Physical vs Digital

As I was biking this morning, I was behind a black Ford truck that was delivering papers. I got to thinking that this was a very expensive way to get a paper to a reader. The driver's time, the depreciation on the truck, the gas, the printing press, the paper costs, etc. And that got me to thinking about what I would do if I was Bezos and just bought a business with a big cost structure around printing and distributing a physical product.

And speaking of Bezos and Amazon, I just read this Nicholas Carr post about the slowing growth of e-books relative to physical books. This jumped out at me:

E-book prices have not fallen the way many expected. There’s not a big price difference between an e-book and a paperback. (It’s possible, suggests one industry analyst, that Amazon is seeing a plateau in e-book sales and so is less motivated to take a loss on them for strategic reasons.)

So back to my bike ride. As I watched the truck deliver the paper to driveway after driveway, it occurred to me that many people prefer to get the paper in physical form. The Gotham Gal does and so does her sister. But my brother in law reads it on his iPad and our daughter Jessica reads it on her iPad mini. I prefer to read it on the web.

Different strokes for different folks. But clearly there is a large and important customer base for the physical product and it is not going away any time soon. Many of the early adopters of ebooks and tablets to read books and the newspaper have made their move. The diehards aren't going to make that move it seems, or they are going to take their time.

So what to do? The obvious move seems to me to price the physical product at a significant premium to the digital product reflecting that the marginal cost of a digital product is zero and the marginal cost of a physical product is not. That will either drive more adoption of the digital product where the profits are likely to be higher or it will drive the margins up on the physical product because the diehards will accept the price increase and keep reading the paper and/or book in physical form.

But we have not seen this happen in the book market and I am not sure we have seen this play out completely in the newspaper market. Is the market and the companies that make it up behaving rationally? Or are they protecting the physical market at the detriment of the digital market?

I realize things are never this simple. But that's the question I was wrestling with on my bike ride this morning. And so I thought I'd share it with all of you so we can discuss it. So let's do that.


Comments (Archived):

  1. kidmercury

    It is textbook disruption, not an apples to apples comparison. Meaning digital will continue to evolve to a point where it has features physical does not. I.e. social stuff. Then physical will be just like vinyl, good for purists, hipsters. But not practical with how society is evolving. Like many vinyl owners also own a digital copy because that is what society requires, I think the same will eventually apply to books.

    1. Martin De Saulles

      I can see how the social sharing aspect of digital news is having an impact – not sure if this really applies to ebooks.

      1. kidmercury

        Digital textbooks I think will be a major breakthrough. I think book clubs will get revolutionized at some point too.

        1. Martin De Saulles

          good point – academic market for more interactive textbooks is huge

          1. Bridget Goodbody

            Martin: I’ve been looking for stats on the academic market for interactive textbooks. Can you point me in a direction? Tks!

          2. Martin De Saulles

            sorry, no numbers to support that – I was speaking from my experience as an academic where I can see the opportunity for academic publishers to add more value through greater interactivity of their titles

          3. Bridget Goodbody

            Tks, Martin! I guess until the publishers create interactive content, its impossible to really know exact demand, right? But, I agree, it seems so obvious that this is where academic publishing should be going!

      2. Cynthia Schames

        Making snippets of an ebook easily shareable across social/email could definitely bridge the value-to-publisher gap.Instead of copying and pasting text, then opening your preferred share medium and having to type in the book name, author, etc, just one click to share and you type in your comments. The technology exists and we all use it every day across the web. There’s no reason why this isn’t part of ebooks as well–other than the fact that ebook publishers come from traditional publishing backgrounds.

    2. William Mougayar

      I’m surprised the textbook sector hasn’t gotten disrupted as much as it should with e-books, although it’s the most conservative segment of the publishing sector.

      1. kidmercury

        I think it will start with home schools. Public scjools arevtoo stupid/corrupt to catch on.

        1. William Mougayar

          Yup. Not just for the social aspects, but the built-in interactivity and hyperlinking are the right features for learning.

      2. Tracey Jackson

        And the really thought it would.

      3. Matt Zagaja

        When I was an undergrad five or so years ago the e-textbook space was just starting to take off. I had one or two books I could get in an Adobe protected format that was not useful. Ultimately I think e-textbooks suffer from their own market dynamic: professors pick the books and publishers charge an exorbitant amount to first time buyers that do not have a voice in the matter. However the first-sale doctrine has created an entire secondary economy of reselling textbooks. I sold most of mine on and and when buying and reselling used textbooks even netted a profit on a few.If digital textbook prices were significantly cheaper then as a student I’d demand a move. However in this market it seems to me that the digital model would be more detrimental to students than helpful unless a “digital first-sale doctrine” were added to copyright law.

        1. William Mougayar

          That’s a very clever insight Matt, and with your own experience. Someone will break the mold, then the river the flow in a different direction.You can buy a decent e-reader today almost for the price of 2 expensive books.

      4. fredwilson

        There is a lot of inertia in the textbook purchasing process. And maybe some graft too

        1. LE

          I think I told the story of the head of the Penn Bookstore who had to be greased in order to let us distribute the coupon books at the front cash registers. The competitors had to stand on Locust walk and give them out. The distribution point (at registers) was critical and well worth the bribe. (Then there was the sexual innuendo foisted on my ex wife by the guy.)Also told the story about when I sold my printing business the new buyer got a contract with Penn because one of his investors was tied into the board. Previously the purchasing department wouldn’t give us any work (didn’t matter at all if I was an alum or not). They had their favored vendors.Had a guy working for me once that was in the construction business and had what they called “coffee and cake” guys. Inspectors that you’d have to leave some money on their car seat so they wouldn’t disrupt your project to much.(I’ll stop at 3 out of dozens of stories like this.)

      5. SubstrateUndertow

        Isn’t digital disruption in the education market largely plagued by accreditation road blocks ?

        1. William Mougayar

          I’m sure it’s a factor, but shouldn’t be a show stopper, if the participants in the value chain are willing to change the status quo.

    3. WA

      Sure hope the students I teach at a local college an evening a week get this opportunity soon. There’s nothing more horrific than watching the faces of 19 and 20-year-olds when they realize they have to pay over $100 for texts that in many cases deliver antiquated notions of academic perspectives as we try to ready them for the real world.

      1. sigmaalgebra

        I had a terrific calculus book, alsoused at Harvard, tough to writea better calculus book. I recentlypriced a used copy — about $9.So, for books that don’t much change,buy used copies and self-study!I learned freshman calculus thatway; never took it in school;started with sophomore calculus;did fine!

        1. WA

          I do send the students online for used versions, however they are hard to come by enmasse or in updated versions. When compiling homework via the publishers sites codes for the texts are also needed. So that presents an issue going forward. I have allowed for hand ins for those without online access. There is another market…one in Asia for example, where the current text at a steeply discounted price to the US version can be purchased-in English-but published specifically for Singapore or Hong Kong markets as one of my students found a few semesters ago.

          1. sigmaalgebra

            Of course, the publishers want to follow’planned obsolescence’ and arrange thatthe used books have little value, etc. So,they do.The solution I suggested for the students,in courses with fairly standard material,was just to f’get about courses, get aused book a few years old for a few dollars,and learn from the book. Maybe latersign up for a class on the material,never buy the expensive book for theclass, and show up only for the tests.That solution will work for only a smallfraction of students.A good solution now is for the prof just towrite notes and/or a textbook in, say,Knuth’s TeX, output PDF, maybe printthat and distribute the paper or let thestudents download the PDF. Otherwise,put some texts “on reserve” in the libraryand let the students photocopy selectedparts.Between the lectures, PDF, and reservetexts, in most courses should be able toget by without the latest $100+ per copytextbook versions.But it’s been a long time since I was a prof,and even when I was I didn’t want to beand certainly don’t want to be now.

          2. WA

            Thanks. Ideas are always appreciated. I was invited to be an adjunct for undergraduates a couple of years ago. I do it one evening a week for a 3 hour course. I love it. I love the students, and really love the opportunity to keep current, and expand my view beyond the core of what I do on a daily basis. It allows me to help take the real world in my core career and introduce some road for the rubber of the students academic lessons to take a spin on. Real world references.I find much of the class to class material for discussion right here as following AVC since 2004 has been a front seat to the development of the tools which have shaped our society from personal to business needs. There are many others I have learned to learn from here as well. I could not see myself without the value added of what I learn from 35 other students and the professors I surround myself with though. I say this with all due respect and concede that as a part time professor I am far from the politics of the school and am not immersed in it in the career sense you were.

  2. Martin De Saulles

    I can see the market for physical books lasting longer than physical newspapers. A lot of people like to see their books on shelves at home whereas the newspaper is a more temporary item. Also, as physical newspaper circulations decline the impact on their ad revenues hits the publisher’s bottom line – book publishers don’t have that worry.

    1. fredwilson

      great point. this is what i am looking at as i read this comment

      1. JamesHRH

        I think Seth or Clay calls this the talisman or trophy aspect of media. Something like – I walk into your office, I see your copy of a Carlota Perez book and say ‘Your into Carlota? me too’.Its not a communication vehicle in the future, its an in situ mental connection vehicle.

    2. jason wright

      yeh, but the more things you own the more the things own you.

      1. Martin De Saulles

        I agree with you in a general sense but would make the case that books (and Fred’s vinyl collection) are different. We have a different relationship with books and music than with most other physical items – they often have deep personal meanings for us and relate to important moments in our lives.

        1. jason wright

          true. i have shelves of books that do that for me. nevertheless, i wouldn’t allow the possessing of them to ‘get in the way’. then they become a burden.

  3. Dave W Baldwin

    A big leap would need to happen. In the newspaper realm, say local, you have the banner ads revolving around National this and that Week. This moves over into placing as many local sports photos as possible. The local television station went after this in a sleazy way (getting ads) and now you have video available to the locals.Yet, the newspaper could also shoot video and place the link on their digital site, but how many do that? Most newspaper sites are full of still photos.To me, when print makes the move into combination of storyline and video, a shift will happen.

  4. Rohan

    Ideally you’d have a big price differential between the physical and digital versions but the physical versions keep too many people employed at the moment – publishing houses, printers, distributors, etc.Change will come but only when there’s no other option but to accept it.. And I reckon it’s a generational thing.. 30 years from now, I’d be surprised if the physical market is just a small niche one.

  5. Jon Smirl

    Make it free on the Kindle and pay everywhere else. Drive people to Amazon’s platform.

    1. fredwilson

      Putting a pay wall in front of news and journalism is not necessarily a good strategy. News is a commodity at some level and forcing folks to get the story somewhere else can backfire

      1. Jon Smirl

        I think that equation may work in this case. The caché of the WP is that it contains the political editorial content not that it is a general news source. He was never going to capture the audience looking for a general news source with a paid app. But he can certainly capture the audience that is looking for that specific WP content. Plus he will keep the print edition as long as he can keep it profitable.Free on the Kindle is a good PR move that will differentiate it from all of the other Android devices. It not like he is losing that many potential pay customers since most of the people willing to pay for WP content will already be wedded to their non-Kindle device.Plus he still gets his soap box which is what I think he really wanted.

      2. JamesHRH

        I think Bezos will look at alternative distribution methods, rather than just pricing.Sells you your own 3D printer and supplies for you to print your own every morning? Lots of cool features could work there.Maybe he only sells the printers to newsstands and they make a comeback.Although, he has a tendency to keep distribution in house, so maybe there’s an Amazon newsstand that publishes on demand hardcopies of mags & papers for people to pick up.

  6. William Mougayar

    The traditional Publishers are still a choke point for controlling pricing differentials, because they still have distribution and prestige power. I’m dealing with one right now, where the royalties offered on the e-book are fairly the same as the hardcover, and the price of the e-book is only $3 less than the hardcover on average.Amazon is trying to change that, and they give the author much higher royalties (up to 70%!), and you can set your own price. So, I’m thinking hard about whether I’m better off self-publishing and setting the price I want, which will be half the hardcover price, and I still make more money.…Aside that e-books are not for everything, there are economics at play. I think the market hasn’t saturated at all.

    1. Tracey Jackson

      I like and respect your comments but what e-book is $21.00? When you are published by a house you do make less on your e-books, the same way when you make a film and stream it you make next to nothing. No question digital entertainment beats the crap out of content generators. The death of the DVD was the nail in the coffin of filmmaking as we know it.If you have a best selling self published e-book you can make money, but you can’t get reviewed, you don’t get press, TV, print or radio. Unless you get to Fifty Shades of Gray levels.Not that publishers help that much but there is still prestige at being published by a house. I think down the line we might all end up self-publishing as the money will not be worth it. But people still make real livings on advances and book sales and all that goes with publishing it the old fashion way.

      1. William Mougayar

        Good discussion Tracey. One should make more with e-books, because it’s more efficient for everybody, so that’s the paradox, no? I’m going by averages of $11-18 for e-books, by anecdotal observations.But isn’t the tide changing with reviews and the poles of influences are shifting to blogs and online reviews. Online will review e-books.My own prediction is that traditional publishers will be great if you’re a high-end, well known author that can sell 1 million copies from the starting gate, but you’d be a sucker to enter that model if you’re new and up-and-coming, unless you don’t care about returns or publicity. The publishers will not help you that much with publicity. You have to pull in your own weight anyways, so you might as well start online.I had 2 books published by Harvard Business Press & McGraw-Hill in ’97, and now looking at Wiley, but I’m not totally jumping yet. Not much has changed in 15 years at their core!

        1. Tracey Jackson

          That’s the problem NOTHING HAS CHANGED. The publishers are dealing with it all like it’s 1976. And here is this annoying thing called the e-book, they don’t know how to deal with, They don’t know how to make sense of the fact that most people now sell more -books than they do hardbacks. Forget paperbacks, e-books have replaced them. They don’t know how to publicize well online. The tech marketing at the houses suck. All they see like the newspapers and the movie studios and the record companies is their revenue is decreasing. They are not making money like they did. Yet they are not adapting to the new format. And they in turn make the artists suffer.Give writers more profit – but from where they will say. We’re losing money.If you are James Patterson, you will make a fortune. The new writer makes nothing and gets no help even if he has a book published. But the e-book thing is tricky too. Some are lucky.And if you are Seth Godin you can pull it off masterfully. But few can so they languish too an many people look and say “they self-published” And turn their noses up.Even published established writers with real reputations complain. It’s a big problem. And they (the pubs) were literally blindsided,But instead of attacking it properly and making friends with the foe as they see it, they make it worse.And then in comes Bezos and buys the Post, so he looks like someone who can embrace it all.As you know Wiley is the best with text books and they still make $.

          1. ShanaC

            i’m actually surprised no one bothered making an independent digital only publishing house

          2. Tracey Jackson

            There are independent digital publishing houses if that’s what you mean. They are springing up.

          3. ShanaC

            not oen that has made it big. Huge winners in the WW Norton sense.

          4. Tracey Jackson

            No, because of the division of rights. They big publishers won’t splinter them off. I think people would offer writers a bigger piece of the online pie but everything is still all tied up. Amazon also makes it tough. It’s hard to be published as an e-book by another publisher and sell on Amazon.

          5. JamesHRH

            Tracey – thanks for dropping the knowledge.While publishers seems to be dinosaurs, they do still add value, to certain authors, as your comments clearly show.And, of course, I still see printed books all over the place.

  7. awaldstein

    Some people love newspapers but they are simply going away. They may exist in some pricing corner of the market but they are expensive, time sensitive, throw away and environmentally foolish.Books I’m uncertain about. Permanence adds value and cost seems a natural way to preserve them even if scarcer.

    1. Richard

      WSJ will be in print form for years and years to come.

      1. awaldstein

        I plan on being around and reading it daily online for years and years.Let’s make a date to talk about this in 2020!

        1. Richard

          2020 is practically tomorrow.

          1. awaldstein

            That is freakin scary!

          2. Donna Brewington White

            One thing to talk about dates in the abstract, another to actually do the math and to think about how our lives will have changed by then.

        2. WA

          yeah like 2020 is to now as 2006 is(was). Scary perhaps an understatement!

          1. ShanaC


      2. BillSeitz

        Might not be home delivered in the suburbs, though.

      3. ShanaC

        wall street is also filled with some very elder gentlepeople

    2. David Smuts

      Newspapers aren’t going away. What else would 10 million London commuters read on the underground without any wi-fi? The question will be whether people will continue to buy physical or digital newspapers when so many are free?

      1. awaldstein

        London underground is so clean, efficient, proper.NYC subway is so messy, retro ( ) and dirty–and wonderfully heterogeneous.We have WiFi in the stations. As will you. As will everyone everywhere.It’s not if, it’s when.

