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Apple's iPad Will Force Consumers to Pay for the Same Content Many Times Over
You have raised an interesting pricing problem. Essentially, you are arguing that the fairest approach is for users to pay a set-price subscription fee and have access to the MLB content via all channels. While I can see how to you—a multi-channel consumer of the content—that might seem optimal, it is not clear to me that a consumer who only accessed MLB content via a single channel would necessarily agree.
Let’s presume that MLB has a target profit margin. To obtain it for the iPhone channel, they calculate their development and delivery costs for the iPhone application and one year of content and divide by the projected number of subscribers, and then multiply that by 1.x, where “x” is their target profit margin. This yields the price for a one-year subscription.
Then MLB decide to add an iPad channel. What you expect will happen is that they will perform the same calculation to derive a cost for that subscription. But, you object, for folks who have already purchased access via the iPhone channel, charging a second time for the same content is unfair. You advocate that MLB instead combine all their development and delivery costs for both (all) channels and price accordingly based on total costs and the projected number of *discrete* subscribers (i.e., a double- or multi-channel subscriber counts as only one given that each subscriber to any channel will have the right to access the content via all channels).
It is clear that this would be a better deal for you (as a multi-channel subscriber), but what if it results in a higher price for an iPhone-only subscriber? (This could happen if, for example, the development costs for the more sophisticated iPad platform were higher, and/or if there were relatively fewer iPad subscribers—which is almost certain to be the case for a year or two at least.) Why should an iPhone-only subscriber have to subsidize your preference for the convenience of accessing the content via multiple channels?
Conceivably, the answer is that because more people will be more pissed off if they perceive they are paying multiple times for the same content than would be pissed off for having to pay a higher price for the privilege of accessing the content through any-and-all channels, even if they never use some or most of them. After all, look at the cable tv pricing model: most everyone pays a standard rate for 100 channels, 85 of which they never watch and no one complains about that…not! :-)
It is too early to know which pricing model will work best here. You are perfectly entitled to have a preference, but IMO you go too far in asserting that most consumers will agree with you. Time will tell.
Brad Hessel (long AAPL)
Feb 1 03:16 PM
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