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In the beginning there was sheep throwing. Virtual goods were free, limitless and innumerable when the Facebook Developer platform launched. The marginal cost of production of a virtual good is zero. Therefore supply is infinite. And the value of a virtual sheep is zero. Clearly, there’s no business in selling infinite goods. 

So, developers aimed to introduce scarcity into the virtual goods economy by replicating the real world dynamics. In our daily lives, we use money to trade time and effort. For example, eight dollars represents an hour of work at minimum wage. I can use those eight dollars to buy a meal at In N Out, which saves me the time of grocery shopping, cooking and cleaning. 

Zynga and Kabam created games that required constant attention and time. In so doing these game developers introduced scarcity. Since time is scarce, users wanted to save time by paying for virtual items and services – just like the real world. $1 and my carrots are ready to harvest now. Just like that billion dollar businesses were born!

The New York Times is facing a similar challenge to the providers of throwable sheep. It hasn’t been able to introduce scarcity in a natural way, a way that aligns the incentives of users and the business.

Today, the Times enacted a nonsensical pay wall with digital subscriptions costing 3 times more than print and web-only access impossible. This action is a symptom of a greater struggle.

The Times faces a conundrum: the newspaper benefits from free distribution but has trouble monetizing it. Readers find op-eds and investigative journalism articles through search, Twitter, email and Facebook. In the long run, this sharing builds the brand and drives ad impressions. But the ad revenue isn’t great enough to support the costs of the quality journalism. Thus the subscription pay wall. 

Subscription services work well for music streaming services because access to old albums is just as valuable as access to the Billboard 100. Dire Straits will always be in my top 10, no matter how many Biebers surface.

But the same isn’t true for news. The value of an article from 2 weeks ago is almost zero. A study found that the half-life of news is 30 minutes – 94% of retweets occur in the first hour. The Twitter example is extreme because the Twitter feed pushes content below the fold quickly, but the point is valid. A day old newspaper is worthless.

For NY Times, scarcity is introduced by time. News is most valuable when it’s fresh. I propose the pay wall should be designed to reflect this. Make all content on the site free after 1 week. But to access this week’s news, magazine, science section, ask users to pay. 

The most devoted readers, the ones who rely on the Times for relevant news and great journalism will pay. Content can still be shared, searched and Tweeted. And ad impressions should remain relatively constant – maximizing revenue.

There is natural scarcity to time. Businesses selling content on the web should use this scarcity to their advantage and build revenue models based on saving time.

 

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One thought on “A Proposal: Scarcity, Sheep Throwing and NYTimes Pay Wall

  1. It’s a great point. Time is not only natural but we’re all bound to it. Businesses don’t have to create a new concept but just use this very universal one.

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