Is online news really an inferior good?

What we have this week seems to reminding me of the concept of elasticity of demand and a question that "is online news an inferior good?".

Here's what I posted at the beginning of the semester:

We may raise questions regarding media products such as how the concept of elasticity of demand works when it comes to new media (e.g., online news media or other online services like blogs); and further, is media we are using normal good or inferior good? Dr. Chyi (forthcoming?) proposes a question, “is online news an inferior good?” and contends that online news is an inferior good based on a theoretical framework (normal vs. inferior goods) that “when income increases, the demand for an inferior good decreases; when income decreases, the demand for an inferior good increases, other things being equal”. It seems interesting that hypothesis was supported even after controlling for other media use (newspaper, television news, and radio news). Regarding this study, I’d like to talk more about why online news is an inferior good; what about other newly emerging media; and other possibilities regarding this.

As of other possibilities affecting the result that online news is an inferior good, we might think characteristics of market. In other words, whether online news is an inferior good or not may depend on the nature of markets. For example, to what extent people consume online news may differ in geographic characteristics of market (e.g., distance or market segment) and systems of market (regulatory system).

Now I'm kind of confused.
Is online news really an inferior good? It makes a perpect sense according to Dr. Chyi's article (in terms of theory adapted and method and analysis used).
However, then, is online news's quality really bad/lower compared to traditional forms/platforms news??
Assuming there's no significant difference of quality in between offline vs. online news, can we still say that online news is an inferior good?

Another thing is whether young people who are likely to get information on the Internet (including online news) are going to demand online news less when they get a job and their income increases?

Another survey about paid news content.

A combined research effort by Ipsos Mendelsohn and PHD has revealed that 55.5 per cent of survey respondents would be very or extremely unlikely to pay for online newspaper or magazine content.

http://www.editorandpublisher.com/eandp/departments/business/article_display.jsp?vnu_content_id=1004030681

But I don't think this is all that pessimistic for the News Corporation.
Because, when questioned further about specific publications such as The Wall Street Journal and Consumer Reports, both of which are exisiting pay sites, 81.5 per cent of online users said the sites were good, very good or excellent value.

Bob Shullman, president of Ipsos was quoted as saying "the message that came out is that you can charge, but you better have incredibly compelling and unique data."

When news become public goods?

Mon journal offert, my free newspaper program has officially begun in France.
http://www.nytimes.com/2009/10/28/business/media/28papers.html?_r=1

We mentioned about this briefly in class.
It has started two days ago. About 30,000 youth signed up voluntarily. Government is releasing Ad. campaigns also.

Can the news be supplied by the government like bridges or roads? What happens to consumer behavior then?

If you are 18~24 you can sign up for 1 year subscription of any newspapers.
French govement is spending 600 euro, which is about 900 million dollars.

I personally think this is a stinky business. Because many newspaper owners are Sarkozy's friends. The French president has been in charge of subsidizing newspapers when he was an Interior minister.

The Guardian reported that French people had little respect for news publications today, "in a climate where politicians rewrite their own interviews for publication and the president's powerful business friends, from construction to arms manufacturing, own several major papers or TV stations. "

http://www.guardian.co.uk/media/2009/jan/23/sarkozy-pledges-state-aid-to-newspapers

Why can't we adapt to the Moore's Law?

The first day I went back to KXAN this semester, the only task I had was change the archive date of several pages. By default, all of our story pages will be archived one year later. This model works fine with stories, but not for our subindex pages. Therefore, we spent around half day simply to change the archive date of tons of pages so that they wouldn't be automatically offline soon.

We changed the date to 2016, which isn't really far from now. However, all of us know that we will NOT be using the same system at that time. We definitely will have new pages for that time. Four years doesn't sound like a very long time, but on web, it's like forever.

Thanks for the short life cycle of desruptive technology, nothing will be the same after two years.

But isn't everchanging also part of Journalism's nature?

Why can reporters deal with news, that's different everyday, but not techonology, which changes significantly only every two years? I know this is not a fair analogy, but think about it this way. News industry should have most information to understant and predict the movement of technology development. And maybe, just maybe, if the resource is used well, news industry can be better prepared for the technology evolution, which never happened.

Why?

Innovation is always going to lead to new and improved products. Within the 12 years I’ve been a reporter I’ve seen that first hand. When I started out in 1998 in Clarksburg, West Virginia we were shooting on SVHS cameras. These cameras were heavy, the tapes were cumbersome, and the quality was horrible. For larger stations they shot on BETA, which provided a better quality, and now P2 cards are the wave of the future. The tape has become obsolete in the TV world for stations that can afford the technology.