        1. chuck close(terman)

          Have you clicked on that link?

          1. awaldstein

            Fixed, thanks!

      2. jason wright

        free is a barrier to entry technique used by the newspaper publishing industry to keep ankle biters out.

      3. ShanaC

        same with ny-ers

      4. kidmercury

        kindle, auto-download prior to commute

    3. fredwilson

      i have thought that for a long time arnold. but watching the ford truck go into driveway after driveway this morning made me question that assumption

      1. awaldstein

        You and Rich and I should have breakfast at Balthazar in a few years and revisit. And pick up the morning papers on the way (if we can).News stands and newspaper boxes (those things you put a quarter in!) sure ain’t propogating. So its home delivery only?

        1. Anne Libby

          If there are still papers (and I’m betting yes) Balthazar will have them.I’m mostly online now, but whe I do get the paper, reading it is a different experience, cognitively. Online is going to have to figure out the discovery we have with the physical paper. It “costs” me too much to read the sports online. I always page through, and sometimes read (and learn) in physical form.And maybe UPS will have daily delivery of the WaPo out to suburban homes, along with all the other physical stuff that’s flowing through Amazon.

          1. ShanaC

            I should try this once

          2. Anne Libby

            Which “this”?

          3. ShanaC

            eat breakfast at balthazars with a newspaper

          4. Anne Libby

            That’s an easy one.(And one of my favorite things is that they open at 7:30am..).

          5. Donna Brewington White

            The idea of consolidating different types of delivery is interesting. I can envision a business model forming around this.

          6. Anne Libby

            UPS and FedEx are in my parents’ neighborhood every day, more than once, and at their house with Amazon deliveries on many of those days. (Mom and Dad are practically digital natives.). These services are also deep in the parts of rural America I know.If we don’t insist on killing the USPS, by actively preventing them from innovating, they’ll be around, too.

          7. JamesHRH

            UPS & FedEx don’t hit the streets until after the typical paper dist’n is done (Fred is, apparently, an early riser on Sunday too).You are suggesting that the paper returns to being an evening routine – 99% of those users are getting their news delivered by angels……. 😀

          8. Anne Libby

            I also remember the evening paper…But why not have print on demand at local PO (FedEx/UPS) and shift delivery to earlier in the day?

          9. Matt A. Myers

            This could be the thought of Bezos … Amazon delivers a lot already – adding a newspaper would add probably close to $0 to delivery cost.The messaging he would control too … that has more value than whatever negative the company would be running.

      2. Matt A. Myers

        – Automated cars will cut the cost of a person’s cost (still then need to solve the problem similarly of the automated car manufacturing line caused towards losing jobs).- Electric cars will cut the cost of depreciation (less moving parts); There are other future technologies coming soon that no one is thinking about, and only few are dreaming of.- A few issues with using paper, environmentally – but they can be solved – and done sustainably.- I like the idea of sharing newspapers, which is easier when you have a more active, more socially-engaged society; It reduces their disposability somewhat, increases their individual utility anyhow – with not just a single person reading it.

        1. Richard

          I give my wsj and ft to a few retired guys at the local coffee shop.

          1. Matt A. Myers

            Cafes usually have a good supply of pre-read newspapers. 🙂

      3. LE

        Papers aren’t picking up any new readers to replace the ones they are losing. Check the age group of the people in those houses near you that are reading the paper.We get the print WSJ daily/weekend and the Sunday NYT (we aren’t in NY either). My wife started to read the WSJ when she met me and likes it (since it turned more “USA Today”) but recently wanted to cancel the subscription to both papers because they raised the price. (Tipping point). I wanted to keep (I like seeing what they write about in the print edition).The paper to me is curration similar to, say, hacker news. And I like knowing what the people at the NYT and WSJ think is important.

      4. JamesHRH

        The stubborness of entrenched distribution players is quite often overlooked (by fans of innovation).Let’s say you had a billion dollars invested in printing and driving newspapers to people. Would the internet make you put your hands in the air and quit? I think I know the answer to that one.My fave anecdote here in ‘FM will kill AM’. This, of course, was shouted from the rooftops my audiophiles, as they believed that no one would listen to music on AM, after hearing it on FM.While that was true, the folks who owned AM distribution infrastructure, ah, ahem, ‘pivoted’: to talk radio. Which, it turned out, had better economics (at the time).

    4. LE

      “and environmentally foolish”I think all of that is an after the fact rationalization that people employ not a primary reason not to do something that you have decided for other reasons is to your benefit. [1] Like if Fred decides to go to the Hamptons the environmental impact of sitting in a car on the LIE wasting fuel or environmental impact is not something he considers. Although he might consider many other things (getting caught in traffic) etc.Or take the suburban soccer mom loading up her large SUV (and I don’t mean cute ute I mean big ass SUV) in order to shuttle her kids around to the games. She considers herself green but would never think at all about the environment in this particular case. Because her and her own kids needs come above that.Not to say that there aren’t people that think this way but that’s not typical of the market in terms of one’s own behavior. (I’ve seen people talk a good game with it though when with others.)I drove to Delaware to the Apple store to pickup 2 macbook air’s yesterday so I could save the sales tax and do some other tax free shopping. I focused on the sales tax savings [2] I would save to make the decision (let’s say several hundred dollars) I didn’t even factor in gas and tolls. The environmental impact? Nope.[1] Taking this to an extreme if there was some wine event you knew of in Connecticut and you had to rent a car and drive there you probably wouldn’t decide not to go based at all on environmental impact nor would you take the train (if you could) because of environmental impact although you probably would consider cost and convenience when making that decision.

      1. awaldstein

        In the nits of your example, you are correct of course.In the big picture I’m not with you at all.This is not about whether you should drive somewhere, it is whether culture will demand more environmentally sane cars to secure the longevity of the planet.It is not about whether they should use glass bottles for wine, it is about whether they should only use what is necessary to mollify the impact.The world is getting better (and I do believe it is) because people do give a shit and we have tools at hand to make change and still do what we love, without it killing us all.

        1. ShanaC

          I still thing the environmentally smartest thing is an electric self driving car sharing coop. I also don’t think it will happen (too many car lovers)

          1. JamesHRH

            in the USA, electricity = coal.Nat gas cars a better short term idea.Where are Doc & Marty McFly with the fusion / flux capacitor combo?

          2. ShanaC

            beats me. Would like that.And yes, I know about the US coal problem

        2. JamesHRH

          I agree with you that ecological sustainability will be driven by fewer people or more durable/flexible hard goods not lower standards of living.

      2. PhilipSugar

        You should have given me a heads up. We could have gone to lunch. I am 15 minutes from Christianna.

        1. LE

          I thought you work in Delaware but live in MD?At the mall a few things stood out.I went to the luggage store to buy a bag and outside there were speakers blaring so loud that I couldn’t even think to make a buying decision in the store.The one clerk in the store said it happens from time to time in an “oh well” type of voice.Chance of him saying something to management? Zip. Luckily the music stopped later and I returned and bought something.This is the type of shit that bothers me the lack of thinking and execution in the buying experience. Nobody with a brain knows what is going on. I grabbed a mall guy who looked like management and told him. My guess is he will do nothing about this (he seemed concerned but I just feel this will not get fixed). Now if I had complained to Sam Walton it would never happen again. Actually Walton would have seen it before it was even complained about.Next I saw the Microsoft store and was impressed that it seemed somewhat busy. And totally like the Apple store (the smaller ones at least.)The Apple store was huge. Almost seemed like a Best Buy back in the day. Not sure that is to their advantage in terms of the Apple experience. It is to large. Clearly it’s drawing visitors from out of Delaware. (I forgot to look at license plates in the parking lot).I will return to the mall it’s a nice ride down on 295S about 55 minutes. Not a trashy crowd either compared to some malls. To bad I forget to buy the Sony camera when I was down there.

          1. PhilipSugar

            Take that exit Rt1 south 7 miles down to the canal make a right 5 miles and you are at my house. My office is the last exit on 95 7 miles South of Rt1.You should see the license plate mix at the Costco.

          2. LE

            Our relatives in Delaware buy everything including vodka there. Who needs Grey Goose when you have Kirkland Vodka.

          3. PhilipSugar

            Oh and the store is so big because they bring people by the bus load. You are limited to a certain number of purchases. Notice how many State Troopers control traffic at that store?I have an easy time as there are only a handful of software companies in DE and they actually know me.To me the stunning thing is how many blue shirts are working at any one time. I’ve never been to another apple store so I don’t know any different.

          4. LE

            Yeah I definitely notice the Troopers. I asked about that to the blue shirt. Like in “American Wedding” scene they are there to “protect and serve”. “For your security?”. Why more security in a mall? In a mall you have choke points. In a shopping center you can flee much more easily.The local store here (5 minutes from the office) is always busy and there are always a ton of blue shirts working there. You can’t walk in w/o getting asked if you can be helped. I find it annoying. I can buy something and walk out with it without a bag or a receipt. No security no nothing. Why? High margins who cares if someone rips off a $39 connector that can be made for 1.50, right? Cost of doing business and it’s a better experience. Shows you what you can do with the right margins.That store is about 1/3 the size of the mall store. But it’s always packed whenever I am there. Monday morning it’s busy. Wedneday pm it’s busy. Friday night. Etc. But it’s still intimate.Of course in your comment I just realized that the experience at the Christian store doesn’t matter since the people are there to save the sales tax. Not the same as with other Apple stores. Makes total sense.

          5. PhilipSugar

            Literally by the bus load. If you bring a bus load they only allow so many in the store at once. The rest stand in a queue outside the store controlled by the State Troopers. Those are the most expensive employees there. They get a double overtime rate and you pay DE that plus a 50% premium to hire them.

          6. LE

            I had no idea of the scale of this.And what’s always interesting is the fact that saving 6 or 7% sales tax is much different than offering a 6 or 7% discount in terms of altering buying behavior. Even though the discount doesn’t come with the small chance of getting nabbed for avoiding “use tax”.Our discussion here is very old school. Remember when you found things out only because a friend knew something that you didn’t and told you? Now you just read things like this every day on the web.

          7. PhilipSugar

            Why did they put a Best Buy and are building a Cabella’s there in addition to every other store you know?Buy $5k of stuff and save $350. Did you see all that roadwork? I go past everytime to the airport.They work night and day. That is going to be done in record time because believe me they WILL get it done before the holiday season. I never have seen a project go that fast. I am sure they were working on Saturday and are today.

          8. LE

            The roadwork? Absolutely my nav system was totally confused.One thing they need though is to change the signage from “Mall Road” to “Christiana Mall”. Especially since any nav system is not up to date almost certainly. And people don’t use maps. [1] In addition to signage before you even get to that point.” I never have seen a project go that fast.”Agree. Other than when there is a major bridge or overpass failure and they somehow manage to fix in record time because they have to.[1] Saying “airport road” is not the same as saying “Philadelphia International Airport exit here”.

          9. PhilipSugar

            Oh, last point. That is their third store in that mall they outgrew the other two.

          10. LE

            Was wondering about that.

  8. MParekh

    Good topic Fred.A lot of innovation is possible in the context of “blended” physical and digital pricing schemes. Most will happen with the passage of time and the advance of technology, but the pace will be determined by how long are the entrenched businesses can make their current pricing mechanisms stick.Going back to your newspaper question, the papers today make it hard to buy reasonably priced digital packages, forcing customers to buy paper delivery and digital combos. For example, I still have home delivery subscriptions bundled with digital subscriptions for the New York Times, Wall Street Journal and the LA Times. This is even though I literally put the delivered newspapers in the trash (recycled of course) EVERY DAY. And I have to put month long “vacation holidays” for physical holidays so that I can minimize the disposal chore as little as possible.Of course the papers are going to at some point stop forcing me to buy the home delivery package at a “subsidized” price vs. the digital price. But until then, there is little innovation.Even Jeff Bezos has not figured out the ideal way to bundle two digital streams seamlessly due to business and/or “business politics” reasons. Since Amazon bought Audible, I’ve been intrigued by the “Whispersync for Voice” product that allows you to buy an audio companion to a digital book just purchased and go seamlessly from one to the other. That is the promise, but the execution for purchase forces the Amazon consumer to have an Audible account AND sign-in credentials, even though both companies are theoretically under one roof. It makes the product experience horrible at the expense of whatever internal politics that drive the separate Audible/Amazon Voice/Ebook businesses.And it’s not just physical vs. digital. The Broadband companies have so far been successful in taking the metered pricing for voice that’s been made hard habit for both users and regulators over decades, and move it over to wired and wireless broadband (so far). This is despite the fact that the marginal cost for data goes almost to zero and much of what the carriers spend on is billing and so-called “service” than to actually deliver the bandwidth.The integration of physical/digital and/or digital/digital related product streams has great promise to come. Most of the hurdles in it’s path have to do much more with entrenched incumbencies, habits, regulation and politics.

    1. Richard

      Yep, why this isn’t clear to them is beyond me.

      1. Dave

        I do the same with WSJ. Presumably they are still selling ads based on the physical deliveries and assumptions around readership. Digital’s delivery cost is a revenue split with Apple for the ipad app. But has very small add potential and nothing like classified ads where newspapers made most of their money for 50 years. The physical version is still subsidizing the digital today based on flawed assumptions.

    2. fredwilson


    3. JamesHRH

      Name another major player who delivers physical & digital from a 98% digital customer interface. I can’tMonster lead over competitors.

  9. Dave Pinsen

    You have to take into account the difference between print and online ad rates when considering pricing for newspapers. The FT, for example, charges less for its print subscription than for its basic digital subscription, presumably because it gets much higher ad rates for print,

    1. MParekh

      Agreed, but it warps the cultivation of new user habits for your digital business in the long-term. Tough problem. Every pub will find it’s own way, but this is another factor determining the pace of the transition.

    2. John Cogman

      Yes, I think that advertising value explains the phenomenon for newspapers, possibly combined with clunky new apps (WSJ, anyone?). But it doesn’t explain books.I think the reason for the physical book price not increasing is that physical book buyers remain sensitive to price and don’t (yet) see the ebook as a substitute.If you’re in the airport bookstore going on vacation and don’t own a kindle, the price of the books on the stand definitely influences how many you buy.That may change as more people get readers but we’re not there yet.

    3. fredwilson

      I don’t think that is sustainable. My guess is that print ad performs less than a web or mobile ad

      1. William Mougayar

        Yes, and the returns are about to get better for online.I’ve been researching that segment a lot lately. With the combination of direct-programmatic, innovations in native advertising, more precision in targeting, measuring and optimizations, I think we will see a renaissance in online advertising that will lift a lot of boats.

      2. ShanaC

        there is no way of knowing – and there is a prestige aspect to print that digital ads don’t have (yet)

      3. JamesHRH

        Demo graphics are what kill the print ads – old people don’t spend as much, as often nor in as many categories.And highly qualitative buyers (who like the tactile nature and ritual of reading a physical copy) share those purchasing the future, printed newspaper = premium paid by reader (agree with you there).

      4. Dave Pinsen

        Seems like it would be easy enough to test that. My guess is the advertizers already have.

    4. robertdesideri

      Ad rates are important. More so are Prime subs. Bundling WaPo online free for Prime members makes more Prime members, equals more revenue for Amazon. He may also offer a paywall version with the print version, but that’s not the game. Bezos is playing the long game, expect to see more transactions for the less strategic to scratch their heads at. No mystery, really. Use the bundle to put down roots into your customers after you’ve used said bundle to pull them in.

  10. WA

    One of the impressions that I got immediately with the Bezos purchase was the acquisition of journalistic credibility in an online and digital world. World where perhaps “I read it on the Internet” becomes a more reliable sounding cliche. As for margins in that sense I am ok paying the value of what the information is worth, whether it be online or in print. Your questions are great food for thought on Sunday with coffee-happy weekend.

  11. Avi Deitcher

    I am not convinced that you have low price elasticity on the physical; I think that it is very price-sensitive, and if you drive prices up, revenues will plummet.However, we have not seen content owners (publishers, in WMougayer’s phrasing below), wiling to recognize that there is a lower value in digital product. They saw digital as a huge margin (nearly 100%), and are not willing to give up some of this nearly pure profit to drive up adoption.Quite simply, the content owners live in the 1950s. Remember what long distance was like in the 1970s and 1980s? A dollar a minute wasn’t uncommon (and the dollar was worth a lot more then). Once price plummeted, adoption went sky-high.Simple comparison: in 1985, just at the breakup, AT&T earned $1.36BN. In 2005, AT&T earned $20BN on voice and $4BN on long-distance voice alone. And there are now lots of other players. Their 1985 revenues, in inflation-adjusted 2005 dollars, were $2.47BN. So they have roughly increased their voice revenues, inflation-adjusted, by an order of magnitude. Not bad.Now if only the newspapers could see that. I think another blog post on this topic at Thanks for the inspiration, Fred!

