Is online news an inferior good?  Examining the Economic Nature of Online News among Users H. Iris Chyi, Ph.D. Meng-chieh ...
From print to online <ul><li>Most U.S. newspapers are transitioning from print to online. </li></ul><ul><li>But, problems ...
Consider the following: <ul><li>Cannibalization of online free offerings on print readerships insignificant </li></ul><ul>...
TimesSelect <ul><li>September 2007: The New York Times on the Web dropped its fee-based program TimesSelect. </li></ul><ul...
Questions <ul><li>Why must online content be free while news in print still requires a fee?  </li></ul><ul><li>Why do read...
Despite substantial usage, the Internet seems to be an innately unappealing news medium.
Is online news an inferior good? <ul><li>Inferior goods </li></ul><ul><ul><li>When income increases, the demand for an inf...
Hypotheses <ul><li>As income increases, the consumption of online news decreases, other things being equal. </li></ul>H 1 ...
Methodology <ul><li>Secondary data analysis of the 2004 Biennial Media Consumption Survey conducted by the Pew Research Ce...
Measurement <ul><li>Online news use  </li></ul><ul><ul><li>About how much time did you spend reading news online yesterday...
Data analysis <ul><li>Ordinal logistic regression  </li></ul><ul><li>Weighting </li></ul><ul><ul><li>The weighted sample i...
Online News Use <ul><li>Among all respondents (weighted N=5,398), 23.7% of respondents got news online through the Interne...
 
Ordinal Regression: Predictors of Online News Use Note . * p  < .05. ** p  <.01. *** p  <.001. Estimated coefficient (SE) ...
Ordinal Regression: Predictors of Newspaper Use Note . * p  < .05. ** p  <.01. *** p  <.001.  The dependent variable (news...
Summary <ul><li>Both hypotheses are supported. </li></ul><ul><li>Online news is an inferior good among users. </li></ul><u...
Why? <ul><li>Plausible explanations </li></ul><ul><ul><li>Unpleasant experience of reading texts online? </li></ul></ul><u...
Not the end of the world <ul><li>People use inferior goods when normal goods are not as readily available/affordable.  </l...
Business implications <ul><li>Don’t give up on the print edition too soon. </li></ul><ul><ul><li>In Hong Kong, newspapers ...
Business implications <ul><li>What works for print may not work for online. </li></ul><ul><ul><li>One should not expect us...
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Is Online News an Inferior Good? (Original)

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Is Online News an Inferior Good? (Original)