But as time goes on all new technology becomes not so new and the cost of the products goes down. I remember my first 5 disc CD changer that my parents got for me and I saved up for was $500 back in 1989. Now, who would pay that much? But then there’s technology television stations are taking advantage of that costs nothing.

Right now if we want to go live from a location we use a microwave truck . The trucks cost stations money because of the gas, the repairs, and updating equipment that gets old. But now with the “new media” craze we’re using Skype. It also allows a reporter to set up their own live shot without the use of a photographer. One big down side is that while technology is supposed to make our lives easier it has also led to more work at least in the TV world. As I tell our interns it will be interesting to see what technology is big once they get in this business. http://www.youtube.com/watch?v=t6hnagSBZbc

Who drives the technology evolution? Customers or Industry?

Let’s examine the cellular phone market. In the late 1990s, when I was a freshman in South Korea, it was hard to find anyone who had a cellular phone, because it was much more expensive than a beeper, which most students had at that time, and cellular phones were not well-supplied to the market. Thus, we would have to wait in a line at a public phone to call someone or check voice messages from a beeper. Today, it is hard to find anyone who does NOT have a cellular phone and the supply for both beepers and public phones have dramatically decreased.

Moreover, competition in the cellular phone market has been getting fierce. As innovative technologies have emerged, the cellular phone market has adapted to the new technology as much as they can to meet the consumers’ needs. When I got my first cellular phone in 1999, I did not imagine that I could eventually call my friends while seeing their faces, watch movies, listen to music, check emails and even help me when I lost my way. I cannot imagine now what could happen next.

So, who drives such new technologies? Is it the consumers or the industry? If consumers are not against the new technologies, their need to adopt the technologies will increase. Then, of course, the industry would try to adopt and introduce the new technologies to meet the consumers’ needs. In this sense, it seems that consumers drive the market. However, the market might determine and even control consumers’ tastes, no matter whether they wanted to adopt the new technologies or not, and could urge consumers to accept the new products. Then the older products would not exist any more (as happened to public phones). As Anderson argued in his book, it is probable that we do not have choices for the things we do not know.

Is Google really gate-keeping?

When we were talking about that Google is acting "psuedo-gatekeeping" today in class, an idea came to me. "How scary! Even though I don't want my taste of news be decided by computers, I'm still too lazy to look for news outside Google news!" True, Google is not really setting a gate and block information, but the impact is similar in terms of what users receive eventually.

So I'm getting curious about how great the impact is. If we can pick some stories from a news organization, and see how much Google news contributes in terms of traffic when the story is on Google news, versus when it's not on Google news. I think Google news has turned the competition between news organizations more bloody. If your story doesn't beat all other similar stories, the story will lose most of the traffic from Google news. (If we can track how many users do go to news stories other than the one Google picked, that will be even more interesting because we can really see the difference.)

Anyways, getting stories onto Google news will be important if the revenue comes from traffic. (KXAN has been trying to get its news onto Google news, but ... And Statesman is always there!)

Gimme a 'G' ...

Someone may have already posted this, but just in case ... Ten Things Google Has Taught Us. I dig No. 9.

News find audience

It's very interesting to see the law of long tail since it is still a case in the era of media-abundance and seems to be the case forever(?). Even though there are infinite media contents and channels out there, they are still be in long tail in media market and several media companies has high percentage of readership and gets popularity.

Regarding fragmentation of public opinion/audience, this phenomenon can be a explanation that fragmentation won't be the case or at least will be moderate.

But there's several cases some of media which were in long tail group get success in terms of readership and popularity--for instance, see how blogs get popularity and there are several factors leading top-bloggs such as posting original story and ideological stance etc. And this could be lesssons for the new economic models/ways of news media: make a story attracting audience. Yes, again, it's a matter of attention.

Another way of this is "news find audience." Given the ambient-news era, meaning news everywhere, news media companies seem to need to find a way of finding their audience (e.g., by using social media such as Twitter and SNSs).

The fate of San Francisco Chronicle

Do you know how to say "Law of the jungle", or "Survival of the fittest" in Chinese?
"The weak, meat. The strong, eat."
It's funny because even in English, it rhymes.

Pete mentioned the New York Times creating a Bay-area version.
I think the San Francisco Chronicle, is becoming a meat.

"The 144 year old paper lost more than a quarter of its daily circulation in the first half of 2009, according to the Audit Bureau of Circulation, dropping a steep 25.8 per cent to under 252,000 readers."

It is really ugly, because every newspaper including the New York Times experienced circulation slide of more than 10% in the second quarter.

Zero-sum game for attention

So how many new choices did we really get?

Long tail has a long tail effect on media studies. I heard people using this theory to explain the future of newspaper in the media market. Anderson's version has realistic connotation because it provides practical examples and recommendations.