    1. Matt A. Myers

      I think digital products, specifically newspapers, are very much ripe for disruption – primarily because of what you said, they’re not willing to give up their pure profit to drive up adoption – especially since their costs may still be inflated from the old system structures they have in place that they must support.

    2. Jim Peterson

      Great points. The majority of newspapers would see their distribution possibilities out of their area being too low to make up for the loss of local revenue.

  12. Richard

    If you think of Newspapers and books as outdoor advertising for the digital good, it will be a long time coming before physical goods give up that coveted bookstore/news-stand location in union square et al.

  13. Guest

    I think it’s highly likely, in the newspaper industry at least, that things will play out the way you suggest in your post, Fred. Thing is, they know they need to tread lightly here:In my opinion, you have 3 types of newspaper content consumer: 1) the guy who likes to get his hard copy WSJ delivered and is used to paying the current rate for this. 2) The guy who used to read the WSJ online, then up went the paywall and this caused him to get his news elsewhere. And 3) the guy who used to read the WSJ online, up went the paywall, and he was begrudgingly happy to pay the asking rate.It took time to get any decent level of success for the guy in scenario 3, but The Street just did a good article on the fact that “More than 400 U.S. newspapers, dailies and weeklies, out of a universe around 1,300, now use a paywall.” (… once thought of business suicide is now starting to reap some very decent rewards.So – I think that in time, the chap in scenario 1 above will very possibly be asked to pay a premium rate to consume his content in this form, and he’ll then either convert to a scenario 2 type of customer (ie: no longer one at all) or a scenario 3 type of customer. The bet that the newspaper guys (now including Bezos) will be making is that there will, over time, be more of 3 than of 2.

  14. Ryan Laubscher

    I think it’s highly likely, in the newspaper industry at least, that things will play out the way you suggest in your post, Fred. Thing is, they know they need to tread lightly here:In my opinion, you have 3 types of newspaper content consumer: 1) the guy who likes to get his hard copy WSJ delivered and is used to paying the current rate for this. 2) The guy who used to read the WSJ online, then up went the paywall and this caused him to get his news elsewhere. And 3) the guy who used to read the WSJ online, up went the paywall, and he was begrudgingly happy to pay the asking rate.It took time to get any decent level of success for the guy in scenario 3, but The Street just did a good article on the fact that “More than 400 U.S. newspapers, dailies and weeklies, out of a universe around 1,300, now use a paywall.”… The once thought of business suicide is now starting to reap some very decent rewards.So – I think that in time, the chap in scenario 1 above will very possibly be asked to pay a premium rate to consume his content in this form, and he’ll then either convert to a scenario 2 type of customer (ie: no longer one at all) or a scenario 3 type of customer. The bet that the newspaper guys (now including Bezos) will be making is that there will, over time, be more of 3 than of 2.

  15. jason wright

    can’t you switch off when you go for a bike ride?that’s why i go for a bike ride, to switch off, to reset the brain, to zen out.”the driver’s time, the depreciation on the truck, the gas, the printing press, the paper costs, etc.” – all things that put food on the table.

    1. fredwilson

      I can. But then the truck starts delivering papers in front of me and that gets me thinking

      1. jason wright

        then you’re riding too slow 🙂

      2. LE

        “can’t you switch off when you go for a bike ride?”I fail to understand why people have a problem or see it as negative at all if someone has creative thoughts while doing an auto pilot type activity like biking, walking or exercise. Where there is no doubt you were on a high that made you think what you thought from the ride, and the fact that it was a nice day, sunny etc. What you did is really no different than a recording artist getting an inspiration for a new song. Would anyone ever tell them to “switch it off”. Or an artist? Sitting at a lake and drawing a picture? What do they think the artist does wake up in the morning and decide to do -or- do they get inspired by something?This is a creative process (I do it all the time I’m always “on”) and to me it’s insulting (or as the Kid would say “ignorance”) for anyone to not understand why this happens.

        1. fredwilson


        2. jason wright

          however one does it, switching off is essential, or burnout will pay a visit….and switching off is when the mind really goes to work, when it’s out of reach.

          1. LE

            “or burnout will pay a visit.”What are you basing this statement on?There are motors that are continuous duty (like in your HVAC) and intermittent duty (like a garbage disposal). Some people are continuous duty.I think it’s also how you spend you time. I’m at the office today but I went outside to fly the model heli in the field next door. And I’m taking the time to do things like AVC. I could be down the shore on the beach (have a place there) but I’m not. I don’t feel I’m suffering at all and need any kind of break. And I think I’m much older than you as well. Everyone is different. In my first business I worked 7 days a week most weeks. And didn’t take a vacation for like 5 or 6 years iirc. I didn’t feel I was suffering at all. If I had to go to some stupid family thing on Sunday that was suffering.

  16. Tom Labus

    Maybe he does an “AWS” service for the Newspaper industry and helps them control costs.I read on the Web but also the physical paper. I find that I read the longer articles and more in depth reporting in the physical paper. More headlines and blurbs online and phone.I was in a book store (great store) in Ridgefield, CT last weekend and they are major haters of Bezos and AMZN for lowering all prices. HATE HIS GUTS.

  17. AlexHammer

    You’re right that that is the logical strategy, except that newspapers are legacy institutions afraid of canabalizing (sp) physical sales. They want both digital and physical sales, but they struggle with what is the right mix, etc.Although ad sales for physical newspapers are declining substantially and have been for a number of years, online ad sales for newspapers are not yet robust enough for newspapers to make the full-hearted switch. When newspapers learn how to better monetize the online content, then, of course, the switch will occur.

  18. Seth Godin

    Irrational.This is the best way to understand the book market (and likely newspapers as well).The buyers of books are not typical for several reasons:1. There are no easy substitutes for most popular books. If your friends are reading The Happiness Project, you’re not going to read a book just like it because it was half the price.2. The cost of the book is tiny compared to the impact on ones cultural life, so the need for substitutes is low. An avid reader (top .1% of the population) spends less than a thousand dollars a year on books.[I’m not talking about Dummies books, textbooks, airport thrillers here].The sellers of books are also not typical, because:1. For many years, it was an oligopoly, with few serious new entrants.2. Most of the people in positions of authority do it for love, not money.3. Those that are hired and work their way up aren’t businesspeople.Fred, you’re absolutely right about the underlying economics as well as the diverse uses that people put newspapers to. The secret for both industries is to switch at precisely the right moment, when switching means changing not just pricing but distribution, advertising, new customer acquisition, staffing and the product itself.No wonder it’s so interesting…

    1. fredwilson

      Any idea when we might see the switch happening Seth?

      1. Seth Godin

        I adore the people I’ve worked with in the book industry, but my sense is that there isn’t a combination of sufficient individual leverage and urgency that will make the switch happen from inside.Even the new merger of Random House and Penguin (which they should have called “Random Penguin,” but no one asked me) still leaves huge amounts of power with agents, individual authors, and the status quo of book culture.My guess: the number of indie approaches continues to rise, ebook-only must-read bestsellers continue to put pressure on the book-only people and, most of all, some of the big book publishing houses go from low IRR to negative numbers.When that happens, I think we’ll see a dramatic reset in the price of ebooks (because, as you said, the marginal cost is zero), which might, just might, come soon enough to avoid losing an entire generation of readers.As for newspapers, I predicted a few years ago that the last big newspaper in print would be delivered to my house before 2020. I stand by that. Once businesses that are steady state (a new paper, every single day) flip to where they lose money daily, the mind is focused and action happens.In order for newspapers to work going forward, they either need local advertising that gets read (hard to imagine that happening in the digital space) or they need readers eager and able to pay for what the papers do.The real question for me about newspapers is: do we lose good journalism forever, of does it come from a new place? We only had good journalism for a hundred years, and there’s no guarantee that’s not a blip.

        1. ShanaC

          I haven’t seen much luck involving the indie e-book only outside of a few successes on amazon. If new publishing/reading model are to develop, amazon can’t be the only source.

        2. Aaron Klein

          There’s one good way to make your “delivery to my house” prediction come true: cancel your subscription.In all seriousness though, I think we already have an answer about good journalism. For all its faults, Politico is a fascinating model of in-depth journalism (long features, breaking news, retrospective e-books with the tale of what we used to rely on TIME or Newsweek for).It’s fascinating to me how much success in the online world is predicated on having the digital gene. It can’t be painted on…it has to be at the core.Here’s hoping that the Bezos DNA transplant works…but of the 500 souls in the WaPo newsroom, I’d venture to bet there are 300-400 opposed to change.

          1. Jim Peterson

            Got to steal that one Aaron, “It can’t be painted on”

          2. Aaron Klein

            Go for it. 🙂

        3. BillMcNeely

          Seth, What’s your thought on the car sales business? It seems to be in a similar state as the publishing business.

        4. fredwilson

          Hmm. I hope it wasn’t a blip!And I second your vote for Random Penguin

        5. Rick Mason

          For over a hundred years in the newspaper industry there’s been a central large printing plant for greatest economy. That doesn’t mean it will be that way in the future. What if printing technology is invented that allows smaller neighborhood plants to be just as efficient?Does it make sense to have different delivery people driving by the same houses delivering for different publishers? Perhaps in the not to distant future there might be small businesses delivering WSJ, NYT, USA Today and competing city papers with a few electric powered trucks in a 10-15 mile radius.Over 120 years ago there was a lot of angst and hand wringing over the amount of horse manure on the streets. Then out of left field another method of transportation was invented and the problem disappeared.

        6. sigmaalgebra

          > local advertising that gets read (hardto imagine that happening in the digitalspace)Have the Web site grab the user’s IPaddress (due to the way TCP/IP works, theaddress is necessarily available to theWeb site) and, then, look up their likelyzip codes and then run local ads. I’veoften seen that now. For the 32 bit IPaddresses, still heavily used, there areonly about 4 billion of those so that itis easy enough to carry data on all thoseaddresses in main memory for less mainmemory cost than taking the family toMcDonald’s (high quality error correctingcoding, ECC, main memory is going for $9per gigabyte). Of course, don’t have tokeep all that data in the main memory ofeach Web server; a key-value store wouldwork fine. A key-value store in acomputer with parts costing less than$1500 should be able to supply zip codesfor about 20,000 IP addresses a second,and that’s enough for a quite busy Website.How busy? Assume 5 ads per page sent, $2CPM, for5 * 2 * 20,000 * 3600 * 24 * 30 / 1000 =518,400,000dollars a month. That would not only keepthe Wapo going, it would also buy it!> soon enough to avoid losing an entiregeneration of readers.You mean readers of ‘belle lettre’,formula fiction? I deeply, profoundly,bitterly hate and despise that junk sinceit was force fed to me, like to a goose (Iwas lucky to save my liver), in grades8-12 and for two more years in college –seven years with only two years ofphysics. Total bummer. I still getpissed and torqued when I think of it.But I’m still a “reader”, thank you: JohnWiley, Addison-Wesley, Springer Verlag,Prentice Hall, etc. The walls of mydining room and living room, with more inmy family room, are covered withbookshelves filled with books. The familyroom coffee table — stacked with bookswith more books on the floor leaningagainst the legs. The tables in mybedroom, stacked with books. One partialbibliography of my books, including somePDFs, has 338 entries.> The real question for me aboutnewspapers is: do we lose good journalismforever, of does it come from a new place?We only had good journalism for a hundredyears, and there’s no guarantee that’s nota blip.”Good” journalism? For “a hundred years”?When? When was 99 44/100% of ‘journalism’good for more than fish wrappings andkitty litter? There’s an Andy Hardy moviein the 1930s laughing at the nonsense innewspapers.I have long rated the sickeningly lowquality of information in newspapers asthe worst problem facing WesternCivilization since the citizens are deniedcrucial information and are usuallymanipulated and misled.

        7. WA

          Do you think there is a chance to see a draconian price reduction in e-books cost to the consumer pushed by a book by subscription service, not unlike a NetFlix model? Scary thought as far as what one could own versus rent as far as books go…but doesn’t Amazon already reserve the right to deny access to a purchase in some cases?

          1. SF

            You can already “borrow” books for reading under Amazon Prime and of course you can check them out of the libraries in both digital and physical form.

          2. WA

            Yes, my bad for throwing that in there. I was thinking more along the lines of what would break the back of the publishers pricing models being discussed. I should have kept it to the minimal question of Books as a Subscription Reading Service by the month, quarter or annually with finite times to access after purchasing the right to read but not neccessarily own. I am certain it is probably not the answer and I know much less about such things then most here…

          3. SF

            Fred was referring to an idea that while delivering physical papers appears relatively inefficient, there is a market for that and perhaps that should be honored by sellers (and they do for the moment).Book pricing seems like a complex subject but I guess I am more interested in why people think books are *too expensive*? What would change in your consumption if eBooks became a lot cheaper… How many more books would you be able to read because of this? What costs of consuming printed material are you unable to afford between Amazon/B&N/libraries and borrowing from friends? Amazon already provides a venue to buy used books very cheaply for most titles.I think there is a lot of models that are evolving and competing and my dream model – buy a physical book and get an eBook included is the *least* likely to happen due to how publishers and authors count sales.

        8. PB

          The thought of “good journalism” going away is a terrifying one. 100 years ago it was hard for the actions of one person or corporation to have widespread repercussions — almost everything was local.Now, the whole world is connected. One financial company can manipulate the price of aluminum worldwide. One oil company can destroy a 1,000 miles square ecosystem. One rogue government contractor can expose a decade of secrecy. 20 religious zealots can destroy 2 skyscrapers.Without good journalism we’ll spend the rest of our lives only knowing the what, when and sometimes the whom. It’s good journalism that tells us the why and the how.

      2. Jeff 'SKI' Kinsey

        Sorry Seth, I am not convinced there will be a “switch” so much as there will be more viable channels. Take my beloved Coca-Cola Classic. I love it in every size, shape, distribution channel imageable. I would not ever suggest they do away with two liter bottles, as an example, just because I prefer the 355mL Mexican Coke [made with real sugar… now if they only offered caffeine free!]. As a former “newspaper man” [display ad sales], I love the Heath brothers’ example in “Made to Stick” about why most newspapers no longer matter. Mega monopolies with an emphasis on “canned copy” over “local” news are more to blame in their opinion [and mine] than a lack of interest in the distribution channel. Fred, I too fault publishers [I am one, so I can point at least one finger at my profession] for ridiculous pricing on digital versions. I personally refuse to spend more than $9.99 on a Kindle version of a book. At that is still too high! Every day I wake up trying to invent a better Kindle reader for tablets and smart phones for our partners’ content in part because I want to own the whole distribution channel as well as ALL channels. We recently added POD [print on demand] for our digital magazine properties because some number of readers, not a small number, want a physical magazine to hold and to share. But I digress… thanks again for a great and timely post.

    2. Matt A. Myers

      With newspapers, do you think there is much of an attachment or value as other people will be reading this too – such as, it is an anchor of sorts?I know more older generations read the paper, young not as much. Are specific websites our anchors? Not so sure it can qualify, as a website is usually updated all day long – however if you read a newspaper at any given point during the day (for a specific day) then you’ll have been able to skim the same headlines, and read more if wanting.I wonder if news websites that followed that same pattern would be more consumable.

    3. William Mougayar

      Bingo on this: “The secret for both industries is to switch at precisely the right moment, when switching means changing not just pricing but distribution, advertising, new customer acquisition, staffing and the product itself.”I think that’s exactly what Bezos will do with the WaPo. It’s ripe for a switch, and no better than an outsider to flip that switch, as soon as the company is ready under it.

      1. Jeff Jarvis

        The publisher of a certain prominent newspaper I’ll leave unnamed has long said that ending print will take away a billion dollars worth of cost but also a billion dollars worth of revenue. As papers fall below critical mass and the lost revenue falls way below the lost cost then…

        1. William Mougayar

          …ah, so we’re waiting for that tipping point.From your mouth to God’s ears 🙂

        2. $7977616

          One trembles at the impending demise of whatever.

          1. Ciaran

            The demise of companies willing to speak truth to power, something that Jeff Bezos appears incapable of doing:

          2. $7977616

            I think you’re giving those companies too much credit. If they were all that relevant they wouldn’t already be yesterday’s news.

          3. Ciaran

            What’s more relevant about exposing the one of the biggest government scandals since Watergate, but one which takes in most other developed countries? The fact that the business model is broken doesn’t mean that the content isn’t relevant.

          4. $7977616

            I guess I don’t know what you mean when you say “government scandal”. This is about creeping progressivism if I’m not mistaken.

