The Times – Pricing and Distribution

According to The Guardian –  information I read for free online, funnily enough – The Times has lost around 90% of its online readership since making registration compulsory, and therefore effectively charging for online news. This bold move, when there are plenty of other alternatives, ultimately means revenues may fall if the fewer amount of customers registrations does not exceed the commission from a large amount of customers viewing advertisements. Hence, charging more for a price elastic product is almost never a good tactic. Despite this, it may be viewed as a  necessary strategic change to keep up with the external environment, which will be evaluated through a combination of a PEST and a SWOT analysis.

The downsides to this decision are obvious: lower readership means lower revenue, a sudden price increase means poor PR and the former and later ultimately mean less competitiveness; the main threat to The Times’ website is their competition, in a well-defined, monopolistic market. Unlike traditional publishing and paper distribution, online media is a much more competitive market – according to Micheal Porter’s Five Forces. As online businesses famously have lower barriers to entry in the online market – where as traditional newspaper printing needs expensive capital investment – there will inevitably be a fight to be a cost-leader, as revenue is likewise lower. Also, readers have greater purchasing power online: they do not need to purchase the product! This means that there is minimal customer loyalty in the online market – a stark contrast to traditional newspaper distribution – which would explain the huge decline in The Times’ online readership as substitutes are quickly found.

But it would be naive to completely dismiss the move; given the market-wide decline of newspaper readership, and a rise of internet usage, it seems a good strategy to ‘join ’em if you can not beat ’em’. Despite paper readers being worth twice as much as online readers, The Times newspaper makes a daily loss of £240,000, which is not entirely accountable to the normal decline in advertising during a recession. The way to turn the business model around, therefore, may be to tap into a new market to boost sales revenue – a form of market development from Ansoff’s Matrix. In addition to the ever-growing usage of the internet, online news, in particular, may become a particularly lucrative market thanks to technological innovations, like the iPad, that increase accessibility to and boost readability of websites . Which in turn, may mean the older reader – a core customer of traditional newspapers – will eventually turn to online media; if The Times does not meet the needs of customers, the instinct of good marketing, their demise may be faster than their competitors.

So will the strategy work? This depends entirely on an external influence: rival newspapers. Hitherto, it has not been unusual to see trade-specific or specialist sources of news to charge online readers, for instance the Financial Times; but now The Times may have created a turning point whereby general online news slowly follows suit. If rival newspapers start to charge for online content too, which decreases the purchasing power of customers and availability of substitutes, then customers may see paying for online news as inevitable and justified, despite lower added value compared to print versions. Having said that, I believe the strategy will fail because other newspapers’ reactions will be determined by the readership of The Times, which does not look convincing, and there will always be a free substitute available: the BBC.

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