Rule 1: Make everything available.
Rule 3: Help me find it. (Let's forget rule 2)

Rule 3 is a logical outcome of Rule 1. You have too many choices, you need someone to sort it out.

But at the same time they are contradictory. Rule 1 seems democratic. Rule 3 seems kinda tricky. If you influence someone to make a choice, is it really a free choice?

Rule 1 is what makes the new media different from the old mass media. The old media deducted the number of shopping list. The new media adds to the shopping list. But as for Rule 3, it's the same old game. The old and new media all influence the audience to make decision. When you do information search or shop for DVD's, do you go through all the pages?

There may be infinite numbers of choice out there. But the numbers we actually pay attention to are finite. Selecting one thing means discarding the other. I think influencing that selection is the source of power of media, whether it's new or old.

Beneficial or not? (for markets or for consumers)

It is interesting to see the recommendations of Amazon.com and other filter mechanism as a pre-selected personal taste for the consumers. Does that mean that we lost our control on making decision to select? I would see that personal using patterns whether they are heavy users or light users on the specific media as a precondition for the recommendation lists in digital entertainment economy to exert influence on the consumers. Probably, it could be the other direction which is the information related to consumers’ interests effectively provided by the services that makes consumers become heavy users. When consumers heavily rely on that media, they will not only pay attention to what content or product the media select for them, but they will also practically have purchase intention and behavior. Otherwise, they will choose to believe another way of word-of-mouth.

Indeed, digital market provides greater supply consumers than the offline market. I like the saying in the article that “many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching – a market response to inefficient distribution.” By expanding the shelf space and guiding the consumers to find out the product they like, hopefully the online news providers can have some idea from this. However, if following this kind of pre-selected mechanism, will it become another gatekeeper?

The fantasy of the digital market

Anderson’s piece gives us a sense of the new economic model for the media and entertainment industries. It is especially useful nowadays regarding how the digital entertainment economy really works. However, here is my big question about the law of the digital entertainment economy. Is the online market really a world of abundance? If it is, to what extent does it guarantee that abundance will be available to individual consumers? As mentioned in the article, online markets, especially the digital entertainment market, limits individual tastes by, for example, the recommendations of Amazon.com and pre-selected music on the front screen of Rhapsody. Such filtering mechanisms are likely to influence consumers’ personal taste. Ultimately, the markets will not provide other products to consumers unless they have been requested. There is a similar effect with Facebook. The Web site suggests people who live in the same area or belong to the same social groups as I do. Thus, I agree with the law, to some degree, which argues that the digital entertainment market guarantees greater supply to consumers than did the offline market. Still, I wonder to what extent the online market law is different from the offline version.

The approach taken to the digital news economy compels me to think about the digital news economy. Would it be the same as the law of the digital entertainment economy? Would the hit-driven mindset work for the news too? For example, in the entertainment industry, recommendations are a remarkably efficient form of marketing, since they indeed influence the tastes—and decisions—of individual consumers. Would recommendations about news also influence the tastes of news consumers? It might be better to define these tastes as opinions and attitudes relative to news consumption. In addition, in the digital entertainment market, a “power law” demand curve seems to be at work. So how might the consumption of news change? Would the law—an increase in supply results in a decrease in price that ultimately affects the increase in demand─still work for the news consumption model in the digital market?

Music and newspaper industries are scarily similar

I think Anderson is at his best when he writes about the physical constraints of old media and the unfettered nature of new media. I especially like his reference in the book (not this article, unfortunately) to the democratization of the tools of production , in which the price of news must fall because anyone, anywhere, can now “report.” In fact, I’ve been joking about teaching a class called “Reporting by iPhone” which would prove that.

The perspective on the record companies, on page 4, and their onerous infrastructure costs to maintain and stock music retail stores is frighteningly analogous to newspapers. Papers have high infrastructure costs; their traditional model is being shaken by digital media; and digital distribution is threatening to undermine the business model. The biggest difference that I see, ironically, is that newspaper content doesn’t have to be pirated to be free – the news outlets did that themselves. No wonder RIAA is better positioned.

So are top brands like the NY Times and WSJ “hits?” Or are only the top brands within the top brands hits, like columnist Maureen Dowd at the Times? And what’s the value in news of user recommendations – are those good or bad for national news outlets? Local news outlets? I think Chris Anderson’s ruminations are really interesting because, without offering a roadmap, they at least lay out how things are, and why.

