#RJInnovation (2012): Determining optimal pricing of a newspaper’s subscription plans

By Molly Hulsey

Prof. Murali Mantrala talks about his research findings on paid content.

The concept of paid content for newspapers online has been a controversial one, and one that has only recently begun to gain some traction with major newspapers.

Prof. Murali Mantrala, doctoral student Vamsi Kanuri, and RJI’s Esther Thorson shared results from just-completed research, analyzing the importance and feasibility of charging for content.

Mantrala calls paid content the “key to reviving, if not saving the newspaper industry.” But will readers play along?

Will people pay?

• Currently, two-thirds of publishers think that readers will pay for online content… but they aren’t sure how much.
• 60 percent of readers surveyed said they would not pay for online content, while 30 percent said the same for print. 76 percent of readers said they would not pay for a mobile news app.
• Mantrala: “People focus too much on how many people aren’t willing to pay… if you simply chart who isn’t willing, you often ignore the people that will pay.” (i.e. using the above results, some 40 percent would consider paying for online content, nearly a quarter would consider paying for a mobile news app. Given the size of the online and mobile universe, those are substantial and important numbers).
• Mantrala also discussed the issues by directly asking people their willingness to pay—it’s possible to get inaccurate answers. Instead he offered them different combinations of services and asked what they would pay for.

Conjoint analysis … survey of 350 readers

• Mantrala designed a research survey, in which respondents were asked to choose between three pricing plans or “none.”
• He combined conjoint technique with the actual offerings of a real newspaper firm.
• Findings:
  • Single copy buyers of papers
    care about seven day print and internet access. They also care more about apps
    being ad-free.
  • Those who don’t use print,
    not surprisingly, don’t want a plan that includes a print subscription. Their
    biggest priority was Internet, smartphone and tablet access, and they value
    news so much that they are willing to pay.

Using the information gained from this study, newspapers can easily predict what subscription plans will prove most profitable.

To apply this analysis to your market, contact Prof. Esther Thorson.