The Psychology Behind The New York Times Paywall

Former Chairman of the Federal Reserve, Alan Greenspan, once said that if he had access to a better understanding of psychology, "I could forecast the economy better than anyone I know." In other words, behind all fancy financial models lies an assumption about how people behave. Humans are not walking calculators, we're often impulsive, lazy, biased, and terrible at math. As such, The New York Times paywall Hail Mary must make it through some key psychological barriers: a territorial grip on once-promised free information, our lazy preference to avoid tough decisions, and flawed memories of how much we actually use a product. The situation isn't entirely bleak: our avoidance of "rejection" decisions may favor the paywall and an elitist class with expendable income might be drawn to the new exclusive site. Whichever way it plays out, here are the psychological factors at work.

Paywall Basics

On March 28th, The New York Times will erect a monthly, metered pay wall for digital content: $15 for web and phone access, $20 for tablet access, and $35 for access to all devices, including the Times Reader app. Light readers can access up to 20 articles directly, and unlimited access through blogs and social media links (for more details click here).

The Bleak

The biggest, baddest psychological bouncer that the Times must get past is the "Endowment Effect"—our tendency to hoard what we already own, even at greater cost. Nobel Laureate Daniel Kahneman found that when a test group was given a coffee mug for free, they demanded more money to give up the mug compared to a separate control group asked how much than they were willing to acquire in the first place. In other words, ownership has its own value, beyond simply the utility of the product.

The Internet has spoiled us with a lavish outpouring of free information. Yet, the paywall asks readers to give up free information for roughly the same price as the Kindle and electronic editions of the Times, based on the flawed assumption that purchasing a subscription is equivalent to preventing it from being ripped from our hands. In Professor Dan Ariely's experiment (video below), ownership increased value eight times.

And, even if The New York Times were to drop the digital subscription price by 88%, its uncertain whether readers will give up free information for any price, since they can get much of the news elsewhere.

Missed Opportunities, Salient Memories, and Popular Stories

When barraged with set of attractive choices, consumers become paralyzed in the fear of regret, often choosing to avoid the decision altogether, rather than chose between options laden with downsides. Barry Schwartz, author of The Paradox of Choice, explains that when study participants were presented with more than one option of CD players, decisions to postpone the purchase jumped 25%, compared to participants who were only presented with one option.

The Times has presented its digiphile readers with more than one option: web, iPad, or iPad + web. Factor in a host of other complex variables, and it might simply be easier to avoid making the decision at all, rather than wade through the depressing list of regretful scenarios. This is particularly troubling for the Times, since Diller argues that choosers tend to focus on what is lost, not what is gained. In other words, as users are staring at the subscription home page, reflecting on what might be missed, the most salient items will likely to be the most popular stories—stories that were widely shared on blogs, Twitter and Facebook. Its easy to imagine that many of these readers will find that all the sexy, can't-miss stories will end up in their social media feed regardless, thus being free. Ironically, the Times television ads entice readers with the slogan, "be part of a great conversation"—once an article becomes a part of the online conversation, its automatically free.

(In the Schwartz TED talk below, "missed opportunities" starts at 10:35)

Hope

Psychology is not all doom and gloom for the Times; in some circumstances, it favors subscription.

First, a counter-intuitive new study suggests that choice by rejection reverses people's preferences. The researchers from University of Miami and Babson College identified participants who preferred a more expensive apartment closer to nightlife. Yet, "Simply instructing them to decide which one they would like to 'reject' makes them more likely to choose the less-expensive apartment," write the authors. Users who arrive at the paywall, unaware that they needed a subscription, are confronted with a "rejection" choice, and thus might be more likely they'll cough up $15.

Second, a tiny, elitist demographic may end up being a significant part of the Time's subscriber base. Schwartz found that there is a class of perfectionist, hyper-competitive consumers, whom he calls "Maximizers", that nervously compare themselves to their more successful peers. As the "paper of record," exclusive access to premium content from famous journalists might be appealing to a crowd that aims to impress at the water cooler and cocktail parties.

The eventual success of the paywall is anyone's guess, but if the psychology behind it proves anything, it's that both critics and proponents who banter over the price of subscription may be overestimating how rational we are.

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3 Comments

  • Neil

    It's an opportunity to make money because the ads don't work anymore. You don't hear about it because they can't write about it. That's why an issue of Time magazine is down to about 20 pages. For example when was the last time you heard somebody say they forgot to buy some Mr. Clean? Even Britney Spears couldn't sell Coca-Cola!

  • Ken Rowland

    Remember to turn off the lights in the mausoleum, um, make that the electricity. ToastTime. Monetize the croutons.

  • steve_from_virginia


    NY Times content isn't any different today than it was yesterday, certainly not $200 a year different. The Times isn't exclusive, it's a monopoly, there is a difference.

    It's a coupon stuffer, a shill rag for 'upper- level' consumer goods. Right now it's on track to price itself into bankruptcy.

    Look for subscription 'sales offers' as time passes.

    Does the Times want to become more solvent? How about them selling their 8th Avenue Mausoleum?