If you are used to reading complete WSJ articles on your Blackberry of iPhone, the end is nigh. Starting third week of January they are going to charge for mobile access.
A mobile only subscription will cost $2 a week. For those with either a print or WSJ.com subscription, the cost will be $1 a week. People with both print and Web subscriptions will get full mobile access for free.
I think it is a great idea to charge separately for the mobile version. But the pricing is not perfect and needs adjustments to maximize profit. Let us analyze this deal and the prices of rest of their offerings (print, online only and the bundle) to see if there is room for increasing profits.
|Print + Online||Print Only||Online Only||Mobile Only|
|Weekly mobile price||$0||$1||$1||$2|
The first observation is for those who are considering Print Only or Online Only subscription and need Mobile version, the most cost effective version is the Print + Online version at $2.69 a week. This indicates pricing inefficiency in their current Print+Online bundle. This is something they should have fixed even before the introduction of pricing for Mobile version.
Who are the Print Only subscribers? Businesses, libraries, and some individuals who still prefer whatever convenience the print version offers. These segments get little or no utility from Online version and are unlikely to switch to Online Only version because of the higher price of Print only version. While the 40 cents incremental cost to add online access makes sense, the base price of the Print Only version leaves more consumer surplus than necessary. The Print only version can be priced higher than its current levels.
Who are the online only subscribers? Mostly individuals, the wired segment. For most of the sub-segments in this category, there is little or no utility by adding Print version. For some, this may even be negative utility. However for those who want the print version added to their online version, the utility they get from it is high. Hence the incremental price to upgrade to the bundle can be more than 70 cents they are charged today.
Who are the Mobile only subscribers? For people on the go with smart phones there is considerable value from the mobile version, more than the current $2 price, but WSJ is prevented from capturing all the value because of the reference price set by their Online only version. Even though it is cumbersome, people can simply read the journal using the browser on their mobile phone, using their online subscription. So the $2 price for Mobile only version makes sense.
What about the price for adding Mobile version to Print only and Online only subscribers? For Online Only subscribers, the $1 is most likely the right price. I bet WSJ’s customer data showed that most of their Online Only subscribers will simply use the mobile browser instead of paying separately. In other words a very steep demand curve, with demand falling sharply after any price more than $0. So the high $1 price for adding mobile version delivers more profit for WSJ than a lower price.
But for the Print only subscribers, those who did not even prefer reading the online version the incremental utility from mobile version is low. I believe $1 price for these subscribers is not the profit maximizing price. The price lies somewhere between a few cents and 40 cents (the incremental price for adding Online version to Print Only subscription).
Why not give away mobile access for free to the Print Only subscribers? Because this would make the print only subscribers who will never prefer adding mobile version think that they are paying for something they do not use. So the incremental price for adding Mobile version to Print Only subscription has to be more than $0.
The net of this is, it is a great idea to charge for mobile version. But the prices need adjustments to maximize profit. While they are at it they should also fix the pricing for the print only subscription.