According to various sources, the Associated Press is cracking down on the republishing of its content on the Internet. See this NYT article for an overview of the situation. I don’t want to get into the reasonableness of the AP’s overall plan, but I will say that it seems a bit like biting the hand that feeds you to try and charge Google for having the AP headlines show up in its search results.
What concerns me more is the, um, economic idiocy of the quotes made by Tom Curley, the AP’s president and chief executive. Among my favorites is the following:
‘“If someone can build multibillion-dollar businesses out of keywords, we can build multihundred-million businesses out of headlines, and we’re going to do that,” Mr. Curley said. The goal, he said, was not to have less use of the news articles, but to be paid for any use.’
Hm. Or perhaps this is better:
“What The A.P. seeks is not that articles should appear less often in search results, but that such use would become a new source of revenue.”
Perhaps someone should explain the law of demand to this man. According to Greg Mankiw’s Principles of Microeconomics*, the law of demand states that, all else being equal, the quantity demanded of a good falls when the price of the good rises. In other words, demand curves slope downwards. (This is not shocking news.) I can even demonstrate with a picture:
See? Higher price, fewer reprints. It’s not rocket science, people. I’m really not sure what Curley is thinking here. Maybe he is envisioning this scenario?
Call me crazy, but I don’t think that perfectly inelastic demand (where people buy the same amount regardless of what the price is) is a realistic assumption in this market. But how else would there not be fewer reprints as the result of a price increase? Maybe something else is going on in tandem that increases demand:
So what could be shifting demand out that Curley is hiding from us? Is he increasing people’s incomes? (Or decreasing them if AP articles are an inferior good?) Is he increasing the price of a substitute? Decreasing the price of a complementary good? Increasing people’s tastes for AP articles? (That one is a sure no, if the PR surrounding the matter is any indication at least.) None of these factors seem reasonable, so I have no choice but to conclude that the execs at the Associated Press could stand to learn a little Econ 101 before making further large-scale business decisions. Not living in a dream world would probably help too.
* I do not really mean to plug Greg’s textbook here, but I do enjoy it. Plus, the fact that he keeps me well-stocked in instructor’s editions means that it’s usually the easiest thing to grab when I need a quote.