Preferences and willingness to pay for tablet news apps

ABSTRACT

Media companies are facing the need to adjust their established business models owing to media convergence. Applications (apps) for mobile devices such as tablet computers offer the potential to enter new markets in order to overcome decreasing revenue from established distribution channels (i.e. selling printed newspapers). This study uses a choice-based conjoint analysis to investigate (a) whether consumers demonstrate willingness to pay (WTP) for tablet news apps and (b) whether online advertising is negatively related to consumers’ WTP. The results reveal that two segments of the market for tablet news apps can be distinguished: a large segment (about 60%) of our sample lacks WTP for tablet news apps, whereas a smaller segment (about 40%) of our sample exhibits moderate WTP.

KEYWORDS:

• Tablet news apps
• willingness to pay
• choice-based conjoint analysis
• paid content
• digital transformation
• media convergence
• two-sided markets

Acknowledgements

The authors would like to thank two anonymous reviewers for their helpful comments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. To consider highly relevant attributes and attribute levels, several expert interviews were conducted. Most importantly, Enrique Tarragona, the head of the tablet app division of the largest German weekly newspaper, Die Zeit, was interviewed in December 2012.

2. Please see further details on the Kano survey in Table A2.

3. For segmentation in two groups, the per cent certainty is 31.78. As a measure for internal validity, this is not satisfactory, but it is outstanding compared to other studies. Moreover, the value for the per cent certainty is higher than that for the aggregated model, indicating that fit to the data improves when using two market segments. This segmentation is followed, although the CAIC value is not minimal. Rather, it is based on the counterrotating relative chi-square value of a maximum for the segment in the two groups reached. This value has taken into account the number of parameters in Monte Carlo simulations as a useful measure of the segmentations proved (Orme, 2007). CAIC segment: two groups 3629; relative chi-square value 59. CAIC segment: three groups 3401; relative chi-square value 47. CAIC segment: four groups 3336; relative chi-square value 38.

4. This result is similar to that of Kammer et al. (2015). However, Kammer, Boeck, Hansen, and Hadberg’s (2015) study was based on compositional survey of attitudes, which cannot capture the impact of cognitive and affective drivers of decisions.

5. Given that no similar studies of this highly innovative media product are known, the estimated demand curves (price–response functions) for the defined market segments cannot be compared to other investigations.

Additional information

Notes on contributors

Hardy Gundlach

Hardy Gundlach is Professor of media and information economics at the Hamburg University of Applied Sciences (Faculty Design, Information and Media) in Germany. He was a consultant to the commission on Concentration in the Media (KEK) in 2006. His research focuses on media economics and management, Internet and digital economics, public management, competition policy, industrial economics, and regulation and deregulation.

Julian Hofmann

Julian Hofmann is Professor of marketing at Normandy Business School in France. He holds a doctoral degree (PhD equivalent) in marketing management from the University of Cologne in Germany and a diploma degree (MSc equivalent) in business administration from the University of Hamburg in Germany. In his research, he focuses on managing media products in general and on branding issues within the entertainment media sector in particular.