      2. $7977616

        Flip the switch sooner than later. Evidence: Blockbusters.

    4. SubstrateUndertow

      I wondering what expanded (daily) functions could be subsumed into such new product designs ?

    5. ShanaC

      yes to the second half.I wouldn’t call the books we choose irrational – like most things, they show a certain status

      1. Donna Brewington White

        Not sure I’m understanding “status” in the way you intended but along with that: a newspaper once read becomes trash, a read book can become part of the decor. I wonder if there has been a decrease in the sale of bookshelves?

        1. Dave W Baldwin

          Remember to give them to your High School….

        2. ShanaC

          ie: what beach book you read is a class thing, whether you like it or not. Certain books are bought and read not just because they are good, but because of the network effect around them involving intellectualism/groups you are part of

    6. Jan Schultink

      You would think that Amazon can run super sophisticated price elasticity analysis (A, B testing other fancy stuff) and that the current pricing is the optimal one?

    7. Aaron Klein

      One of the irrational parts is quite frankly the structure and costs of the organization. WaPo has a staff approaching 500; Politico has a staff approaching 150.Which organization is more relevant in Washington DC right now?

      1. $7977616

        neither? or wait no, whichever one is closest to Media Matters?

    8. Jeff Jarvis

      Back when Random House was owned by the Newhouses and I worked for them, the then-CEO, Alberto Vitale, used to shake his head and lament the illogical foolishness of the book industry, discounting the most popular books. Hadn’t they heard of the law of supply and demand? Of course, he also shook his head over the practice of letting bookstores send unsold inventory back.Once Barnes & Noble goes under — and isn’t that only a matter of time? — and bookstores in essence go the way of record and video stores, then isn’t that the tipping moment? Will there still be print books? Yes. But what will the price be? Today, of course, one pays a premium for instant gratification of the physical object in B&N stores vs. Will Amazon and publishers then be able to charge a greater premium for print over digital? Is there a critical-mass point for books like newspapers at which it’s just not viable to print books?

      1. $7977616

        Maybe print books will still be available via print on demand? The piece has a point. Some people will always want the physical book even when possessing real printed books is a decadent retro luxury and an obscene waste of space and carbon credits. Probably you’re right too that bookmongers won’t survive much longer as international franchises with brick and mortar everywhere.

      2. PB

        While I agree that Barnes & Noble is going ot go under sooner than later, I don’t agree that bookstores in general will go the way of the video stores and record stores. They’re not actually the same beasts:Video stores went under because you could garner the same experience (watching a movie) with far less hassle than schlepping to the video store (a DVD arrives in the mail from Netflix or you download the movie of your choice on demand from your cable company or Netflix or Amazon). Greater ease! Not to mention better selection (almost infinite) and usually better pricing as well.Same with the record stores. You get the same experience — the ability to listen to the newest Green Day album without having to schlep to the record store. You can buy it from iTunes… or before that was popular, steal it via Napster… or before that was popular, make an identical copy of your friend’s CD.Again: same result, lower cost and greater convenience.With books it’s not the same. Reading a book on a Kindle is not the samer as reading a physical book. In some ways a Kindle is better. In others it’s worse. And there’s not much savings by buying digital. And post-reading, the book is… gone. With a paper book, it’s there on the shelf, spine-out, reminding you of your thoughts of the book every time you glance at it.So… yes, Barnes & Noble is going to go under relatively soon. The independent bookstore will take a LOT longer. Especially with so many of those Barnes & Noble purchases now going to the Indies. 🙂

    9. Richard

      Lack of quality original content will kill the newspaper well before its newsstand price.

  19. David Smuts

    Personally I prefer the digital version. HOWEVER, as a consumer I’m being ripped off with the e-version prices so 9 times out of 10 I’ll buy hardcopy as more often than not, the price is usually the same or even cheaper than the e-version!I have an issue with paying the same price for a digital product that costs a fraction of the cost to produce in physical form. My only way to protest (as I believe many customers do) is to shun exorbitant digital rip off prices.

    1. fredwilson

      Me too

  20. Deborah Newman

    The scenario you describe is also happening in music. I just searched for the new Daft Punk album on Amazon, and they price the physical CD at $10.60 and the MP3 album at $11.99 (which includes a “digital booklet”). Isn’t this backwards? There is no manufacturing cost for the MP3, no warehouses, no pick-pack-and-ship, no trucks, and importantly, no returns. Amazingly enough, according to Nielson/Billboard’s Music Industry report for 2012, total CD album sales were 193 million (down 13.5%), and total digital album sales were 118 million (up 14.1%). So physical still outweighs digital, and the record labels will continue to support physical formats for quite a while.

    1. fredwilson

      Does anyone buy either of them? I listen online and if I want to own I buy vinyl

  21. Guest

    It’s amazing how much investment goes into a physical product that gets delivered and discarded in the same day.Advertisers want you to get it into my home. Lower the barriers.That said, most non-national papers would be smart to develop a separate education section, written partly by student journalists, partly by staff, and feature kids. Publish school schedules, news, changes, sports schedules, tax controversies, etc.That’s where local news hits the heart, and will keep the parents coming back to keep up on the stuff that effects them directly, not to mention the occasional articles that mention or feature their kids. Advertisers would dig it.The nationals? I tried the Times for a few months. Really loved it, but couldn’t keep up with the recycling, even with the gardens. I love the physical product, but if you want to get it to me make it cheaper.

  22. Bridget Goodbody

    It seems to me that digital will disrupt the physical when it provides an experience that is both better than, and alien to, physical. If all that’s happening is a change in distribution methods, then you’re in the realm of “I prefer my iPad to paper and you prefer paper to iPad.” To the detriment of students, other than cost, an e-book isn’t all that much different, content-wise, from a printed text book. I like to imagine that, once the type of experience being delivered is totally different, ie once the digital experience becomes as open, exploratory, and discovery-driven as the Internet can be and as rich as some of the best data visualization experiments happening, than digital and physical won’t be competing with each other so much. It’s pretty exciting!

    1. fredwilson

      That’s why I read on my Nexus7 (typing this on it right now)I can jump out if the book and into maps, photos, Wikipedia, etc)I can’t read on a book anymore because books can’t do that

      1. Bridget Goodbody

        I have to confess that my summer reading was a marathon session of Orange is the New Black. that I love looking at art on Google Art Projects. And I can’t read a newspaper anymore because its hard to hold and drink coffee and respond to e-mail at the same time!

  23. takingpitches

    The marginal cost of additional distribution of a paper like the Wash Post or a traditional author like JK Rowling may be close to 0 (similar to a lot of IP such as software, music, movies, or pharmaceuticals), but there are larger upfront costs that need to be covered too.One needs to also throw in other costs measures into the discussion.When those are thrown in, I can see why one can make an argument that the type of pricing proposed can be perceived as digital free-riding.

  24. Ana Milicevic

    There’s one other angle to consider: newspapers and magazines are an ad-driven business. Advertisers are increasingly willing to spend less on print than they are on other channels. Faced with declining ad revenue, how long can physical newspapers continue?The transition will be very gradual as with any situation where you have changing methods of consumption. Perhaps marquee newspapers will offer weekend physical edition subscriptions (like the NYT does) or perhaps you’ll be able to special-order any issue and have it mailed to you at significantly higher cost (I fondly call this the newspaper memorabilia market — and I come from a family of news people and a basement stocked with old issues kept to document a wide variety of occasions). Improving digital experience will also be important — and this tends to become a lot easier with generational shifts.In any case, I think that newspapers are very different animals than books. While one can read and enjoy today a book that was written generations ago, newspaper content is extremely perishable. While the method of delivery (e.g. reading on the web or on a tablet) may end up being the same, not sure that market assumptions for one carry over to the other (re: the ebook prices quote in Fred’s post above).

    1. Matt A. Myers

      Digital books could be ad-driven, as good paperback books – but that’s the reason I think people are fine with paying more for a book without ads.

      1. William Mougayar

        When you flip into Flipboard, you get ads here and there, and it’s not so bad, because they are done well and are informative more than disruptive. That’s how Ads should be. They should blend and inform, not interrupt.

        1. Ana Milicevic

          Yes, I like those too — they are complementary to the content you’re reading.

          1. William Mougayar

            Yes, Flipboard has done a really good job at matching the topic, AND making it educational. That’s how advertising should be, according to David Ogilvy who figured it out 50 years ago, when he said “Are your ads looking more like magazine spreads yet?”I’ve been writing a post on that topic, hope to push it today, if I stop commenting here 🙂

      2. Ana Milicevic

        The challenge there would be to do it well at scale so that it’s not detrimental to your actual reading experience (after all, you’re there for the book not for the ads). This is where I find the Jay Z Samsung collaboration interesting (even though that’s an entirely different type of content).

  25. Matt A. Myers

    Things get priced on value, and a price that will be paid for any object or service by a person will be determined by their disposable income.If people have $0 disposable income but highly value something, let’s say entertainment or comfort or other value received from music, then they will pay $0 for it.What clever business people have done that I have seen over and over again is they first sell a product cheaply to get it seen/experienced by the masses, and then they increase the cost to what the utility value is. Daily used products, for some like hair gels or deodorants, are can be around $7-$8 (when not on sale) for a stick of chemicals.That’s roughly 25 cents per day to “smell fresh.”So it seems that 25 cents per day is what the largest market segment who 1) are worried about the problem they want solved, and 2) based on their current economic state.That stick of chemicals though doesn’t cost anywhere near that to produce, probably closer to $0.25-$0.50 cents to produce. The added costs are the distribution, the cost of storage (whether at a store of otherwise), and then the markup by the retailer to pay for everything including adding to their profit.The cost of a digital book is close to $0. The value to society? Potentially infinite, depending on the material and ideas presented, and who the target audience is. So then really the only other factor is how valuable is that book to that person in the moment.University / college students, anyone learning in academia are perhaps unfairly charged for their books, or rather taxed by the book industry (who’s in competition with itself), and by the schools themselves who look to make profit on the books sold – additional tuition fees, hidden in the profits of books. And this happens because whenever you put public money (subsidized or make loans available), then economic forces, whoever can benefit from that will increase their prices (rent, tuition, etc) will match their prices to the new disposable income level of the individual.I’m slightly surprised there isn’t a bigger privacy of e-books out there – or maybe there is, it’s just not well-known? Perhaps book publishers are smarter to not go after them (or are they) as to not draw the consumers’ attention that they exist?The only way to protect against to protect against these mechanisms is either to put a cap on maximum cost (will be disliked/hated by those who will no longer be able to be as profitable), and perhaps – something I haven’t ever thought about until now – is putting a minimum price on things, and this example might be wrong – but perhaps say 1 cent for every song played (assuming not purchased outright); If anyone has more thoughts on this or knows of anything I can read related (on cap or minimum price) – would let me know! :)So in conclusion, the contents of a book will never lose its value, nor will the value of “smelling fresh” – and so if these values of what people are willing to pay doesn’t need to change – though I think it does allow room for a system where we made books (aka learning) available as cheaply as possible – then we could use that money otherwise spent on giving profits to a firm (who’s services are no longer needed, other than for management and support of an ecosystem) towards something better, and my mind always goes towards health – or perhaps go towards education and creating even more books and material – and keep that cycle of innovating thoughts moving forward.Content of a book or the leading books on a subject can evolve of course is potentially of course until someone releases a book with curated ideas in a more digestible way – however there will always be different levels of reading and analytical depths for the same topic, so many books in same area are and will be needed and can exist.

    1. ShanaC

      ok, there is a cost to the book – human labor costs. Other than that – 0

      1. Matt A. Myers

        Initial cost, yup. Though that author gets additional value and exposure for every copy ‘sold’ or given away, too. In some sense that far outweighs, in maybe most cases, maybe the gain you’d get otherwise.

  26. palbi

    Books and newspapers are really different animals though.As much as it’s rational to ask for e-books to be priced lower than physical copies, for newspapers revenues from ads and classified need to be taken into account too.I suspect that most newspapers still generate more advertising revenue from their physical copies so strictly from a cost/revenue point of view – as of 2013 – it would still makes sense not to have the digital versions priced lower

  27. Kevin Selle

    In trying to move my in-laws to iPad I realized an important difference. Looking for information digitally requires “hunting”. The newspaper (or my industry, local TV news) represents someone else doing the hunting and delivering a package of pre-screened goods. It gives them a sense of what is important without doing any work (hunting). Also, is the price equality of digital books simply the publishers keeping the savings of printing and delivery instead of passing onto consumer?

  28. $28312048

    Fred (or anybody really),Where does being a responsible corporate citizen factor into your purchasing decision? You’ve invested in principled companies like Twitter and espoused a lot of love this week for Amazon, Kindle app, Bezos, etc… But is there at any point in the process where you factor in what your purchase is supporting? Bezos & co. have a long history of not all that great treatment if workers, taxes, publishers, the environment, etc.What does it say about our country when our President goes to an Amazon warehouse to tout the new middle class jobs that don’t even pay a living wage, no job security and often in dangerous conditions.Amazon is hardly a lone and I’m far from a bleeding heart liberal, but companies like Amazon and Walmart have had a very destructive effect on a very large ecosystem and I wonder where our values as a country start to kick in over over our love of low, low prices.

    1. Drew Meyers

      Americans are definitely suckers for low prices. And that’s not good for our society. Low prices lead to more crap, waste, and inefficiency. If things cost more, then people would think harder before they bought them. But the consumerism machine of this country stresses buy, buy, buy – and the cheaper things are, the more people buy — and that’s how you make the economy grow. Not sure what the answer/solution is though..

      1. $28312048

        The economy growing in some ways almost feels like an illusion – driven largely by consumer debt and bound to collapse once that runs dry. Henry Ford wasn’t altruistic when paying his employees enough to afford what they were making. The guy at the Amazon warehouse can barely afford to feed himself and put gas in the car and get to wherever in the middle of nowhere it is located – let a lone afford a Kindle and purchase anything to put on it.It is incredibly short sighted for companies to continue squeezing the work force penny for penny in the name of “share holder value” without being able to see the long term tsunami of pain that is headed for us.The system is currently completely lop-sided, driven by hedge fund managers and a small, elite investor class trying to squeeze every penny and not giving a damn what the next quarter looks like. Most will throw out a pithy “I’m running a business, not a charity” and don’t care to look at companies like Costco to see how the two concepts aren’t mutually exclusively. Costco is hugely profitable. Amazon has seen quarters few and far between where they weren’t swimming in red ink. Who ultimately has the longer term business model?

        1. Drew Meyers

          The writing is on the wall…

  29. William Mougayar

    Someone big will have to pull the trigger on a big change, and the others will follow. That could be Bezos. He could shut down the Washington Post physical paper and go all digital, and that would put into question that whole daily cycle of news that doesn’t make sense if it’s delivered on paper.They could replace the Washington Post with a weekly magazine that has more in-depth analysis, long-form essays and other types of writings. But for daily news, there is no more room for the daily paper.

    1. $28312048

      Ultimately this is where newspapers have to go. Long form in depth journalism and local coverage. It is extremely counterintuitive for them to be doing things like closing foreign bureaus, news desks, etc and essentially just reprint the AP wire. There is no value in that. The AP and Reuters apps are free!

      1. William Mougayar

        Yes, I like to read investigative journalism when it’s really well done, or well-researched pieces. That’s valuable.

  30. jason wright

    one format could compliment the other. a weekly printed edition that sets the agenda and stimulates discussion for the next seven days in the digital channel.

  31. Adrian Palacios

    Timing isn’t right for the switch to digital. My assumptions:-yes physical requires more materials/ people, but that also keeps a check on who can enter the publishing business…remove that barrier (a la digital) and now anyone with a computer can distribute-a large segment of the audience is too entrenched in their old ways– I have an iPad, a kindle touch, etc but ended up hating the digital-only experience for many many many many reasons. Additionally, this segment will not tolerate a sudden shift to a more expensive experience. And I would bet this segment is still much larger than the digital segment. -like someone mentioned, there is irrationalaility at play as well–there is a romance behind story-telling and an equivalent romance in how that experience is delivered. For comparison, go look at a hard cover version of Dave eggers “hologram for a king” and then look at it on the kindle. Not. The. Same.-I wonder about media consumption that is pure reading (newspaper, book, magazine) and fear that minutes spent on average is headed down and being supplanted by video, audio, etc. I think publishers know this and are scared to make a move.

