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May 24, 2010, 10 a.m.

Consumer Reports rolling out paid content mobile strategy, taps potential users to set prices

The journalism world is still grappling with to-charge-or-not-to-charge, but it’s clear charging has the momentum — particularly on mobile devices. The New York Times is moving ahead with its January paywall plans and has put only a limited selection of stories in its iPad app. The Wall Street Journal is hunkering down with its paid-content model. The Washington Post waded in a few months ago with a 99-cent iPhone app. But the decision to charge is really two decisions: whether to charge and, if so, how much to charge.

One longstanding news outlet — Consumer Reports — made the first decision long ago and, true to its roots, keeps doing tests on the second. It accepts no advertising and is funded almost entirely by the sales of its publications and donations. Those funds support a staff of more than 600 people and runs a compound with multiple labs testing everything from cereal to toilets, plus a separate track and offroad track where it tests cars and SUVs. “‘Free’ is something we don’t like to use around here very often,” Jerry Steinbrink, its vice president of publishing, told me. Readers have to cover the cost of producing the content, and no project can operate at a loss, he said.

Strategic pricing

The magazine is strategic about setting prices, often borrowing from its own editorial practices. In determining how to charge for its new mobile website, for example, it ran tests with potential users. The magazine is in the process of testing out pricing plans for its “next-generation” iPhone app, which is still in development. (Their current app provides only limited access to CR content.) One group of app testers will be asked how much they’d pay for the tool; another group will be asked to react to some suggested prices.

“Because we are Consumer Reports, we test everything,” Steinbrink told me. “We depend a lot on focus groups. We’re trying to determine, with user input, what an acceptable price point would be.” Steinbrink wasn’t prepared to give a likely figure for the Consumer Reports iPhone app, but considering its functionality — it allows you to take a picture of any barcode, which will pull up all data Consumer Reports has on the product — and CR’s business model, don’t expect it to be a run-of-the-mill 99-cent app. Steinbrink thinks it might require a subscription fee that is renewed a few times a year, perhaps putting it in the range of their website which costs $26 per year.

Mobile strategy

Their new mobile site, which works on any web-enabled mobile device, lets users look up product information and compare items. (The barcode feature will only be available in the app.) For now, that site costs 99 cents for a 24-hour pass, or $4.99 for a month. Subscribers to the Consumer Reports website ($26 per year) can access the mobile site for free, but magazine subscribers ($29 per year) still must pay for web access, just like non-subscribers. By mid-summer, Consumer Reports expects to eliminate the 99-cent option, and lower the monthly fee to $3.99. Subscriptions are a better model for Consumer Reports, Steinbrink said, because they offer the magazine a more predictable, consistent income.

The choice to build both a mobile site and an app was deliberate, Matthew Goldfeder, director of mobile products told me. “Mobile use is going up, and will only continue to go up,” he said, predicting that some of the “sexyness” of apps may wear off as mobile web browsing improves.

There’s also another strategy at play. Consumer Reports hopes the mobile site will get new users to subscribe to the full website, which has many more features and more information than the mobile version. Both Consumer Reports’ site and the magazine skew older; the typical site user is a white male in his early 50s. They’d like to get younger users — say, recent college graduates buying electronics — to identify with a brand they associate with their parents. When that recent grad eventually buys a first house, hopefully Consumer Reports will come to mind. The magazine wants to give users “the kind of content that goes with their life cycle,” Goldfeder told me.

From niche to news

Consumer Reports is more like some of the niche sites we’ve written about recently than a traditional American newspaper. Sites in the niches offer unique and valued information that a certain readership is willing to pay good money to read.

Duke economist Jay Hamilton divides information into four categories: producer information (info that lets you do your job better), consumer information (info that helps you make a better purchasing decision), entertainment information (fun), and civic information (info to make you a smarter voter and citizen). Hamilton says the first three categories have it relatively easy, but the fourth one will always have trouble charging. Just as The Wall Street Journal fits nicely into Category 1, Consumer Reports slides obviously into Category 2.

Still, Steinbrink said there are some lessons general news publishers could learn from Consumer Reports. Shrinking ad revenue “forces editors to look at their content and produce the kind of quality a user will actually pay for.” Just putting a paywall in front of content that used to be free might not be enough.

POSTED     May 24, 2010, 10 a.m.
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