what book sellers are competing with are those other modes of delivery. That is why, except in extremely rare cases, households only tend to buy one book.

Now, let’s move on to music. Previously, the issue in delivery was quality (albums to CDs) and portability (cassette tapes). Then came digitisation (actually that came with CDs) and supposedly every thing changed. Yet, iTunes is able to sell music despite the fact that you can get that very same music for free (albiet illegally but nonetheless). The obvious reason is that it allows for easier delivery. Pandora radio — something that I suspect could charge for a subscription — does delivery differently but allowing tailoring and experimentation. Indeed, it works like radio that way — the obvious delivery-based competition for music sales.

I could go on but let’s get to newspapers and the current apparent dilemma. The claim is that newspapers when they lost classifieds, moved to unprofitability. In reality what happened was that newspaper content and classifieds shared a delivery mechanism — timely and regular delivery to readers. But classifieds found a better mechanism and one that made search easier as well as involved lower costs. News content could also use that mechanism. The problem was that classifieds still had their traditional customers — advertisers — while news content was now much less about delivery and more about information. According to my hypothesis, that is the problem.

So the response has been, let’s work out how to get people to pay for information. One example of this is Chris Anderson’s notion of “freemium.” You give away 99 percent and charge for 1 percent. The idea there is to charge for some premium content. But my conjecture here is that is wrong. What you need to do is charge for better delivery. Ad-free is an example of this but customisation is another way.

Now I don’t have the ‘solution’ for newspapers but my guess is that once they start thinking about giving away content and charging for delivery, payment mechanisms will come (something that Jonathan Rosenberg was groping towards).

[/DDET]


8 thoughts on “Psst, no one has ever sold information”

  1. They New York Times tried freemium, bundling opinion columns plus access to a limited  number of archive articles per month. I don’t recall whether that went on for one year or two, but they subsequently decided to throw everything without charge open back to 1851 apart from archives over the period 1950-1980, and go for increased advertising revenue instead.

    The Times is still in financial trouble though, so if the current approach is better than the previous one, it is still not good enough.

    Like a number of other newspapers it is also offering subscriptions to a digital replica of the printed edition for a monthly fee ($US14.99 a month for Mon thru Sun editions). Presumably it considers this an improved mode of delivery compared with access to the Times web site, but I can’t find out how many subscribers it has attracted. One question about this delivery method is the extent to which advertisers value the electronic circulation and are prepared to pay for its numbers.

    (Physical subscription within the Times direct distribution area is $10.60/7 day week (a little over $45/month.)

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  2. We pay for information all the time, though not always with money. We pay with our time and attention. Time that can be spent elsewhere. Thus by consuming a newspapers information we are incurring an opportunity cost of not spending that time elsewhere – with our children or wives, working on my PhD thesis, or on the report I am writing at the office. 

    Make no mistake we are paying, but payment is more than just cash. Time is a significant investment. Both time and price are valued, as is the information, and the relationship we have with the publisher, based on prior value derived from past information.

    Price is part of value, but only one of twelve dimensions, including time. More on my thesis on value at valman.blogspot.com.

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  3. I think you are correct that we pay $$$s for the delivery rather than the information. But isn’t that true of every product? I pay for a diamond because they are not laying around on the ground. Someone has to dig it up, cur it, and deliver it to me. Looked at this way, we only ever pay for the human labour that  delivers a good (where “delivery” is taken to include manufacture and creation).
     
    So as an economic proposition, I am wondering whether the statement “nobody pays for information” is true but empty.
     
    I think what you say about newspapers applies also to TV. TV forces you to watch ads whereas newspapers do not. But with illegal digital viewing becoming easier and more popular, I wonder how long that can last.

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  4. There is a theory that the reason the music industry has been so recalcitrant when it comes to downloads is not because they fear legitimising free music, but because they have a vested interest in the medium – CDs. As such, Sony and the like have refused to pursue non-physical formats because it would undermine other parts of their business.

    Therefore it is quite likely that the delivery method that is most important means of income, as you suggest.

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  5. I’m not sure where delivery stops and information starts in your categorisation. But surely Bloomberg’s entire business model relies on selling information. It’s aggregating information that it is impossible to get in any other way (If you’ve ever tried to find a price in a thinly traded market, you’ll appreciate how valuable it is).

    That’s information, to me, not delivery.

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  6. People will not pay for information until it is delivered so saying people pay for delivery or pay for the information is one of those pointless discussions.

     People will not pay for delivery if there is no information. People will not pay for information unless it is delivered.

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  7. One difference you don’t identify is that, unlike with free downloadable music, newspaper websites tend to be well set out and don’t give us viruses so if a convenient aggregating program (like the iTunes store) came out that charged a little something for access to articles, it would have to add something seriously good (and new) to the experience (maybe aggregating articles by topic, providing background on issues, generating automatic timelines etc…hang on a sec, the BBC website already does that) – newspapers may have shot themselves in the foot on this one.

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