  32. Carrie Mantha

    I wonder if there is a relatively price-insensitive phenomenon around habits that form early/nostalgia. My dad uses a kindle for book reading but still likes to read a physical newspaper because it’s been a ritual for so long. I do pretty much everything on my iPad, but when I’m home visiting him I really enjoy reading the physical paper next to him as well.I realize this has been the (generally incorrect) knock against all kinds of change, but maybe there’s some reason it actually holds true here? That would seem to indicate that the whole market will eventually turn over, just with a longer time-horizon.

    1. LE

      “but when I’m home visiting him I really enjoy reading the physical paper next to him as well.”Key “next to him”. Dad. You haven’t decided that you want to do this enough to do it when you “aren’t next to him”. So you like it but only in that situation. Which makes sense. Like people who only watch the Super Bowl.This is similar to when people get together with family over the holidays. It’s a tradition but many families only get together on the holidays. They would never get together if not holidays. So it’s something that works on a limited basis in a limited set of circumstances. Not something that you like doing (like dining) and you do all the time with no reason at all because you like it on it’s face value. (Dining out of course used to be only for special occasions.)

  33. Jeff Jarvis

    Fred,There’s an issue of critical mass. The reason that papers are cutting back frequency but still holding onto three days a week is because (a) they still have enough print advertisers to justify those days and, more important, (b) they have distribution contracts for coupons and circulars (FSIs — free-standing inserts — in our argot). Both (a) and (b) are buying local mass.Raise the price of the print and lose circulation, then there will come a point at which the paper no longer has critical mass especially for its FSI customers, who already are shifting to mobile and digital for couponing and who can also use the USPS (another physical business in desperate shape). I spoke with a major circular advertiser two years ago and asked when they thought papers would drop below that point of critical mass. Twenty-four months, they predicted.Yes, some people still like paper newspapers and book. Some people still liked horses when they became economically (and, in cities, environmentally) unsustainable. Tough.The goal of every newspaper must be to become a fully sustainable digital enterprise before the point at which print becomes unsustainable — the point of critical mass when circulation drops too low for advertisers and advertisers finally learn to shift to digital anyway.Now, you’re right, some publishers (e.g., Belo) are reacting by raising prices in print. That’s a milking strategy in part.The other problem with raising print prices — as well as putting up digital pay walls — is that publishers continue to think that they are in an industrial-age business of manufacturing content and the physical (or faux-physical) artifacts on which it is distributed.I’ve come to realize lately that we should not see ourselves in the content business; that’s a trap that makes us concentrate on pay walls and copyright and other means of protecting old business models.No, news is a service. Its goal must be outcomes — an informed public — not output of products. We no longer have to treat everyone the same — a mass, a critical mass. We can now offer individual service to people based on what we know about them: where they live and work and what they’re interested in and whether they have kids or like to ride bikes….Who does that today? Jeff Bezos.

    1. fredwilson

      Great comment Jeff. You know a lot more about the news business than I do!

      1. LE

        Not a comment on Jeff but…so do the people who are in the news business who can’t turn it around. Think of how many things someone not in the business would suggest to them to which they would reply “that wouldn’t work because…”.

    2. Matt A. Myers

      “No, news is a service. Its goal must be outcomes — an informed public — not output of products. We no longer have to treat everyone the same — a mass, a critical mass. We can now offer individual service to people based on what we know about them: where they live and work and what they’re interested in and whether they have kids or like to ride bikes….”This is the bingo paragraph. The way to distribute and personalize for this is where I think we still fall short.

    3. ShanaC

      what do you think of the nytime’s pricing strategy then (print is cheaper than digital)

      1. Jeff Jarvis

        It delays the inevitable, eh? My wife was finally ready to cancel the paper but it wasn’t worth it so we keep getting it. But I read only digital. She reads mainly digital. But the Times still pays for print and distribution. It also gets more ad revenue from print, of course. But that’s rapidly declining. I wouldn’t turn off print tomorrow. But I would try to push to digital (thus the name of Digital First, a newspaper company I advise) and I would set a date for planning for that switch. Instead, papers are trying to string out the time they keep print and its models. Dangerous nostalgia.

        1. dianawudavid

          Jeff, Don’t you think it pays to be nimble and switch, as Seth puts it, “at the price moment” when print seems unsustainable for advertising and content combined? A plug for courageous opportunism vs dangerous nostalgia!

        2. ShanaC

          yes, which is why I keep wondering. I want them to push digital, but I would seriously subscribe to print, waste the paper except for craft things, and get all the benefits of digital. I don’t get it at all

      2. SF

        Why is this so strange? NYTimes has a well-understood mechanism of making money on the print edition. They are fine charging you some difference + profit between actual cost of producing and delivering the paper and what advertisers pay. For the digital edition ad rates are a lot lower so you need to foot more of the bill. If you are a print subscriber than whatever revenue your digital reading generates is gravy, thus the subscription is free with a print edition…Once advertising metrics get adjusted for people who are just using print edition as an arbitrage tactic *then* NYTimes digital subscriptions will have to carry the full cost of producing the content they crave.

    4. LE

      “Who does that today? Jeff Bezos.”While true (I buy much from Amazon) Bezos is a big thinker he’s not a “Jobs” regarding the small details that matter. The granularity. As such his organization is built that way from the top with it’s hiring practices. Similar to google. Merely building something big that catches the wind not building something that has even begun to maximize how the wind is caught. (They have a long way to go with Amazon which I guess is good because there is so much upside.) [1]That’s the reason that trying to buy something on Amazon can be such a difficult experience.I bought a Sony Rx100ii camera yesterday and it was a complete CF as always. Took way to much time to decide on the purchase. Wanted to buy a new laptop bag. Similar but even worse. Great if you know what you want exactly, hard if you don’t. Even with the Sony (I knew exactly the model I wanted) to many combo choices with confusing shipping options (by Amazon or fullfilled by Amazon) etc. Don’t make me think so much.My point is fixing this problem will rely on getting the small things right. LIke Apple did with Iphone obsessing over minute details. I don’t feel that is Bezos’s strong point.[1] For example Walmart not only figured out a way to get you cheap products but also (because Sam knew customers on a micro level) how to get you to buy more of those products and products that you didn’t even need or think you needed.

      1. Jeff Jarvis

        Except I find buying things on Amazon easy.

        1. LE

          I like buying cars but I recognize that most people aren’t like me. Also you have to separate what you in particular find easy and/or non-challenging and what is typical.There is a learning curve to using Amazon. Not as bad as ebay but a learning curve just the same. Even for things you are quite familiar with (like the camera in the attached search). The merchandising is bad. Lots of room for improvement there. Takes to long to winnow things down (once again even for things you know about). Once you get to the checkout screen there isn’t even a button to get back to do something else. (You have to fool with the URL I’m sure that’s intentional though). I could go on and on.Problem is it is difficult to make gui changes to something that big.If you buy many things on Amazon you should be using an affiliate account to get back 4 to 6% for putting the purchases through the affiliate account if you aren’t already doing that. Takes gaming the system but not difficult at all.

    5. Jim Peterson

      Thanks for the insights.Kudos on your recently becoming full-time at the CUNY Graduate School of Journalism:

      1. Jeff Jarvis

        Thanks much, Jim.

    6. robertdesideri

      Jeff, the scavengering by the Yelps, 4SQs, Groupons and others for digital FSIs is amusing —they’re fighting over carcass scraps whilst creating yet another race to the bottom. Scavenger rollups and acquisitions soon come. Services such as Twitter enable users to filter for and serendipitously discover news they want to ‘pull’, different from a push customization model where, as you suggest, publishers assemble the end content as a service. Not good for newspapers. Good for Twitter and other managed discovery schemes. What happens next? A good portion of the 23 million acres of timberland in Georgia becomes golf courses and condos. A lot of timber workers join the unemployed. I agree with Fred, physical newspapers will not disappear overnight, but it’s going to happen. The opportunity created by all of this (except for the timber worker unemployment) is huge, and it will be solved by one of the giants. Amazon?

    7. jim

      The irony of this comment stream is that the best thing to come from the Jeff Jarvis era is, of course, the @ProfJeffJarvis twitter handle. It’s more insightful than the “real” man himself. Think about that.

    8. Russell

      +100 “The goal of every newspaper must be to become a fully sustainable digital enterprise before the point at which print becomes unsustainable”The challenge for big newspaper and book publishers is the people best informed about their audience (editors, sales and management) aren’t literate in the coding – so their input and feedback on proposed solutions is limited.I see a huge opportunity for groups like to do enterprise level education for the key decision makers and participants to understand what is happening under the hood.

  34. Paul White

    A couple of comments:a) I am a quick tech adopter, but love my morning physical newspaper – it remains a better format for the 1 paper I love, the WSJ. I also have online WSJ, but only use for research. Beyond that, I also love Flipbook for its ability to quickly get me additional newsfeeds that I would not otherwise find. Best of all worlds.b) I believe that we will all see this best of all worlds soon apply to books. We are now seeing an e-copy come attached to a physical copy of music and movies. This should be the approach for physical books, with e-copy only at a discount. Those that want to pay for the physical will also learn that sometimes the e-copy is sufficient (and buy more of them) but have the option.c) Amazon has found ways to eliminate the costs associated with physical delivery. These will no doubt be applied to physical delivery of the Post, which will help the bottom-line. In fact, maybe there is an opportunity to deliver both together (hard goods plus the paper) with the electronic version also available for a lower fee.

    1. LE

      “These will no doubt be applied to physical delivery of the Post”Physical delivery is based on a legacy model with union drivers and contracts that came about in a era when there was profitability to support that. (Like with the auto companies). As those contract go out the window (and the union guys die) there is definitely a way to save money on at least that aspect of the cost model.For example the local paper I get is delivered for free and totally supported by advertising.

  35. Tracey Jackson

    The world does move on but sometimes it has to go slowly and with tech it has been on steroids. When you pull out the rug from long standing icons of our culture like the book and newspaper you are going to have people who move fast and people who hold on. Music was easier as it was just being listened to in a different way. One was always one step away from music, so if it’s a cassette player or an iPod – no big difference. Older people will hold on to the old forms, they will watch the news at six and read the paper they can hold, buy books at whatever tiny stores are left standing.Books are objects as well as things to entertain and enlighten. I have two Kindles and for the last six months have totally gone back to the real deal. The book. I like to see it, to turn pages, to hold it and put it on a shelf. I missed it. I spend enough time staring at a screen.As an author I like to see the thing I produced. I like to hand it to people and sign them.But I think the younger generation will not know anything different and by the time they are all in their forties, papers, magazines and books the way we know them will be gone forever at some point as the bottom line will not make sense otherwise.But really how can you charge more for something that is slowly dying? Newspapers are having such a hard time holding on most all are losing money I know this is the wrong place to say it, and i do love technology but the thought of every part of our lives being relegated to our phones and tablets I find a little sad as one loses the sensual pleasure of touch, sight, smell and history that so many objects carry with them.

    1. awaldstein

      Not necessarily a good analog but I have photographers as friends who shoot in film. Pricey to develop but it will continue to go up as time goes on.I’m as techie as they get but drawn very much to mechanical processes in the art I collect. Silkscreens. Lithographs done on big French screw presses. Platinum prints. Imperfect. Tangible. Wonderful all.

      1. fredwilson

        My daughter shoots film. Medium and large format

        1. awaldstein

          Film and light as design go so hand in hand.She may have heard of Marianne Engberg, an amazing (but obscure) Brooklyn photographer, now in her 80s, who still shoots in film. Shot the world through a pin hole camera for almost a decade.Amazing women and artist.

        2. ShanaC

          i hope she is freezing her favorite films

      2. Tracey Jackson

        Great analog, Arnold. You see this in what you do. People are totally captivated by the ease and efficiency of something, digital photography, streamed music and then thy old thing gets kind of hip, it’s retro, it’s the way their heroes did it. So film is coming back. Turntables are coming back. I bought one this year. Artists are releasing albums again. Daft Punk made an amazing one. It was fun to hold it. Though the sound on my bluetooth was better.It won’t be the norm, though it will be part of it. But wine will stay in bottles, right?

        1. awaldstein

          If you are making wine to be drunk in the next few months, boxed wine can work. Not my world of consumption though ;)Overall though the thickness of glass in bottles is being reduced by the eco conscious, even the most natural of winemakers. Good thing.And even the most natural of the natural are using artificial corks for anything but their most age worthy bottles.

      3. SubstrateUndertow

        “Imperfect. Tangible.”poetry up vote!

    2. Anne Libby

      While I’m reading a lot on my Kindle, the biggest loss is the ability to pass the book along. I have a number of family members and friends who pass books back and forth. Doing so on the Kindle is unnecessarily restricted and very inconvenient. Some Kindle books cost more than the trade paperbacks, which makes this even less sensible.My strongest case for the ebook — as things stand today — is the business book, text books, and other knowledge/information that will lose currency. And reference books that I would probably never lend, like a dictionary or a Bible.

      1. JLM

        .College text books continue to be a rigged and artificially lucrative market.JLM.

  36. Dave

    A book is different than a newspaper. Newspapers made the bulk of their money from ads, particularly classified ads, for more than 50 years. Marginal cost of an item delivered thru apples newsstand is a 30% revenue share to apple which is not insignificant. Newspapers haven’t figured out how to replace the ad revenue and digital subscriptions aren’t close yet for most papers.Books are interesting. We have spent most of the past decade with amazon using books as a loss leader. I don’t think we know what the cost of a digital book really is or should be since the key seller isn’t trying to make money on the product. But it does make sense that as amazon consolidates market power it would cut discounting. A number of articles have also indicated that publishers margins are much higher own physical books than ebooks. Seems odd to me but it is easy for me to forget that bookstores/amazon are not the publishers. Somewhere along the way it seems like amazons direct publishing model could stand book publishers on their head if amazon really pushed it.

  37. Don Jones

    In the +-2 decades since the Internet came into existence, it has generally disrupted from the bottom, which makes sense since its principal benefit has been rapid communication at virtually zero marginal cost. The presentation technologies have only recently begun to show promise.The instances of publications continuing to be profitable with print versions – WSJ, The Economist, Financial Times – appear to offer a premium paper experience that holdouts who aren’t price sensitive still value.Your pricing suggestions seem to be rational, though I believe they will result in only temporary revenue increases/stabilization, as the holdouts fade from usage over time.Wonder if there will ever be a digital handheld newspaper experience – a foldable product that feels similar to paper, but is digital.

  38. Lev Samsonov

    I suppose that WSJ is a perfect prototype to find effective and innovative business model for media companies. The matter is to find the effecient monetization provided the current one is under delivering more and more. Ultimately that should lead to 100% digital business but the customers that prefer offline part should be persuaded to get online or they become online organically.. Also WSJ is important content generation vehicle that can be used for business goals. I hope soon we will see the moves from Jeff:)

  39. nirvdrum

    There’s a third option, too. Those that don’t like to read on a device still won’t, but they’ll cease to buy the physical product because of (perceived) price gouging. This will undoubtedly be hailed as a success of digital media (or the inevitable decline of physical media, depending upon your disposition).

  40. Todd NYC

    Some commenters note that revenue differences as well as cost differences between physical and digital influence the relative pricing to consumers. For instance, we can’t compare the prices between physical subscribers and digital subscribers without knowing the relative magnitude of physical ad revenue vs. digital ad revenue.That aside, it still may be rational to subsidize physical media with the digital revenue. Physical media may have perceived marketing and branding value beyond its direct revenue potential. Consider an analogy with theatrical film releasing – itself typically a loss leader, but it juices the home entertainment market so the overall release is profitable.Assuming that the two markets – digital and physical – are not completely fungible (and evidence suggests they are not), one can continue to see what could be perceived as one market subsidizing the other. In fact it would be incorrect to label it as subsidizing, if we characterize physical and digital as two components of one single IP distribution strategy.

  41. Drew T

    It’s cheaper to have Saturday and Sunday home delivery of the New York Times (which includes a digital subscription) than it is to have just a digital subscription ($!4.40 per month vs $15). Maybe it’s easier to sell advertisers on circulation and physical advertising.

    1. Drew Meyers

      Advertisers probably figure someone will be more likely to look at it if a paper is sitting on their doorstep than if someone is given the choice between thousands of places online to get their news.

  42. ZekeV

    Or, it could be that e-book readers are still concentrated in the spendier demographic and thus pricing reflects luxury good economics. The newspaper market is a little further along on its transition to ubiquitous digital consumption, and so purchasing a *print* subscription to a newspaper is a luxury purchase, and smart publishers take advantage of this to get full value from the demand curve. If I’m right, as e-book readers become more widely distributed, the relative pricing of e-books vs. print will flip. OR maybe not, but you will have to buy an e-book first, and then you can add a print-on-demand copy for an additional $ (thus giving spendier readers a justification to spend what they are willing to spend on a particular title).

