Willingness to Pay for Online News: An Empirical Study on the Viability of the

Subscription Model

A powerpoint for Com 548 MCDM University of Washinton

 Yun Li Oct 20, 2009

What is the issue?

The Internet has become a well-established news medium, while, no business models seem to generate reliable revenue streams for online news services.  

 Advertising model (the effectiveness of online advertising remains questionable)?  e-commerce never fulfilled its promise.  

What is the viability of the subscription model?

 

 A study has been conducted to investigate how consumers in a geographic market respond to fee-based online news services. Paying intent (willingness to pay) for online news is measured.  What factors have an influence on paying intent are also examined.

A random-sample telephone survey of 853 Hong Kong residents was conducted during November 13-17, 2002

   very few users actually responded to paid content  most had no intent to pay in the future.

 free alternatives existed online and offline users did not perceive online news as something with unique value. the possibility that online news is an inferior good.  

Factors Related to Paying Intent

Age : (negative)younger users were more likely to pay for online news access. Newspaper use : ( positive)more time spent reading newspapers meant a higher likelihood of paying for online news. Income: (negative)people with higher income were actually less, not more,willing to pay for online news.

 

“online news is  characterized by a horizontal demand curve at the price of zero.” “consumers would purchase as much as they can at the current price, but if the price goes even a penny up, the quantity demanded drops to zero.”

 

 Conclusion of Chyi's research:  Online  news publishers may find it difficult to use the subscription model to achieve economic viability  “free becomes not just an option but an inevitability. Bits want to be free.” ( Chris Anderson’s )

discussion questions:

 What is the future of the online news industry?  What revenue model do you think that Internet news publisher can apply to achieve profitability?  Is there value to maintaining digital media when profitability is not achievable?  

 Citations:

   Anderson, C. (2009). Free: The future of a radical price. New York: Hyperion.  Chyi, H. I. (2005). Willingness to Pay for Online News: An Empirical Study on the Viability of the Subscription Model. The Journal of Media Economics. 18 (2), 131-142.   

 

 Thank you !