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Economist validates the free content model

December 8, 2007 - 1:35pm — yelvington

Ben Compaine cites an economist's study of the Washington Post that provides "another data point" in the online paid-content discussion:

With 30 pages of assumptions, explanation and calculations, Gentzkow makes a well substantiated finding that, The Washington Post would have been better off charging a modest sum for its online version (on the order of $6.00/month) until about 2004. After that, however, the growth in online advertising expenditures crossed over to affirm that it is significantly more profitable to set a zero price for the online edition when one factors in even a small transaction cost for online payments. He suggests that his findings are robust enough that they would likely apply to other big city newspapers.

Interestingly, the study includes a calculation of the “consumer welfare benefit” of providing free content in the Washington Post's market.

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