  43. Daniel So

    maybe it’s more a sign that the price of ebooks have been artificially inflated.

    1. fredwilson

      I was wondering about that too

      1. LE

        If the price of ebooks goes down people will buy more ebooks that they never read and the total sales and profit will be higher.Remember when you used to have to go to a video store and make a decision on what video to rent? And you picked up two just in case you didn’t like choice number one? Now you go to netflix and roll what you want and have no fear of buyers remorse.Problem is it’s possible that model only works when there is no buyers remorse. And a physical thing that you get as part of the process (like a McDonalds toy gift for the kids).Very possible that behaviorally buying a book for .99c and not reading will create some negative dissonance that will prevent you from buying other books at .99c. (I don’t know the answer but this of course could be tested).With your album example you get a physical something to put on a shelf. So if you buy another album (say back in the day) and you didn’t like it you still get something on the shelf to show your friends. Same with physical books. How many physical books have you purchased that you never read totally? But you keep the book and put in on your shelf. It’s an object like shoes in a women’s shoe closet. It feels good because it’s an object. It’s a collection. People like to collect things and make collections. (Must be rooted in something that there is a wikipedia page on.)An Ebook is not something you can collect and construct some fantasy in your brain or think others are going to see and care about.My in laws have all their albums from back in the day in their house. I saw it (when I first met them a few years ago) and gave them positive feedback on the collection (my wife is much younger and many of the albums are the same that I had in high school).

      2. Daniel So

        so i was thinking about this some more, especially regarding newspapers.To flesh out what I earlier, perhaps the price of the physical product is already being sold at a premium and the ebook’s price has been artificially inflated, pegging as certain percentage of the physical product. From that point of view, it’s not so much the physical product needs a price bump but the digital needs to be allowed to reflect the true market price and deflate. This will then “drive adoption” of the ebook standard as you say, though it will not “drive up the margins of the physical product”. (This scenario assumes that the demand for the physical is relatively inelastic, which I doubt).If we’re going to take an opposite approach and say that the physical paper needs a price premium, then I think we need to critically evaluate the value of the physical newspaper. One qualm I have with the line of thinking in this article is the premise that, for the diehards, the physical product (newspapers) is wholly superior to the digital. [I am focusing strictly on the diehards]. IMO, even for the diehards It’s more of a mixed bag.The “good” would be things like being able touch what I read (helps with memory retention), write on it (ditto), create scrap books, look intelligent.The bad, imo, is waste, similar to the remorse one feels in buying a 500 channel TV package. Even for this specific demographic, I am sure there is a lot of wasted utility in the physical newspaper, which in its simplest form can be represented by each page/article/word the diehard is unable to read. To make things worse, this waste leaves behind a physical reminder.In this regard, I believe that currently, the ebook version is better than the physical (even for the diehards) since it leaves behind little waste.Why am I talking about this? Well, this “waste” weakness of the physical newspaper needs to be remedied, somehow, before we can make any talk of introducing a price premium on physical newspapers. And this is kinda why I like Jim Hirshfield’s answer above regarding print machines. If such print machines could be made, one could be able to customize their physical newspaper, print only what they want and do so in a fast, succinct and effortless fashion. This would create a ton of added value due to customization, while simultaneously eliminating excess content, thereby eliminating waste.It’s a fanciful idea perhaps but not that far removed from reality. While we’re being fanciful, may I add that it’s important for the printer to be able to fold the paper as well.TLDR: In regards to adding a price premium for physical newspapers — In its current state, a newspaper’s excess pages sully the value of the physical product, making it difficult to add a price premium. Physical newspapers need to be able to be customized cheaply and effortlessly for their real value to shine. Whether this is done through custom printers or some hitherto unfathomable AMazon black magic remains to be seen.

  44. JimHirshfield

    At the order of magnitude of reported losses for WaPo ($50M/year), I’m going to go out on a limb with a crazy idea: Bezos will back the development of an at-home newspaper printer. He’ll develop some form of gel in a cartridge that the machine converts to “newsprint”. It’s the Kindle Printer. Buy it for $399 and “subscribe n save” on regular deliveries of GelPaper for $49 per month. WaPo comes free.Then shut down the presses.

    1. Daniel So

      that sounds awesome

      1. JimHirshfield


    2. Drew Meyers

      Or sell the Printer to a neighborhood organizer/influencer, who is in charge of printing the paper for everyone in the area who wants it every morning. Crowd source the delivery to the community (there are still kids who will do it for very little money same as there was 10 years ago), and have a payment/tip system built in so there is an incentive for the printer & delivery person.

      1. JimHirshfield

        Tech gets smaller, faster, cheaper. So why add another layer?

        1. Drew Meyers

          I don’t really think people want to have printers, and paper, and go through the motions of printing something out everyday. Personally, I’d rather have someone deliver a finished copy to me and I tip/pay them for that service.

      2. JLM

        .Actually this has been going on for years. When you subscribe to the WSJ/NYT in Austin, TX, it is printed by the Austin American Statesman.JLM.

        1. Drew Meyers

          Yea, I’m thinking of a printer per neighborhood / subdivision. Thinking within biking distance, so kids can easily deliver. Just thinking out loud..

          1. JLM

            .You are talking about convergence — printing and delivery.In my neighborhood one can still get the AAS, NYT and WSJ via hand thrown delivery but it is done by a guy in a pickup truck not a kid on a bike.I think the kids are too lazy to do it.JLM (former paperboy).

          2. Drew Meyers

            Yea, but if the routes were shorter/closer and there were more people doing less work…it may work at a cheaper price point. Maybe I’m wrong 🙂 (former paperboy substitute)

    3. Drew Meyers

      @JimHirshfield:disqus See this follow up article I published on Geek Wire –

  45. Pete Griffiths

    Part of the reason for delayed switching is that the digital product doesn’t offer anything like as much added value over the physical product as it could. Even something like the NYT ‘Skyfall’ multimedia experiment, whilst interesting, misses the key point about digital. The ‘new normal’ relationship with content is interaction! And most digital offerings barely scratch the surface in this regard.

  46. Stuart Willson

    Worth noting that with newspapers, as opposed to books, the largest source of revenues is advertising. Thus, companies are incentivized to do whatever they can to drive circulation (or as the case may be: stem circulation losses), which is one reason why they are loathe to raise prices for “premium” users. You’ll see the same things with magazines where they virtually give the magazine away so that they can sell your eyeballs to advertises. Also newspaper production is largely a fixed cost business (labor, plant, distribution, etc) and another reason for desiring high circulation is to leverage their fixed costs.

    1. fredwilson

      Good points Stuart. But if circulation is the main goal why put up pay walls?

      1. Salt Shaker

        Cause most successful mag/newspaper publishing companies need a dual rev stream w/ both sub fees and adv. It’s that way in the cable TV biz too, although premium channels like HBO/SHO are exceptions w/ a single (and extemely robust) sub rev stream.

      2. Stuart Willson

        I think it depends on who “they” is. If we’re talking about the average daily newspaper (say, the Seattle Times), they’re doing it because they’re desperate: they believe their content has value, and the mathematics of the print to digital transition are terrible (lost circulation revenue + lousy digital advertising supply/demand dynamics and pricing). They know if they do nothing, the business is going to decline as people transition from off to online, and so the thought is: we have people paying for print (our content is valuable), we should have people pay online (it’s the same content). The problem obviously is that newspapers had local monopolies on content and the internet changed that game. Today, their content (a lot of it) can be found anywhere, and so a paywall for the average paper isn’t going to work. But: IF a paywall were to work for a daily newspaper, they’d first have focus on and strengthen their unique content (example: sports) through extensive blog networks, exclusive content (e.g. beat writers today should get better scoops than sports bloggers) and then try to build am individual paywall around that vertical. The Seattle Times, as an example, has a great set of sports blogs (Mariners, Seahawks, Huskies, etc) and while that hasn’t gotten me to subscribe – yet – it’s mostly b/c I never seem to hit the paywall trigger and get blocked.I think as it relates to the NY Times, it’s a different story. The content is unique, both in its quality and in its subject matter. Examples: long form content in the Magazine, interactive content on the web, Dealbook, and 538 (well, prior). This content is unique and to me, has value. So I pay for it. And people increasingly are paying for NYT’s digital content. If you look at the last quarter, digital revenues were up 45% and paying subs up 35%. I expect this to continue, b/c I think people are increasingly getting comfortable with the concept of paying for unique or otherwise valuable (e.g. the method in which its distributed). We’ve seen that with the success of Spotify, Pandora, Netflix and others. It’s not going to work for most people and that’s great. We paid for local newspapers before because we had no choice. But if you have content that people want and they can’t find it anywhere else, recent trends would suggest that they’ll pay for it. And that’s when you put up a paywall.

        1. Drew Meyers

          totally agreed stuart. i think more and more people/brands with established and loyal audiences are going to start going the paywall route. But, as you say, it comes down to how unique and valuable is the content. That’s the incentive. And how easy is it to give my credit card?@fredwilson:disqus if you put up a paywall on this blog, I’d pay for it. The content is that valuable. But there are only a handful of blogs out there that I’d say the same thing about & be willing to pay for.

          1. fredwilson

            i am more interested in circulation/audience than money

          2. Drew Meyers

            I figured. Just saying you have a loyal enough base that it would work if you chose to go that route. Most bloggers/writers couldn’t pull it off though.

        2. fredwilson

          i agree with you about the times. i was encouraging them to offer subscriptions on this blog at least five years ago. and i like the way they ended up implementing it. you can still get to the content for free but if you are a regular reader you need to subscribe. very smart.

    2. ShanaC

      true – I’m actually being given newspapers

  47. Shaun Dakin

    Two things:1) I worked for FedEx from 1996 – 2001 and the economics of delivery is paramount with some of the best minds in the business. There is / will never be an easy answer to getting a physical item to an address. The more rural the address the more the USPS2) Newspapers have never seen readers / subscribers as their customers. That is, papers have seen advertisers and sources as their main “customers”. While, readers / subscribers have rarely been treated with respect.When was the last time you read about a Publisher talk about “delighting” their subscribers (as Bezos does every single day with every single purchase I make).The change to the paper industry can not and will not take place with publishers that still can’t get rid of the deer in the headlights routine with ad revenue plummeting year over year over year.The change won’t come from journalists who care little about revenue and all about themselves and their sources in order to create the “brand you”. In Washington, DC you get sources to get invited to fancy Georgetown parties (and you think you are going to get tough investigative journalism from people that want invites to parties?)I’m a Post subscriber (7 days a week of paper) because I value the product that the Post puts out. However almost every day I’m frustrated in my interactions with the Post.For example, when I read my mobile version on my Android phone and I share via the native Android share app the headlines do not get transfered to Hootsuite.All I get is the URL.So what? This means I don’t share articles as much as I would like.It means I am not delighted with the Post.It means I don’t LOVE the Post as a brand but I grudgingly support it because it is the right thing to do.And, guess what, I know many people at the Post. I have a direct connection to some of their digital folks. I’ve let them know about this issue.Crickets. Nothing. No sense of urgency.I hope Bezos can figure it out.Shaun DakinFounder@PrivacyCampFounder#PrivChat a weekly twitter chat on #Privacy (Tuesday Noon ET)

    1. LE

      “When was the last time you read about a Publisher talk about “delighting” their subscribers (as Bezos does every single day with every single purchase I make).”Can you give examples of how Amazon “delights” because to me they have so much work to do in this area and I’m not sure the organization there today is built to do that. (Culture must change).Amazon has built an efficient “just in time system” for me to get a product at a cheap price delivered to my door in most cases the next day. But then prior to the Internet the local paper did that as well (every day).

      1. Shaun Dakin

        1 I order something for Wed delivery on Sunday and it arrives Monday.2 I pre-order something for $20 and the price falls to $17 and they refund the difference3 My Kindle doesn’t work and they send me a new one immediately with no charge.The list goes on and on.

    2. Drew Meyers

      “When was the last time you read about a Publisher talk about “delighting” their subscribers”The ad model is not conducive to “delighting” your subscribers. Because your customers are actually advertisers, not readers/subscribers. Delighting readers doesn’t make money unless you figure out a way to convince readers to pay for the service themselves.

  48. andrewparker

    Pricing the digital version at a significant discount would take a “cost-based” approach to pricing. A big Wharton No-No ;)Instead all forms of distribution of e-books / paper should be set by “value-based” pricing. If digital is actually a better consumer experience (IMHO it is not) then charge a premium, not a discount.When you let your costs dictate your pricing, you will always be on an inevitable march towards zero gross margins. A mature business like the Post can’t go there. A growth engine like Amazon can.

    1. fredwilson

      That is all true Andrew. But if you ignore cost in your pricing strategy and you are operating in a zero marginal cost market you invite lower cost competition.I think a lot of the things they teach in business school are based on analog logic

      1. robertdesideri

        Bezos is the best business school in town. Or at least tied with Google. No other ‘real’ B schools for digital have yet arrived. Prime was one of my fav B school classes.One strategy would be to offer something “free” with a paid physical WP subscription. A new flavor of Amazon Prime. Give paid physical WP subscribers free Kindles. Content deals. Amazon coin rebates. Or pay the paper delivery kids very well in Amazon Coin 🙂 Or bundle…Amazon’s got lots of levers in waiting. It’s going to become much more interesting in the a) games, b) music, c) books sectors. Bezos’ collection of levers is how he will produce earnings. His competition should be v afraid.

  49. John Revay

    WOW Sunday am and already over 120 comments in < than 3 hrs – must be a great topic ….I was driving in the car this AM, – I had to run up to my office for a moment, I saw probably over 100+ people on bikes ( no race or other event just bikers riding), I also so a guy a guy driving in a red truck delivering papers. he had a flashing light on his roof….While in the car, I was listening to CBS radio – they did a spot on new resurgence of vinyl. They talked about this company in NY – that has been pressing vinyl for the last 4 years – each yr their business at least doubled.

  50. David Silver

    Surely the high value of print advertising relative to digital advertising is an important reason to hold down costs on the print version:…This also explains the rise of free papers in many big cities.

  51. BillMcNeely

    The book and newspaper industry is not the only one fighting this physical vs digital divide.Everybody’s best friend ,the car dealer, is fighting this hard. I literally had my boss this week tell carrying around a 5 pound binder is so much easier than plugging in a user name and password into a computer. Really?The other thought I had was which experience feels more authentic. Some folks to include your wife get a better experience from physically touching and leafing through the physical object. Others like yourself, like how the experience can become more than 3 dimensale thanks to a bit of code and the tablet.

    1. Luca Hammer

      Don’t people prefer to touch the car itself?

      1. BillMcNeely

        Yes, it’s very hard to make a car sale without someone actually driving the car. However, the business loves analog and the opaque They love to speak in word tracks and scripts abhors real conversations with people. Customers are really just marks. Great place for The Fabulous Fab

        1. LE

          “Yes, it’s very hard to make a car sale without someone actually driving the car.”Cars are bought on emotion and the new car smell (at least for new cars that is). At least that’s the way it used to be with the older generation.”They love to speak in word tracks and scripts abhors real conversations with people. Customers are really just marks.”Because it’s a waste of time. And they are marks. People will cut off your balls if the next dealer gives them a price $100 cheaper. “People” means most buyers it doesn’t mean every buyer of course. There is always going to be someone who is loyal to a fault and “I’ve dealt with Dave for 20 years and wouldn’t buy a car from anyone else”. But the masses respond to price primary. The dealer system knows this and as such they operate the way they do. [1]Look at what happened to Saturn.[1] Why does fixed pricing not work with cars? Because it makes no sense to not maximize profit on people who are stupid buyers (who will subsidize people like me – thanks!) and it makes no sense to not give people an incentive to “buy today”. To get them off the fence. It all is perfectly logical if you understand the psychology of buying.

          1. BillMcNeely

            You bring up a great point. There are no white hats in the car buying experience.

    2. Drew Meyers

      Is there anyone in the car industry in this community? I’ve been toying with an idea and would love any feedback from people who really know the space. “Buy My Wheels” –

  52. Chris Fralic

    There is something unique and different about a physical paper. Last year at the US Open, a New York Times salesperson convinced me to sign up for Sunday delivery of the physical paper in addition to my online subscription. I did it because it was less money each week plus I got a $50 one the spot gift card. Economic of that aside, what I found was that I now actually read the NYTimes every week, and in fact I look forward to it – where online or on the iPad it was more occasional. Physical is a better reading/discovery experience for me, online is better for sharing and more, but having both is the best of both worlds.I think Jeff Bezos should offer free home delivery of the Washington Post to every Amazon Prime member.

