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Before you set up a paywall, try selling a pair of khakis for $550

June 24, 2010
A guy in khaki pants

Some pants can be really expensive, but can you really tell the difference? (Note: I have no idea what this guy paid.) Source: Ed Yourdon's Flickr page

…because that’s essentially what you’re doing when you try to charge for online news content: You’re taking something that everyone has and marking it up. By doing so, you’re implying that what you have is better than everyone else’s—meaning you better damn well back it up.

You’re also—and this is the part I don’t think enough people in the news business consider—assuming that there’s a market for your marked-up product. If you’re trying to sell a $550 pair of khakis, there is apparently a market for that. Like I was saying the other week, there may or may not be a market for people who will pay for your news content.

I feel like this is a worthy comparison: News, like a pair of khaki pants, is ubiquitous, and despite looking similar across multiple brands, quality varies wildly. Meanwhile, consumers don’t really seem to care. There’s a niche that will pay good money for superior quality, but most people just need something that functions well enough.

Here’s what you’re paying for with the khakis:

…the fabric cost is $54.

At Martin Greenfield, a union shop where employees earn about $13 an hour, before benefits, it takes an average of four hours of labor to make a pair of pants. The pants pass through the hands of at least 20 people in the process of cutting fabric, adding pockets and building out a fly. So with labor and fabric, the cost to make Mr. Sternberg’s pants was about $110 — a fifth of what they cost in a store.

The final price reflects the markups of the designer and the retailer, what they charge to cover expenses, pay their employees and, with luck, make a profit on what sells to cover the losses on what does not. Mr. Sternberg doubles the cost to arrive at a wholesale price of $220. The retailer adds another markup, typically a factor of 2.5, which brings us to $550.

I’d argue again that most people aren’t paying $550 for khaki pants, despite the alleged enhanced quality described here. Nevertheless, some businesses are able to make enough money off the people who do, to turn a profit.

So for me, that right there is the big question with news: Is there a niche of news consumers who are willing to pay a premium and is that niche big enough to sustain a decent-sized newsroom? (Note: Read this Steve Yelvington post to delve deeper into the question.) Moreover, can any newsroom improve upon its news so much that it goes from being valued at $0 to view to something like $3.95/month to view?

I don’t think that free online news is a reflection upon the quality of work being put out by some news organizations. But I also don’t think it makes any sense to realize that your revenue model is outdated and expect customers to just become the new source of money. We need another plan.


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