Free versus Fee: The Print Battle in Baltimore

Printed newspapers have been pricing themselves out of the consumer market for a long time. Newspaper publishers have slowly increased their subscription prices while the value that consumers place on the information in newspapers has declined.

Publishers think that a newspaper today is a bargain at 50¢ or even $1,00 and they don’t realize that its relative worth has instead fallen to a fraction of that. They see ony their own printed product in their market, where most have a monopoly. They think their newspaper is the daily text news product available in their market — a true statement if you consider only print — and they know that their production costs are rising, so they raise their printed newspapers’ price.

What they forget is that consumers in those markets have gotten get more and more access to other daily sources of news in text — notably the ability to access every other newspaper in the world online. The effect of consumers’ newfound cornucopia is that the economic principle of Supply & Demand has lowered the relative value of the printed newspaper for those consumers. (I’ve previously written about the online version of this change).

This effect is a major reason why newspaper circulation has declined in the U.S.: Consumers see the newspaper’s value as worth just a fraction of what publishers are charging for it. The consumers moreover know that the publisher’s demand for 50¢ to $1.00 per day adds up. Just ask anyone who’s paying $621.40 annually for home delivery of The New York Times‘s daily printed edition.

I mention all this because the Baltimore market today began what amounts to a test of this thesis. A free newspaper, the Baltimore Examiner, distributing copies daily onto 260,000 upscale consumers’ doorsteps, launching into competition against the Baltimore Sun, which charges $2.50 per week for each of the 247,193 copies that it delivers to homes daily. Until today, the 169-year old Sun had a monopoly on its market, but nonetheless lost 20,000 readers, or nearly 8% of its circulation, last year. What will happen now that it has a free competitor?

Though those newspapers’ distribution numbers are almost equal, the rest of the competition might not be, reports today’s Wall Street Journal (paid content). Over its history, the Sun has won 15 Pulitzer Prizes for journalism and has a newsroom staff of 340. The Examiner apparently has a newsroom staff of only 20. The Examiner‘s stories will short— 300 words or so — and the paper is designed to be read in under 20 minutes. The Sun‘s 247,193 copies are distributed throughout Baltimore, but the Examiner‘s 260,000 will distributed only in neighborhoods where the median household income is at least $73,000, far above the $50,000 medium household income in Baltimore County overall. And the Examiner‘s ads rates are relatively cheap, about $2,900 for a full page, versus perhaps $17,000 for the Sun.

Whichever newspaper wins the battle — and victory will be apparent by the relative direction that the newspapers’ circulation move during the next two or three years— it will be an object lesson about paid content and the relative value of newspaper news in the U.S..

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