    1. Luca Hammer

      Don’t forget that Bezos bought it himself and right now there are no ties between WaPo and Amazon.

    2. LE

      “There is something unique and different about a physical paper.”It’s pushed to you and you look at it that’s what’s different. This is all about distribution and one advantage that a physical delivery has over digital.”I think Jeff Bezos should offer free home delivery of the Washington Post to every Amazon Prime member.” [1]Would not take long at all to run some spot tests to see exactly how many people would take that for free if it was for free.Essentially the model is to determine if, as an “advertisement delivery system” it makes sense to push the paper at a loss in order to make it up in advertising revenue. My guess is that with legacy union contracts there much to do to make this work.[1] A personal Bezos investment but I’m sure some advertising deal could be struck.

    3. Salt Shaker

      Offering a free sub to every Amazon Prime member is a very worthwhile and testable prop. To serve an incremental digital sub costs WaPo nothing, while print distribution has hard costs. One prob I see w/ this model is on the editorial side. Editorially speaking, WaPo is not national in the same veign as the NYT and WSJ, although they could easily craft a true national edition. Offering Amazon Prime subs a free WaPo subscription will help the paper to efficiently drive its rate base, which will have a direct effect on ad rev.

  53. Luca Hammer

    About the book market I got told that printing and distribution is so cheap in most cases (fully automated, cheap materials, infrastructure already available) that it doesn’t really influence the price. Marketing is most expensive.With papers I assume that the journalists are the most expensive part and most papers make more money from advertisings than from subscribers. Therefore they would even deliver papers at a loss to keep up their reach.

  54. Tom Hughes

    Printed newspapers deliver a high-resolution experience(pixels per inch) far in advance of any screen. This matters a great deal for certain kinds of journalism. I hope for hybrid outcomes like the NY Times delivers, bundling print and digital; print for depth, digital/mobile for speed and convenience, both undergirded by the same high standards.

    1. LE

      “Printed newspapers deliver a high-resolution experience(pixels per inch) far in advance of any screen.”Can you explain what you mean by this? Web offset is actually pretty sucky resolution wise so I must be misinterpreting your point.

      1. Tom Hughes

        Not a huge point: simply that you can jam more info onto a printed page than you can onto a screen (especially a mobile screen). And print remains “mobile” in the sense that you can carry it easily (so “portable” is really the right word). I think this means newspapers and news magazines could still be the vehicle for long-form journalism and, especially, for data-rich stories with maps, tables and so on: look at what the Times delivered about Hurricane Sandy’s aftermath. They hardly tried to fit that into the web site, what did fit only fit because it was poorly connected to the rest of their site. Conversely, nobody expects to read “breaking news” in a printed paper; and many stories are short, and don’t need that high-res delivery.When I read the NYTimes app on my phone, I feel up-to-date; when I read a long article with maps and pictures and so on, I feel more deeply informed. My hope is that there will be room for both experiences in the future, and for at least some period of time, I’m pretty sure that the best way to deliver both experiences is to deliver in print and digital both, sharing a brand and a set of standards.

  55. Rick Levine

    Interesting discussion. I think our buy-in to digital media leads us to minimize some of the benefits of physical media in our lives.Some of our pleasurable social interactions revolve around physical media; sharing the sections of a newspaper; scrounging sections at the coffee shop; lending books to friends. Yes, those of us who were raised on paper media, and for whom these interactions are habitual, will be aging out of the marketplace. However, our demographic is growing, and isn’t going to shrink in the near future, so the fade might be slower than advertised. (And, the current electronic interfaces won’t work for us as our vision and small motor skills deteriorate. While I hope solutions to those problems will outpace my aging needs, that’s probably optimistic.)Additionally, today’s digital interfaces are akin to looking at the world through a hole in a fence.There’s an added cognitive overhead needed to use a tablet/pad/screen to do creative work, compared to spreading out media and creative output over a larger workspace. Doing research, visualizing relationships and taking advantage of the serendipity afforded us when we can use all of our field of vision and our kinesthetic senses isn’t going to go away. I hope digital media evolves to more closely match the scope of our physical capabilities. Today’s implementations are only pale shadows of where they need to go. (Cheap, malleable electronic paper, ala The Diamond Age, anyone?)And last, it turns out that our children need to use their bodies as they learn to create. They have to start learning to draw and paint by exercising their large motor skills, long before their small muscles are ready to catch up. Their bodies are involved in creativity, in ways that cannot be taught in the hundred square inches of a digital tablet. While we can say that those of us raised on physical media will be disappearing, we’re realizing that our kids formative creative experiences are much better addressed by the physical than the digital, despite our personal investments in reforming our world to be more wired.

  56. Paul Fisher

    There is a an interesting magazine company in England Called Imagine. Ten years ago they had a large portfolio of low price magazines. Today they sell things called “bookazines” These sell for like $18. They are nicely bound and have much more evergreen content. And they sell very very well. They are collectible. Folks buy them for evergreen information: things like “How It works: the most innovative machines of the last 100 years”. Imagine is doing very well because they have realized that folks are actually interested in, and value physical media. It just needs to be the right sort of content.

    1. awaldstein

      Taschen is another case in point but don’t follow their economics.

  57. J Nicholas Gross

    Physical paper will always be preferred by some readers. Speaking from my perspective, although I suspect it is not uncommon, my theory is there is some common but strong kind of psychological need for “completeness” as concerns the news, or at least parts of it anyway. There is a feeling of satisfaction when you read an entire physical document. Humans are physical, tactile creatures and have a need to have physical stimulation. When you “read” an online version there is no physical feedback, and you never really know where the site/news begins and where it ends. It also seems to grow with time. You feel like you are never really “done.” So while it is attractive in terms of speed, currentness, etc., it lacks a certain psychological aesthetic that I don’t think will ever be replaced. Even e-readers don’t really duplicate this experience – yet.

  58. ShanaC

    One of the things I keep thinking about: There isn’t a sense of on demand networked printers in houses, for much of anything. It is a huge thing holding 3d printing back, as well as other forms of print on demand. Easier for us mentally to just get a shipmentWhen I think of new forms of print, I think of on demand books and that scene from Diamond age, describing newspapers. On demand. No delivery – but highly physical.I think of the big failures of tech today _ exiting the physical. The physical is important. It gives texture to the pleasures and moments of our lives. Computers don’t quite.

  59. goldwerger

    When the VCR came out, my parents swore they’ll never get one into our house. When cell phones came out, my wife refused to get one. When CDs came out, vinyl owners swore they’d never switch to digital. Even when cars we’re invented, many people swore by their horse and carts…There is an adoption curve AND a timeline for adoption. And sometimes it’s a very slow timeline to get the long tail fully transitioned (phones and color TVs took more time to reach mass adoption than most people realize). This is not always a function of how fast technology facilitates the transition (faster today than in the past). But also a function of human psychology and the time it takes to change behavior.There will always be legacy left on the fringes for hobbyists, sentimentals, and other folks. But I’m not sure that constitutes a market opportunity of scale.When cost goes down through innovation, it accelerates the switch of laggards. And so, I believe physical distribution of books and papers will actually mostly go away, much as milk and ice deliveries have (except as a micro market for diehards, as vinyl remains today for record lovers).But I do think this will take some time, perhaps years, for the long tail to fully complete the transition.(And I do think we haven’t fully seen the end product on this market yet either)

    1. LE

      “There is an adoption curve AND a timeline for adoption.”I was around when faxing came out. I remember when Fedex thought they would operate a business sending faxes for companies that couldn’t afford a fax machine for the nascent technology.Over the course of just a few years in the 80’s faxes became totally ubiquitous. It was an amazingly short transformation because the value was so obvious vs. the cost. Really really quick adoption.It happened so fast that Fedex bailed from the business idea.

      1. goldwerger

        Yes. It’s really hard to predict how fast or slow things catch up or take over. It’s the outcome that is inevitable…:)

  60. Abdallah Al-Hakim

    Tiimely tweet that I read today which fits with today’s post!“@bMunch: the newspaper is “something people used to read before the Internet. Basically, it was like reading a giant tablecloth.” – Eben Weiss”

  61. markslater

    i’ve not read a physical paper in years. Its just not how i consume news neither is it how younger generations ever will. But then again i’ve not watched fox or cnn either….the journalistic integrity of those channels was long ago hijacked by corporate and political interests….again none of the young pay even so much as an aota of attention here….News for me is delivered or referred in through my social networks. I’l click on a link of a friend way before i trust hannity…..Flipboard has got alot of my weekend attention – i love that i can browse stories across multiple sources in a beautiful format – and can store these stories in a “create your own paper” curation method for future referral and as an indicator to friends of what i am reading…….John henry just bought the boston globe for $75M. I can’t think of a big waste of money. He bought it from the New york times who 4 years ago paid $1.1B – its my guess he’ll see the same depreciation……

    1. William Mougayar

      what if he shut down the print version, and stuck to online and some creative weekly magazine?

      1. markslater

        go ahead – load up on your phone or tablet…..

  62. Salt Shaker

    Owning a newspaper today is like owning a pro sports team. It’s frequently not a good investment and fueled by the rich looking to play in a new sandbox (e.g., Jeff Bezos, John Henry). The daily and Sunday page count of the NYT, for example, keeps diminishing commensurate with the decline of advertising rev, while the paper’s daily newsstand price has risen to a startling $2.50. Any content published in print today is continually grappling w/ the escalating costs of PPD (printing, paper and distribution). Even though many consumers still prefer reading newspapers in physical vs. digital form, there’s a huge financial incentive for publishers to convert subscribers to digital. To drive conversion, I believe the NYT should explore a biz model where they offer prospective subscribers a free tablet w/ a full 2-year digital subscription, similar to a cable model where one rents the box. This strat will drive acquisition rates and reader loyalty. The NYT could simultaneously strike a deal w/ Amazon, iTunes, etc. and recieve a 10% royalty on any additional purchases made by subs using the “free” tablet. Just a thought.

    1. sigmaalgebra

      But how would people use the NYTto wrap fish cleaning and linekitty litter boxes? And, withoutthose to uses, why would anyonewant anything to do with the NYT?

  63. PhilipSugar

    What I see is the loss of jobs of the pulp-wooder, the paper company operator, the long haul trucker, the pressman, and the delivery driver. All skilled middle class jobs.Just like you I realize things aren’t so simple and I don’t have the answer, but that is what I see.

    1. LE

      “All skilled middle class jobs.”All created as a result of the profitability of the original model which doesn’t exist anymore. Had the original model not been as profitable (and had such a barrier to entry “ink by the barrel”) those jobs would have never existed in the first place.

      1. PhilipSugar

        Yup, but would I rather pay them that way or by SSI disability?

        1. LE

          Yeah but that’s not a decision that you are able to make. That’s a market decision.Your argument though is similar to how my thinking has changed in respect to certain union jobs. Union jobs keep certain people happy, employed and productive and prevent them from becoming a bigger cost to society (idle mind is the devil’s workshop type of thing). The only question is really where the line is and the escalation in costs. Also the reason I’m not bothered as much by government spending and waste (like those conventions the postal service held in nice places) it does create jobs and benefits to the economy it’s not all “wasted”. Just like military spending. The dollar goes in someone’s pocket down the line.

  64. LE

    “because the diehards will accept the price increase and keep reading the paper and/or book in physical form.”The diehards are only diehards up to a certain point. The pricing elasticity.But more importantly at a certain point the whole system goes out of wack if the volume drops to much.In other words a print run is a fixed setup cost and then the incremental or marginal cost of producing an individual book or newspapers goes down.Bottom line is that at a certain point you begin to not have “lift” and you will stall and fall to the ground.Same with delivery and all other aspects of the distribution chain.This is one of the reasons all those people complaining about getting paid more by McDonalds (and all the liberal supporters of “just pay more you make billions”) are wrong.Change the price of a burger at McDonalds and all the sudden you change buying behavior and people buy less burgers and then each burger costs more and then …Don’t want cigarettes sold at your local convenience store? Great. Get ready for the price of sandwiches to increase (because of the lack of customers and profits of cigarettes) to the point where the model fails to work. It’s all interconnected. It’s like a balloon you can’t poke one part without something happening in response on the other side of the balloon or in the balloon.

    1. William Mougayar

      To use your language, LE, “if it bleeds, it leads.” This model has been bleeding for a while. Let’s hope it leads somewhere!

  65. sigmaalgebra

    No, I have a different ‘take’ on thesituation, that is, a different ‘reason’most people prefer paper copies ofnewspapers:Here’s how it goes: They have kitty cats.As we all know well, kitty cats reallylike fish. So, these kitty cat owners buya lot of fresh fish, complete with heads,guts, scales, fins, etc.Then to feed their kitty cats, the ownersclean the fish. This is the first placethe newspapers come in: To read how toclean fish? No, no; that would be a bitabove the level of content of the NYT andintended audience of the NYT, e.g., wouldinvolve using a knife, which, along withguns and razors, the NYT would no doubtlike to outlaw. Instead the kitty catowners use the newspapers to wrap the fishcleanings.Commonly people are careful not to insultthe fish cleanings by putting them next toDowd’s column or the editorial page.Next if feed a kitty cat, especially inManhattan where mostly can’t let littleFluffy Whiskers use the great outdoors,green grass covered litter box, needmaterials. So, we get the second use forthe newspaper — shred it for the litterbox.I don’t take the NYT for three reasons:First, I feed my little guy (plus thestray that arrived for an extended stay)with official cat food so don’t have towrap fish cleanings. Second, while I dohave three litter boxes in the basement,one quite large with maybe 40 pounds oflitter bought at Sam’s Club, my kitty catslike my backyard and neighborhood for alitter box. There’re plenty of grass andbushes out there.Finally, the NYT would be a little betterif it was without all that greasy ink onthe paper: When shredded for kittylitter, it would get ink on the back sidesof my kitty cats, and they wouldn’t likethat.So, finally, my suggestion to the NYT:Leave the ink off the paper. Anothersuggestion: Have two versions of thepaper, one pre-shredded for kitty cats andthe other not, for fish. Since the NYThas wanted to get their circulation up,these are by far the two best ways I canthink of. No, no, no need to thank me;I’m willing to perform a public service!This is the best I can do for the NYT,long totally unable and/or unwilling everto say anything important about anythingimportant, no references, doesn’t know howto report percentage changes, can’t draw ameaningful graph of numerical data, failshigh school term paper writing standards,uses ‘journalistic’ techniques right up todate as of about 1850, maybe occasionallyas late as 1900, keeps trying tomanipulate readers with crackpot, ‘the sky isfalling’, nonsense such, as over and over,with never any meaningful evidence, thatevil, sinful (morality play anyone?)humans (formula fiction drama techniqueanyone?) and their hideous CO2, auto brakelining dust, auto air conditioning workingfluid, etc. are destroying the pure,pristine, precious, delicate, sensitive,100% all-natural environment along withall the plants, animals, etc. and is aboutto flood all of Manhattan, grabs people bythe heart, the gut, and below the belt,always below the shoulders, never betweenthe ears, gets scared women addicted to along theme of many ‘stories’ with falsefears and false hopes as in…NYT: Warning. Don’t run a campaignagainst kitty cats because then you couldlose nearly all your remaining business.Nearly all the NYT resting on kitty cats– who would’a thought?Still, “The medium is the message” wherenow the “medium” is the Internet with 100+million Web sites and 100+ million blogs.Content’s going to the Internet with theaudience fractured into many pieces withmuch more content, very highly specializedfor narrow audiences, e.g., rap orPuccini, with the highest quality contentof much, much higher quality than has beencommon, e.g., James Simons’s ‘QuantaMagazine’,https://www.simonsfoundatio…many YouTube videos, or Eric Landerlectures,…I’m hoping for some Erhan Cinlar, EugeneDynkin, Ioannis Karatzas, Albert Shiryaevlectures and notes on stochastic processesin continuous time with nonlinearfiltering, control, and statistics onsample paths, after I get some more workdone!

  66. Techman

    I’m more of a digital person when it comes to consuming content. I don’t mind reading a physical newspaper to pass time, but usually I grab news from either the TV or the internet.

  67. Greg

    Great topic!

  68. LE

    By the way the crew that Bezos hires for his new hobby/venture will be under the same pressure that Armstrong is which caused him to fire Creative Director Abel Lenz for using a camera in a meeting regarding Patch AOL’s local initiative.Think he’s high strung? He is. And you can hear a timid fear in his voice. Not the way I’d imagine Army leaders sound or even losing basketball coaches sound.”“Abel, put that camera down. You’re fired,” Armstrong said”…Being successful in a low hanging fruit situation is different that being able to fly a suicide mission and come back alive.I’m sure that Abel was caught in one of those situations that we all are from time to time when something hits you totally out of the blue and you can’t even think how to defend yourself or come up with a quick comeback to flatten the attacker.