  1. 1. Is online news an inferior good? Examining the Economic Nature of Online News among Users H. Iris Chyi, Ph.D. Meng-chieh Yang School of Journalism The University of Texas at Austin
  2. 2. From print to online <ul><li>Most U.S. newspapers are transitioning from print to online. </li></ul><ul><li>But, problems in the current model deserve attention. </li></ul>
  3. 3. Consider the following: <ul><li>Cannibalization of online free offerings on print readerships insignificant </li></ul><ul><li>Subscription model not working for online news </li></ul><ul><li>Online news is not perceived as equally desirable as print papers – other things (price, content) being equal. </li></ul>
  4. 4. TimesSelect <ul><li>September 2007: The New York Times on the Web dropped its fee-based program TimesSelect. </li></ul><ul><li>Jeff Jarvis : “TimesSelect is dead...With it goes any hope of charging for content online. Content is now and forever free.” </li></ul>
  5. 5. Questions <ul><li>Why must online content be free while news in print still requires a fee? </li></ul><ul><li>Why do readers respond to online and print newspapers differently? </li></ul>
  6. 6. Despite substantial usage, the Internet seems to be an innately unappealing news medium.
  7. 7. Is online news an inferior good? <ul><li>Inferior goods </li></ul><ul><ul><li>When income increases, the demand for an inferior good decreases, other things being equal. </li></ul></ul><ul><li>Measure: income elasticity of demand </li></ul>
  8. 8. Hypotheses <ul><li>As income increases, the consumption of online news decreases, other things being equal. </li></ul>H 1 : When income increases, online news use decreases, after controlling for demographics (gender, age, education) and news interest. H 2 : When income increases, online news use decreases, after controlling for demographics (gender, age, education), news interest, and other news media use (newspaper, TV news, and radio news).
  9. 9. Methodology <ul><li>Secondary data analysis of the 2004 Biennial Media Consumption Survey conducted by the Pew Research Center for the People and the Press </li></ul><ul><ul><li>Random-sample telephone survey </li></ul></ul><ul><ul><li>Sample size: 3,000 </li></ul></ul><ul><ul><li>Response rate: 34% </li></ul></ul>
  10. 10. Measurement <ul><li>Online news use </li></ul><ul><ul><li>About how much time did you spend reading news online yesterday? </li></ul></ul><ul><li>Income </li></ul><ul><ul><li>Last year, that is in 2003, what was your total family income from all sources, before taxes? </li></ul></ul><ul><li>News interest </li></ul><ul><ul><li>How much do you enjoy keeping up with the news – a lot, some, not much, or not at all? </li></ul></ul>
  11. 11. Data analysis <ul><li>Ordinal logistic regression </li></ul><ul><li>Weighting </li></ul><ul><ul><li>The weighted sample is representative of the national population. </li></ul></ul><ul><ul><li>Weighted according to Census Bureau’s 2003 Annual Social and Economic Supplement (ASEC). </li></ul></ul>
  12. 12. Online News Use <ul><li>Among all respondents (weighted N=5,398), 23.7% of respondents got news online through the Internet yesterday. </li></ul><ul><li>Half of these online news users are asked the following question: </li></ul>
  13. 14. Ordinal Regression: Predictors of Online News Use Note . * p < .05. ** p <.01. *** p <.001. Estimated coefficient (SE) Predictors Model 1 Model 2 Income -.082* (.039) -.126** (.040) Gender (being female) -.111 (.154) -.017 (.159) Age -.005 (.005) -.010 (.005) Education .209*** (.054) .208*** (.054) News interest .324** (.109) .288* (.112) Newspaper use .073 (.057) TV news use .037 (.046) Radio news use .226*** (.051) Weighted N 543.2 541.1 Model  2 (5, 543.2) = 23.9 p < .001  2 (8, 541.1) = 46.8 p < .001 R 2 (Cox and Snell) .04 .08
  14. 15. Ordinal Regression: Predictors of Newspaper Use Note . * p < .05. ** p <.01. *** p <.001. The dependent variable (newspaper use) incorporates those who did not spend time reading a newspaper yesterday in the analysis (time spent = 0) because most people may access a newspaper if they choose to use it. Estimated coefficient (SE) Predictors Model 1 Model 2 Income .165 *** (.023) .161*** (.023) Gender (being female) -.565*** (.087) -.579*** (.088) Age .035*** (.003) .033*** (.003) Education .074* (.030) .082** (.030) News interest .582*** (.068) .536*** (.071) TV news use .068* (.027) Radio news use -.005 (.028) weighted N 2268.7 2247.8 Model  2 (5, 2268.7) = 454.3 p < .001  2 (7, 2247.8) = 452.2 p < .001 R 2 (Cox and Snell) .18 .18
  15. 16. Summary <ul><li>Both hypotheses are supported. </li></ul><ul><li>Online news is an inferior good among users. </li></ul><ul><li>Online and print newspapers co-exist not as two normal goods but as a combination of an inferior good and a normal good. </li></ul>
  16. 17. Why? <ul><li>Plausible explanations </li></ul><ul><ul><li>Unpleasant experience of reading texts online? </li></ul></ul><ul><ul><li>Problems associated with news site design? </li></ul></ul><ul><ul><li>Because it is free? </li></ul></ul><ul><ul><ul><li>Consumers perceive products with a higher price tag as more enjoyable (Plassmann, O’Doherty, Shiv, & Rangel, 2009 ). </li></ul></ul></ul>
  17. 18. Not the end of the world <ul><li>People use inferior goods when normal goods are not as readily available/affordable. </li></ul><ul><li>In other words, people use inferior goods when they need to. </li></ul><ul><li>Inferior goods </li></ul><ul><ul><li>Convenient </li></ul></ul><ul><ul><li>Useful </li></ul></ul><ul><ul><li>Profitable </li></ul></ul><ul><li>But Ramen noodles are not perceived as good as steak, and should not be marketed as such. </li></ul>
  18. 19. Business implications <ul><li>Don’t give up on the print edition too soon. </li></ul><ul><ul><li>In Hong Kong, newspapers are doing well, even among young readers. Re-examine the nature of news products from consumers’ perspective. </li></ul></ul><ul><ul><li>The free paper model is working in Europe. </li></ul></ul>
  19. 20. Business implications <ul><li>What works for print may not work for online. </li></ul><ul><ul><li>One should not expect users to pay a comparable price for news sites as they would for a print newspaper. </li></ul></ul><ul><li>Two papers that went online-only lost traffic and profits. </li></ul><ul><ul><li>A Finnish financial daily (Thurman & Myllylahti , 2009) </li></ul></ul><ul><ul><li>The Seattle Post-Intelligencer </li></ul></ul><ul><ul><ul><li>Print still provides some important reputational and marketing benefits to online activities (Picard, 2009). </li></ul></ul></ul>

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