It does not matter to customers what your costs are

The arguments on paying for online newspapers focus on the cost of running the news operation including the news desks reporters, editors, web site etc. Proponents of pay to read say readers must start paying because of these costs. On the other hand those who argue that information must be free focus also on the costs, the marginal cost, and a make the case that it costs you nothing to serve one more reader and hence it must be free.

The cost arguments are irrelevant. One can charge for a product only because of the value it delivers to the customers and not because it costs the marketer to produce. Similarly, free argument based on marginal cost does not hold either. If the readers can get the same content elsewhere for free, the content becomes commodity and its price will spiral down to $0.00. It does not matter that there are fixed costs to producing and distributing commodity content. Content can only be charged if it has differentiated value.

There is an Ad in today’s WSJ on their news sports coverage. It says

“When we report on sports, we focus less on what you’ve already seen happen and more on what will happen next”

That is differentiation.

2 thoughts on “It does not matter to customers what your costs are

Comments are closed.