  69. William Mougayar

    As long as Digital is a derivative of, or slave to Physical, the digital cannot impose its rules on the physical.From a publisher’s point of view, the e-book is a by-product of the hardcover, and for the newspaper, its online site is a 2nd cousin to the print journal.Contrast to cases where the digital is the main product (like this blog, or TechCrunch, etc..), then it does well on its own, without the physical baggage. And I hope this happens with e-books. Some big author has got to publish only as an e-book for $10, and if you want the hardcover, you can get it printed on-demand for $35.

  70. Dave W Baldwin

    Off subject Fred, but a 13 yr. old female New Yorker on why Facebook sucks-

  71. Benedict Evans

    Two observations:First, home delivery of newspapers is not universal – it exists in the USA and (I believe) Japan, but not many other places. UK physical newspaper sales are mostly newsstand, for example, and the same is true of magazines – mostly subscription in the US, mostly retail elsewhere. So the role of retail in discovery and in providing barriers to entry is another complicating dynamic.Second, looking purely at books, part of the dynamic is that the marginal cost of a book is a pretty small part of the retail price ($1-2). In the UK ebooks are VATable and print isn’t, so the marginal cost of the ebook at the same retail price could well actually be higher.Meanwhile, there is pretty limited price elasticity for some products. For example, a literary biography might expect to sell 10-20k copies in the UK at £20. If you cut the price to £2 you wouldn’t sell 10x more – you might not even sell double. The absolute number would be higher in the US but the dynamic will be roughly the same. The number of people who will buy a biography of Lionel Trilling is not really constrained by price.Meanwhile the cost base of a publisher is both significant and largely fixed – the editors cost what they cost (and the authors’ mortgages are the same) regardless of sales.So while for some genres and publishers there is an obvious opportunity to play around with selling by chapter, subscription and sticker cost, for others the ‘optimum’ price might actually be pretty similar on digital.

  72. Brad Lindenberg

    What is irrational is the premium print receives for ‘advertising’ versus the cents received online for comparative audience sizes. Marketers justify $80,000 ads as ‘branding’ even if the circulation and audience is tiny. This is the revenue fueling the presses and once this differential diminishes, publishers will be in trouble.

  73. Allen Lau

    We are still early in this transition. Kindle only launched in late 2007. As a comparison, music took almost 10 years before it was transitioned. And different media types will transition from physical to digital at different rates.The current ebook system is a bridge product. Using encyclopedia as an example, Kindle is the Microsoft Encarta equivalent. The creative process, reading experience and business model of the current ebook system are still very similar to the traditional system. The back-end process of producing ebooks hadn’t changed much. And ebooks are still being sold as paid content. The ebook equivalent of Wikipedia is emerging but it will take a bit of time before it transforms the old system. We should expect a lot of innovation in these areas in coming years. This is the classic innovator’s dilemma. The best has yet to come.

    1. fredwilson

      that’s why we backed you and Wattpad Allen

  74. sigmaalgebra

    If some printed content is just to bethrown away, then why bother with it, thatis, why spend the time to read it, at all?Instead, if I spend the time to readsomething, then I want to be able to keepit, index it, etc.I’m willing to keep the physical books Ihave for my professional library,especially the ones I carefully studied,but for the rest — keep it around aspaper? That’d be a lot of space andweight.For newspapers, it was always tough toclip, save, and index articles I had readand wanted to keep. Now, for a digitalarticle want to keep, it’s easy. I havemy own system of indexing, and it worksplenty well enough.E.g., today, from the AVC thread ofyesterday about Thiel and Kasparov, I gotasked for some citations. Okay. Since Ihad kept digital copies of the sources, Ihad the citations right away and respondedin:…With paper, I would not have had a chance.Citations are becoming important and willsignificantly raise the level ofdiscourse, especially on politics. E.g.,citations are now quite common in moreserious posts at Hacker News. Politiciansbeware: It’s become dirt simple forcitizens to get and keep exact copies ofyour earlier bloviating.The old situation that politicians couldsay stuff, just say it, just stuff, andleave its effect with the voters but theactual words gone with the wind is over.

    1. $7977616

      I lost three walls of invaluable books in a fire. All my most treasured tomes. I was in a funk for a decade until I discovered how easy it was to replace that library with e-books. I now carry around most of those three walls in my Kindle.

      1. sigmaalgebra

        “Three walls”.Yup. As in…three walls are what I have in my diningroom. Two more in my living room.Kindle? I just checked for one of myfavorite books and found…with some outrageous price for a used copyand no Kindle copy in sight.Okay, I’ll try again:Yup, got…with some outrageous price for a used copyand no Kindle copy in sight.I’d be glad to have these in PDF(especially with Type 2 fonts).But, net, so far electronic copieswouldn’t help much in replacing myprofessional library.

        1. $7977616

          Thanks. That helped.

  75. Lee Greenhouse

    The approach you’re suggesting has actually been adopted by many professional peer-reviewed journals. Essentially, the model sets a “base” price for e-access and then levies a surcharge (say around 10%) for subscribers who wish to get the print edition.

  76. Pranav Piyush

    Fred, another tangential thought – maybe the total market for books is not growing as fast as the alternatives.Ultimately, books satisfy two separate kinds of needs/desires (depending on how you look at it): 1) knowledge, or, 2) entertainment (i.e. the feeling of “I am learning or acquiring knowledge”).Looking at #1, more and more top authors are on twitter, blogs and podcasts, dishing out knowledge at a more digestible frequency and complexity. Maybe, this is the new version of books?#2 also seems to be replaced by digital alternatives. Instead of dummies guides, we have websites that read “Learn [X] in 30 days”.Both these forms of books are certainly getting replaced by a different kind of consumption model. The product (i.e. books) itself is changing. No wonder everyone is having issues figuring out the right operational stuff! 🙂

  77. Andres Lawson

    I think we are in fornt of a misconception that is leading us to the wrong rational thinking: Price is not set up based on cost.Price = Value conceived by each customer. If Value perceived > Price, you will buy the good/serviceHaving an ebook has, in my personal appreciation, has a higher value (I don’t have to carry it, I can access it from anywhere in the world, etc) than having a printed edition.Price is set up based on the value it delivers to each audience. If the value is based on the content (and not on the paper or ink) there is not a clear reason why the price of an ebook should be lower than the price of a physical book.If margins are high, probablly in the long run there will be more competitors and the market will shift towards a “perfect market”

  78. Aaron Klein

    Fred, off topic here, but even the Nigerian scammers are using calendar invite spam now! I’m telling you…this might necessitate a change in your scheduling habits.

  79. butterscotch66

    I cannot figure out why people think ebook prices should be x% of physical book prices. The cost of producing something for sale to the public — the cost of goods, materials, shipping, marketing, PR, etc. — has NOTHING to do with the price it is sold at. It’s all about demand. Companies are going to charge the price that maximizes their profit. Period, the end.If they figure out that they can charge $20 for an ebook and make $200,000 on sales of 10,000 copies, or charge $10 for it and make $205,000 on sales of 20,500 copies, then they will sell it for $10 instead of $20. The cost of goods, and marketing, and the payment to the author, will have NOTHING to do with that price that they decide on. Nothing whatsoever. It will have everything to do with maximizing profit.People need to stop thinking about the cost of distribution, for similar reasons. Think about it in terms of movies. If the cost of distributing a film to theatres suddenly was cut in half tomorrow because of a technological breakthrough of some kind, do you think the price of tickets would suddenly fall by half also? No. That would be idiotic. They will charge what people are WILLING TO PAY. Do you expect to pay 1/10th as much for your ticket to a movie that cost $10 million to produce as the one that cost $100 million to produce? No. That would be idiotic.If people are WILLING TO PAY even MORE for ebooks than physical books, say, for the sake of immediate gratification and convenience — despite the lower production and distribution costs for ebooks, then they WILL cost more than physical paper books. It’s not even up for debate. So I don’t know why people get worked up over it. It’s all about what people are willing to pay. And nothing else.

  80. Ciaran

    I read a fascinating article by Rory Sutherland (which I now can’t find) where he suggested that the price of ebooks (and MP3s and any other digital alternative to a physical alternative) should be more expensive than the traditional version.His reasoning was that the value of a digital product, which you can access anywhere, is greater to the owner than a physical product which you have to carry around and which decays over time.Unfortunately I think that the time for this model has passed, but I still like the idea of it as it relates to value rather than cost.As to why the cost of ebooks hasn’t dropped so far, perhaps Amazon simply doesn’t need to let them drop that far now they have 6-% of the market. I’m sure that once they have put all of their other competitors out of business, they’ll probably stop dropping prices on physical books, cameras, etc…It strikes me that if Fred really wants to talk about a company trying to run the table, he should look no further than Amazon, as the penultimate paragraph of this column suggests:

  81. Mustafa Sabuwala

    Actually FT does exactly this.

  82. vruz

    Physical analogue objects only make sense for arts and crafts where the intrinsic value of the object is non-zero. The intrinsic value of a newspaper belongs in the rubbish bin. If you’re not a librarian or a crazy collector, the shelf life of a newspaper is 24 hours.Delivery of information on paper is over, if not this generation it will be the next: kids who are already completely detached from the tree murdering practice.Books on paper will only make sense for very high quality prints, like art books, where the intrinsic value of the object is timeless and non-zero.Kind of a pointless argument at this point, I think.

  83. Chris Stephenson

    Print will die when digital end-points (tablets/e-readers) become part of the subscription cost (a la cable tv boxes) or become drastically cheaper (a la cell phone plans). In other words, it’s not about raising the price of print, it’s about drastically reducing the cost of the digital experience. My kitchen table should have a short stack of low cost tablets for each of us to read the paper each morning. But as long as e-readers remain over $150, print (even with its increasingly weak content) will slog along.

  84. Michaela Barnes

    As to ebooks, I wish Amazon would offer a package of physical and digital. To me, they serve different purposes. The digital allows me to carry it with me easily, to search, and to read it back lit where the lighting is too low to read. The physical will last the test of time, and is easier for me to wander around a book. If there’s a book I think I want to keep, as opposed to just read and move on, I get it in physical, old world form. While I love my Kindle, I suspect it will be the 8 track of digital in not that much time and unusable as a format. Technology moves on.

  85. SF

    My understanding is that the cost of physical book with a reasonably large print run is only a $1 or so. That is used to explain by eBooks are not much cheaper than physical ones. The costs of editing and royalties are the bulk of the cost and I am not seeing any suggestions as to how and *if* that should be changed.With an existing highly efficient printing process there might not be a reason not to continue printing books for $1 of printing cost, especially since a lot of people will continue buying them either out of sticky preferences, lack of consistent online access, status, etc.Newspapers are a completely different problem and issue.

    1. $28312048

      Do you have any reliable information in regards to how much the rest of the process costs as compared to just the 30% Apple/Amazon/Google take?

  86. Peter McCarthy

    Irrationality but absolutely required by all in trade book publishing to make a successful transition to digital consumption. Basically, the business is tipping to digital. As Carr points out, it was tipping quickly and has now slowed. Trade publishers maintain relationships with authors, agents, libraries, distributors/wholesalers for both physical and digital, retailers (book-specific, big box, niche, physical and digital, digital-only, etc.), and more. All of the players wish to maintain their position in the value chain and, it can be argued, most offer enough value to do so. However, the value of each morphs as consumers choose formats, devices, and methods of discovery. The result, I think, is pricing that never seems to make sense but when looked at closely and at *that* moment, makes perfect sense. With that in mind, I’d summarize the current situation like this:- bricks and mortar bookstores are in a very shaky position — publishers would like to see them stick around (majority of sales still physical — online and off — and majority of discovery occurs on-store). So, preserve print price but keep it low enough as to be attractive to consumers. Equals lots of trade paperbacks. Death of mass markets. Fragmented hardcover distribution (eg. libraries more significant channel than ever for HCs).- eBook penetration slowing but still growing strongly (especially among certain genres and consumer types) and showing no signs of actually stopping. So, publish into digital format simultaneous with HC or TPB publication, price to same margin as print (which actually doesn’t allow for as much of a B2B increase in discount as one would imagine — paper, printing, binding distro relatively small % of book’s cost — author, marketing, PR more). Amazon no longer *needs to lose money to out-maneuver competition as they have the most ubiquitous platform and competitors are tending to match price, not try to beat. But…those two facts may not hold. IF they do not, prices will drop. But only when they need to…at some point Amazon needs to earn a profit, yeah?So, the short-term game looks weird but makes sense. As you wisely indicate, Fred, each consumer is unique. So, so true for books. Authors, too. And those nutty left coast eCommerce players. Not to mention B&N and the indies. And agents. Yikes! Complexity = price shake-outs that don’t seem to make sense right now but actually do internally. Of course, the consumers will “win” and someone in the value chain will “lose.” Except, of course, the author and the reader. They stay. Always.Thanks for a thought-provoking piece.

  87. Rick

    Hi Fred,I might be one of the few book publishing insiders to post here (although I count Seth in this camp as someone who has disrupted to book industry from the inside out). As an insider, I can say book publishers margins are improving significantly – driven by the astonishingly high margins of their digitized back catalogs. Publishers have a very good thing going at the moment, and have paid some dear DOJ fines trying to protect eBook prices. If publishers could figure out how to consolidate/merge their back office functions (as Harper Collins recently did with their warehouse) they could be even more profitable.I think your conclusion is regarding pricing is correct, but the book business will be slow to come to it. Perhaps printed books and bicycles have something in common. Printed books could become vastly more expensive and more finely crafted and collected (even more so) as objects of beauty, rationalizing higher prices and in some ways sending the business back 100 years. Paperback books could slowly wither. Perhaps publishers would produce fewer better books.And Seth is of course correct. We were never selling paper, we are selling ideas. Perhaps newspapers and magazines will remember what they are selling – game changing, fact checked longer form journalism to help us put news into context. not just the news itself. I bet we both would be willing to pay more for that.

  88. jmb

    Consumer expectation for newspapers and books is pretty different, isn’t it? You’d rarely hear someone talk about the ‘experience’ of reading the news. In other words what would it take for you to re-read yesterday’s WSJ from the recycling bin vs. a book sitting your shelf.Something to consider when you talk margins / willingness to pay. I’ll always see the upfront price of a year’s subscription, no matter how many times you show me what it is per paper.

  89. bobwyman

    I’m told that many papers have debt agreements that would default if their revenues fall too much. Thus, some need to sell the higher revenue, potentially lower margin paper product simply to keep their revenues up and prevent default on debt.

  90. Dondi

    Yes, the publishers are protecting the print market at the expense of digital. When the New York Times started offering digital subscriptions, the full-access version cost $8.45 a week. At the same time, I could get a print subscription – which included full digital access – for $7.65 a week. They were willing to pay me $0.80 a week for the privilege of buying the ink and paper, paying people to set and print the paper, shipping it to Boston and paying someone to deliver it to my door.The rationale is similar to cable – I’m paying $4 less a month to Comcast for basic cable plus Internet than if I had only Internet. It’s all about what they can charge advertisers. Obsolete business model, et. al.

  91. aseoconnor

    We’ve all heard the rumours of Amazon launching a used kindle market, and it would be a welcome to most consumers. I will rarely buy a kindle edition of a book if I can get a used edition (with shipping) for less.If I buy a used book the goodwill gets my money, shouldn’t the price of the ebook – which essentially cost the publishers nothing per additional unit – reflect the price of the used market?

  92. jeffreymack

    Maybe it’s time that the newspaper industry takes a look at print-on-demand. For subscribers who love reading their news on paper, perhaps the newspapers can offer a breakthrough consumer printer (sold at no profit?) that allows subscribers to subscribe to certain sections of the paper, which are then transmitted to the printer in the morning, printed (and possibly bound), and grabbed on the way out the door. Subscribers can literally have the paper “hot off the press”. While this wouldn’t appeal to me, I bet it would appeal to some.

  93. Steve Lerner

    Changing cost structures and generational balances move us to the tipping point. But ultimately, improving the physical experience of digital through new and advancing technologies brings us to the tipping point sooner. As they say, “video killed the radio star,” and technology will kill the need some feel for the physical media thus making a cost-based decision practical.

  94. Niraj Sheth

    A big difference is in ad rates. ARPU on digital is still much lower than print, meaning if you price the print at a premium to more a customer to digital you’re getting less ad money out of them. With ads still contributing 90%+ of revenue in the media business, offline or digital, te last thing you actually want to do is lose the cash cow of a print subscriber and move him to digital. Unless you an figure out how to make more money on him, which is the real question we should be asking