This is a legitimate question.
Imagine that tomorrow, the two papers announced that it would no longer be possible to purchase individual online subscriptions: instead, you could buy only a joint subscription, for a price roughly similar to the previous cost of a single subscription. What would happen?
Obviously, there would be some revenue loss. Anyone already subscribing to both newspapers would suddenly find herself paying much less. But it’s hard to imagine that in practice, the overlap is really so large: maybe 20% at most. And over the course of a year or two, there would be a much larger effect from increased demand. After all, subscribing to two leading newspapers for the price of one would be a really great deal, one that consumers would be happy to exploit. This arrangement would be likely to increase online revenue, possibly by a substantial amount.
On a more theoretical level, let’s imagine that the NYT and WSJ are trying to maximize their joint income. Offering separate subscriptions is effectively a form a price discrimination: it extracts a little more money from wealthy readers who are hungry for news and willing to pay for two subscriptions. By offering their subscriptions at different prices, the papers can also target slightly different segments of the market. But is this the most effective form of price discrimination? Probably not. It would make more sense to offer core access to both papers for a basic fee, and then some more expensive frills to get extra revenue from readers with disposable cash. After all, that’s how price discrimination usually works—ask anyone who’s flown recently.
Under a joint arrangement, consumers would inevitably complain that they didn’t want to subscribe to both papers. Why should they be forced to pay for a New York Times subscription when they just want to read the Wall Street Journal? But this complaint is based on a misunderstanding of markets with zero marginal cost. Aside from the relatively trivial price of webhosting, it doesn’t cost anything to throw in the New York Times for everyone who wants to read the Wall Street Journal. Why shouldn’t it be included?
In fact, there’s a strong resemblance here to the debate over a la carte cable. Consumers constantly grumble that they don’t want to subscribe to all 10 gazillion channels; they only really watch five or six. Why can’t they just pay for the channels they want? As I’ve argued before, this misses the key point: the cost of providing content is in creating the content, not streaming it to viewers who already have cable. If it was possible to purchase channels a la carte, everyone probably would subscribe to only five or six channels, but that doesn’t mean that they would pay less: instead, either (1) the total amount of content would go down dramatically or (2) they would end up paying roughly the same as before, just getting less for their money. (Probably both.) After all, the money to create content has to come from somewhere; if everyone subscribes to their five favorite channels, the total cost of production won’t magically decline, unless it turns out that nobody wants to watch MTV after all.
There’s a possibility, of course, that the current system of bundled cable directs money in an inefficient way: without consumers making an explicit decision to pay for some channels but not others, it’s not clear which channels are really the important ones. In practice, however, cable companies have plenty of information about the content consumers want: they can look at ratings, survey results, demographic data, and so on. Ultimately, the channels receiving the highest affiliate fees seem to be more or less those that provide the most valuable content, at least according to this chart.
If they attempted to merge their paywalls, the New York Times and Wall Street Journal would face a similar problem: how to split the revenue? In fact, this is probably the biggest barrier to such a deal (aside from the possible DoJ lawsuit). If they used a simple measure like pageviews to allocate revenue, there would be perverse incentives to create cheap, frivolous content that drew eyeballs but didn’t provide enough real value to justify a subscription. On the other hand, if they tried to apply more complicated measures, it would be tough to write the specifics into a contract. If a focus group says it likes the NYT’s travel section, how much should that be worth?
This is where the analogy to cable suggests an alternative. Two papers don’t need to sign a contract with each other to bundle their content; third parties can do it for them. Just as Comcast negotiates with dozens of content providers before assembling its packages, an Apple or Google could come along and bargain with several national newspapers to assemble a cheap bundle of online subscriptions. Since the bundler would have a very strong incentive to provide a reasonable price for customers, it would put in the effort to determine what each paper really contributed.
Why hasn’t this happened already? First of all, online news is still in its infancy. But I think there’s also a widespread failure to understand the economic advantages of arrangements like bundled cable. It’s easy to dismiss them as relics of an earlier era, when it wasn’t technologically possible to deliver a different package of channels to every home. In fact, bundles are an excellent way to circumvent the dilemmas of providing a service at zero marginal cost. The ideal is to provide as much value as possible while still collecting revenue, and as Microsoft has evidently discovered in marketing Office, the optimal way to do that is usually to throw in several different kinds of content for one fee.
Eventually newspapers will understand that too.
Edit: Tomáš Bella points out in comments that this idea is already in place: he’s launched a project to combine leading content providers in Slovakia under a single paywall. David Backus writes in to point out an excellent paper by Crawford and Yurukoglu, forthcoming in the AER, on the effects of bundling by cable providers. Yanis Bakos and Erik Brynjolfsson have also written some very insightful papers about bundling of information goods, which provide a much more refined and better-articulated version of the ideas I’ve advanced here.