This book, the Long Tail, is the straw that convinced me to join Netflix. My selections are way down at the end of the long tail… I prefer TV series from the 60s, 70s and 80s, like MacGuyver and the original Mission Impossible. But for $5 a month I can get that, thanks to the infinite shelf space of digital information. I rarely make selections based on the recommendations, but it happens. I liked the Mel Gibson movie “Payback” and Netflix recommended “Point Blank” – the 1967 original of the same story. Ditto with “Ocean’s 11.” Now the original movies, starring Lee Marvin and the Rat Pack, are among my favorite movies. I don’t think the tattooed, pierced guy at the video store could have recommended those flicks, and I know the store wouldn’t have had them in stock.

The scarcity of time and energy... (or ability)

It seems the cost of current information consumers/user is not only about the monetary cost but also the cost of time and energy. If the cost of searching information is lower (fewer time, easier subscription procedure, clearer or well-organized interface, etc), it's more attractive for people to pay a bit than totally free to use the information.

The cost of searching and full understanding the information also plays significant role in the free information aspect. In making political voting decision, most relatively uninformed people may use information shortcuts (require little effort to acquire information) such as friends, coworkers, political parties, and other groups to gain brief and simple idea of certain policy and to make their decision rather than fully understand what does the policy contain.

The other thing is about the inferior goods theory that Iris mentioned in class. The labels fear the "channel conflict" of cheaper MP3 downloading and the decreased sells of CD; however, will the consumers are still willing to pay more according to the inferior goods theory? To what extent the pricing distance between the inferior goods and the superior goods will affect each other?

Circulation drops again on newspapr price hikes

The NY Times and USA Today both saw circulation drop. News Corp, ironically, saw print circulation increase after raising the price of online content.
http://www.bloomberg.com/apps/news?pid=20601103&sid=a3zVFwU3wo7A

Does the "Long Tail" stand at odds with "Free?"

• Compare Anderson's candy experiment with his statement on the Longtail: "By offering fair pricing, ease of use, and consistent quality, you can compete with free."
• An interesting chart from Anderson's blog on increased demand for less popular titles as Netflix has grown.
• An interesting criticism of the Long Tail: The Long Tail" told us consumers were losing their taste for hits, and it argued that making available online more obscure titles would level the playing field. Between this study and the research of Professor Elberse, we have evidence that popular titles now represent a greater share of sales and merely making songs available online does not put an artist at an advantage.

Umm, What About My Candy?

After reading The Longtail, I started wondering about the areas of economic indulgence where abundance and prices have never been higher. What industries are having a Shortail effect?

Personally, I've been miffed by the candy industry's constant push in price lately. While they can chalk up price increases to distribution capabilities, can't they apply the same principles of Netflix and Rhapsody and so on?

There's an interesting dive into this that leads me to believe there is a limitation to The Longtail effect. Consumption of pre-existing goods which can be recycled or reused (books, cars, music, speeches, other intellectual properties, etc.) can have variable costs which spiral down over time because they assume a one-time cost creation structure. In other words, once a book is written it is written; once it is printed, it is printed.

However, consumable goods such as candy, health bars, protein shakes, baby formula assume constant cost creation structures. In other words, once a piece of candy is made, it is made but another must be made to replace it. It cannot be recycled or reused once consumed.

So then, we see a gap in The Longtail flow -- it cannot be applied across the consumer continuum where one-time consumable goods apply ... much to the disappointment of my sweet teeth.

Record labels need to wake up

When you look at the big picture of marketing music and selling it to the mass audience there are so many things to consider. It seems to make sense that online companies such as Netflix would profit better from certain movies than chain stores since Netflix operates out of what I can assume to be one hub, while Blockbuster has to have centers all over the country. What is wrong with the bigger picture is greed I believe.

Anderson mentions that the record company has to charge 65 cents per song to the whole seller in order to make up for lost profits because the consumer will likely not buy the entire album. I think that is the old way of thinking for the record company. I would think as a producer of music you would consider the fact that fans of a band may only buy a few songs, so why in the end produce an entire album. Sure there are die hard music fans that will want it. But why not just put out a few songs, see how those do, and then if it does well go back out and produce an entire album? I’m just a little confused by that. It’s almost like television stations remembering the good ole days of advertising revenue in the 1980’s. I think they still look back on that business model and think we need to generate money like we did back then.

While the article talks about taking online music for free being a gamble that is true in a sense. Sure it takes more time since you will likely download a song that sounds like someone recorded it off the radio. But if you take the time to download 2 or 3 versions of that song you will likely find one that sounds right off the CD. Of course if you get caught I’m sure it wouldn’t be worth it.

Newspaper model reversing?

The NY Times now makes more money from circulation than from advertising - a dramatic reversal of the traditional business model. Of course, the Times can profit from circulation as a "superior good" but what's the fate of, say, the Statesman?

http://business.timesonline.co.uk/tol/business/industry_sectors/media/article6886390.ece