|
Getting your Trinity Audio player ready...
|
A digital subscription to the New York Times currently costs US users $18.12 per month. People in Germany only pay €8.76 per month.
The Swiss quality newspaper NZZ sells its digital subscription to people in neighboring Germany for €14.90. People in Switzerland pay CHF24.
If we want to compare these prices, we need a common base.
The most common base is the US$. But even after transferring the local currency into US$, price comparisons don’t tell us the whole truth. That’s because people in the US and in Germany and in Switzerland—not to mention from much less developed countries—are living in countries with hugely different price levels and average income rates.
A value corresponding to US$ 10 will be a considerable amount of money in one country and not much more than a couple of coins in another.
In the mid-80s, The Economist magazine invented an ingenious way of comparing price levels in different countries: the Big Mac Index.
Because the McDonald’s burger is sold in many countries across the globe and because it is the same product wherever it is sold, it should be an apples-to-apples comparison to set the price of a Big Mac in one country and that in another country side-by-side. Some economists even argue that those prices, transferred into US$, should be more or less the same.
That is not the case.
The Economist calculates its Big Mac Index twice a year as a means to identify currencies that are, in relation to the US$, over-valued or under-valued.
Methodology
Now, I did something similar in order to compare the pricing of digital subscriptions. I transposed the local monthly price of several paid content offerings into the number of Big Macs an inhabitant of the given country could purchase in a McDonald’s outlet nearby.
To do this, I needed the local prices of a Big Mac. For many countries, this research already was done by The Economist. You can look up those prices in The Economist’s reporting.
Unfortunately, being a tool to compare currencies, The Economist uses a common price for all countries of the €-zone. But there is no common price of a Big Mac in all of €-Europe. In the French capital Paris, a Big Mac will cost you around €6. In The Austrian capital Vienna, you can get the same for €4.10.
So I had to separately research local Big Mac prices for some countries. In doing this, I got the impression that The Economist underestimated the price of a Big Mac in Switzerland. According to their last article on this topic, a Big Mac in Zurich costs CHF6.50. When I did my research, it was CHF7.50. For all other non-€ countries I’ve adopted the prices published by The Economist.
So, what’s the price of a digital subscription in burger units?
As you can see, the German and the Swedish tabloids BILD and Aftonbladet charge the same amount as does the Polish quality newspaper Gazeta Wyborcza: less than 2 Big Macs. Even the Wall Street Journals lifts its paywall in return for the local value of not even 2 burgers. The New York Times as well as the Swiss NZZ charge people in their home-markets 3.3 Big Macs, the German FAZ even nearly 4.
Many news organizations differentiate between at least two types of subscriptions. A basic version, which lifts the website paywall and maybe gives access to the news app. And a premium subscription, which also includes access to the digital edition, either an e-paper or a tablet-optimized multimedia app.
As shown above, the Wall Street Journals only charges 1.8 Big Macs (US9.99) for its low-priced subscription. But if readers want to make use of the iPad app, they have to pay US36.99. In the US, that is the value of 6.5 Big Macs.
The Swiss NZZ does something very similar, selling subs to its news app for CHF24 but charging CHF54 to people who also want to the ePaper.
That corresponds to nearly 8 Mig Macs in Switzerland. That’s about as much as people in Great Britain and in Germany have to pay for their respective newspapers of record as well. People in Austria and Sweden get their local newspaper flagships for only 5 Big Macs.
Applying current exchange rates, Swiss Die Republik is probably the most expensive paid content startup for the broad public. CHF22 converts to something like US$25 per month. Zetland from Denmark charges 129 Danish Krones, which would be equivalent to US21$. But if you transpose those local prices into local Big Mac equivalents, Zetland appears a lot more expensive than Die Republik!
Case Study: Twitch
This May, live video platform Twitch announced that it would differentiate its subscription pricing. Before, a subscription to a Twitch creator cost US$4.99 all over the world. The price might have been translated into the local currency, but the local price would have been as near as possible to US$4.99 after application of exchange rates. Obviously, that meant that Twitch subscriptions came at considerably different prices, depending on where you lived. US$4.99 means something very different to creators and subscribers in the US compared to, say, India.
Now, Twitch has started to adjust its pricing locally. That means, that Twitch will become less expensive in many countries. Twitch is quite sure that lower prices will lead to even higher revenues. For a transition period, it even offers compensation to creators who might suffer from lower earnings due to lower prices.
On May 20th, Twitch started with cheaper subscriptions in Turkey and Mexico. A Twitch sub in Turkey now costs TRY9.90. In Mexico, you’ll pay 48 pesos (MXN). Transposed into local Big Mac equivalents, that means, that a Twitch sub in Turkey and Mexico now costs about the same as in the US: a little less than 1 Big Mac. Before, a Twitch sub in Mexico cost the equivalent of nearly 2 Big Macs. In Turkey, it was even 2.5 Big Macs.
Some news media present in different international markets make use of a similar pricing strategy. Spanish daily El País asks people in Europe to pay €10 to access its paywalled content. In Latin America, people pay something like €5. The result is that subscribers in Madrid, Montevideo and Buenos Aires pay an amount that will buy them 2 Big Macs in their respective home countries.
NZZ, the most prominent news publisher from rich Switzerland, asks to pay CHF24. People in a little less rich neighboring Germany are asked to pay €14.90. That’s nearly 3.5 Big Macs vs. 2.5 Big Macs.
People in the US pay something like 3.3 Big Macs to subscribe to nyt.com (after an initial promotion offer). People in Germany have to pay half of that, an amount corresponding to only 1.6 burgers (after an initial promotion offer which comes even cheaper and/or longer-lasting than the promos in the US).
Markus Schöberl
Editor and Publisher, pv digest
This analysis was first published here, and is republished with kind permission.
