Sunday, May 22, 2011

More Crosswordnomics

I said before:
If you're wondering, the NYT also pays the most for their puzzles, namely $200 for a daily puzzle and $1000 for a Sunday. Not necessarily a good hourly wage, but pretty good for a hobby that most of us would be doing for free anyway...
Loyal economonomist Exogenous Combustion wants to know if the pay is any more than an honorarium, a token payment for our services. Seeing as many people would do it for free (or even pay), and given the New York Times' position of dominance in the crossword world, we might expect that to be the end of the story...but actually, there's some interesting dynamics behind the pricing.

First of all, there actually has been some competition on the newspaper end. Indeed, a few years ago the New York Sun initiated a price war! Here's a quote from Peter Gordon, then-crossword-editor at the Sun:
The Times was paying $75 for a daily when The Sun started. We started at $90. The Times went to $90. The Sun went to $95. The Times went to $100. The Sun went to $101. The Times went to $135. The Sun went to $136. Then The Times went to $200, and I couldn’t match that...
When it launched in 2002, the Sun was an upstart paper attempting to challenge the Times on its own turf, and Peter Gordon was, for his part, building up a daily puzzle that truly rivaled the Times in quality. When the Times raised its price to $100, within hours Peter Gordon sent out a message that the Sun was now paying $101. Some months later, Will Shortz (NYT crossword editor) succeeded in compelling the slow-moving Times to raise their price to $135. Instantly Gordon announced $136! ("We're #1!" "No we're #1!" "No we are!") Eventually the Times countered with a huge increase to $200. ("No seriously, don't mess with the @#%$#@* New York Times!")

Unfortunately the Sun's hard copy form (and its crossword) folded in 2008, but the pay increases it triggered remain (I love me some downward-sticky wages). The NYT crossword is once again without any real competitor, but those 6 years of competition raise lots of interesting questions about the industry dynamic.

For one, they both clearly wanted to be the paper that paid the most. The Sun placed high value on charging even a trivial amount more. The Times placed a high value on charging a significant amount more. Why? And was the Sun was ever truly challenging the Times, just by paying slightly more for their puzzles? (The answer is both yes and no...stay tuned). Would the situation have played out any differently if they knew the Sun would fold after a few years?

What would be the optimal price strategy if you were the NYT? If you were Will Shortz? Hey, whose side are Will Shortz and Peter Gordon on, anyway? Where does the money come from (the answer is not the same for both of them), and is it cheaper at the margin to pay Shortz in higher wages or happier employees?

More to come.

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