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May 24 2010

14:00

Consumer Reports rolling out paid content mobile strategy, taps potential users to set prices

The journalism world is still grappling with to-charge-or-not-to-charge, but it’s clear charging has the momentum — particularly on mobile devices. The New York Times is moving ahead with its January paywall plans and has put only a limited selection of stories in its iPad app. The Wall Street Journal is hunkering down with its paid-content model. The Washington Post waded in a few months ago with a 99-cent iPhone app. But the decision to charge is really two decisions: whether to charge and, if so, how much to charge.

One longstanding news outlet — Consumer Reports — made the first decision long ago and, true to its roots, keeps doing tests on the second. It accepts no advertising and is funded almost entirely by the sales of its publications and donations. Those funds support a staff of more than 600 people and runs a compound with multiple labs testing everything from cereal to toilets, plus a separate track and offroad track where it tests cars and SUVs. “‘Free’ is something we don’t like to use around here very often,” Jerry Steinbrink, its vice president of publishing, told me. Readers have to cover the cost of producing the content, and no project can operate at a loss, he said.

Strategic pricing

The magazine is strategic about setting prices, often borrowing from its own editorial practices. In determining how to charge for its new mobile website, for example, it ran tests with potential users. The magazine is in the process of testing out pricing plans for its “next-generation” iPhone app, which is still in development. (Their current app provides only limited access to CR content.) One group of app testers will be asked how much they’d pay for the tool; another group will be asked to react to some suggested prices.

“Because we are Consumer Reports, we test everything,” Steinbrink told me. “We depend a lot on focus groups. We’re trying to determine, with user input, what an acceptable price point would be.” Steinbrink wasn’t prepared to give a likely figure for the Consumer Reports iPhone app, but considering its functionality — it allows you to take a picture of any barcode, which will pull up all data Consumer Reports has on the product — and CR’s business model, don’t expect it to be a run-of-the-mill 99-cent app. Steinbrink thinks it might require a subscription fee that is renewed a few times a year, perhaps putting it in the range of their website which costs $26 per year.

Mobile strategy

Their new mobile site, which works on any web-enabled mobile device, lets users look up product information and compare items. (The barcode feature will only be available in the app.) For now, that site costs 99 cents for a 24-hour pass, or $4.99 for a month. Subscribers to the Consumer Reports website ($26 per year) can access the mobile site for free, but magazine subscribers ($29 per year) still must pay for web access, just like non-subscribers. By mid-summer, Consumer Reports expects to eliminate the 99-cent option, and lower the monthly fee to $3.99. Subscriptions are a better model for Consumer Reports, Steinbrink said, because they offer the magazine a more predictable, consistent income.

The choice to build both a mobile site and an app was deliberate, Matthew Goldfeder, director of mobile products told me. “Mobile use is going up, and will only continue to go up,” he said, predicting that some of the “sexyness” of apps may wear off as mobile web browsing improves.

There’s also another strategy at play. Consumer Reports hopes the mobile site will get new users to subscribe to the full website, which has many more features and more information than the mobile version. Both Consumer Reports’ site and the magazine skew older; the typical site user is a white male in his early 50s. They’d like to get younger users — say, recent college graduates buying electronics — to identify with a brand they associate with their parents. When that recent grad eventually buys a first house, hopefully Consumer Reports will come to mind. The magazine wants to give users “the kind of content that goes with their life cycle,” Goldfeder told me.

From niche to news

Consumer Reports is more like some of the niche sites we’ve written about recently than a traditional American newspaper. Sites in the niches offer unique and valued information that a certain readership is willing to pay good money to read.

Duke economist Jay Hamilton divides information into four categories: producer information (info that lets you do your job better), consumer information (info that helps you make a better purchasing decision), entertainment information (fun), and civic information (info to make you a smarter voter and citizen). Hamilton says the first three categories have it relatively easy, but the fourth one will always have trouble charging. Just as The Wall Street Journal fits nicely into Category 1, Consumer Reports slides obviously into Category 2.

Still, Steinbrink said there are some lessons general news publishers could learn from Consumer Reports. Shrinking ad revenue “forces editors to look at their content and produce the kind of quality a user will actually pay for.” Just putting a paywall in front of content that used to be free might not be enough.

November 20 2009

14:00

The FTC should give nonprofit news a closer look

You know the old saying about how we’re from the government and we’re here to help you? That’s what came to mind as I read the Federal Trade Commission’s notice for its workshop on journalism in the digital age.

The notice makes the case that “news organizations,” which it notably does not attempt to define, are suffering at the hands of aggregators and other online actors that have drained the fun and profit from news gathering. Among the solutions the FTC wants to examine are some that would seem to support nonprofits — tax treatment and greater public funding, for example.

Memo to the FTC: No thanks.

It’s not that the FTC’s proposed solution are so bad, though I don’t much like the idea of government funding non-broadcast news operations. It’s that they provide fresh fodder for misinformed critics who have come to the conclusion that nonprofits pose a threat to for-profit news sites and journalism generally.

Mention “nonprofit” to some of these folks, and you’re likely get an allergic reaction. No sooner had San Francisco investor Warren Hellman ponied up $5 million for the Bay Area News Project than somebody complained errantly that the new venture would rely on unpaid college students, forcing other media to cut staff to remain competitive. News flash: Old media aren’t competitive in the online age, and that isn’t the fault of Warren Hellman or any nonprofit. Others fretted that donated money like Hellman’s comes with agendas and strings attached. And advertising dollars don’t?

But I digress. Nonprofits offer a viable solution to the decline of socially responsible journalism. By design, they put mission ahead of profit. And as a result, they will live or die based on their commitment to transparency. When the government gets involved, it introduces the appearance of special favors and the potential for political interference. That’s the death of transparency.

To be clear, I don’t object to the notion of government oversight. A little can go a long way — witness the FTC’s late-1990s antitrust investigation of Intel Corp. At the time, Intel dominated the computer chip market and, along with Microsoft Corp., seemed capable of devouring anything in its path, much as Google appears today. But just before trial began in 1999, Intel signed a settlement with the FTC in which it admitted no guilt and essentially agreed to be nicer to the smaller kids in the technology sandbox.

Based on this experience, we can assume that what the FTC workshop really hopes to accomplish is to once again nudge the bullies into being nicer. I would submit that there are better ways to accomplish this goal. One might be to bring in witnesses who can explain how the nonprofit model works and how it complements the work of for-profits in journalism and other sectors.

My nomination would go to Duke’s Jay Hamilton, author of All the News That’s Fit to Sell, which is cited in the FTC notice. In the book, Hamilton makes the case that journalism is becoming a public good. He writes:

The point here is that since individuals do not calculate the full benefit to society of their learning about politics, they will express less than optimal levels of interest in public affairs coverage and generate less than desirable demands for news about government.

I do agree with the FTC that the stakes are high because unlike the great oil and steel trusts of old, the big powerhouses of the Internet are in the business of ideas. As Bill Kovacic, then a law professor at George Washington University and now an FTC commissioner, told me during the Intel case: “I think the impact is so important because its impact on information services affects everything we do.”

The FTC workshop will be held in Washington Dec. 1-2.

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