Tag Archives: economics

How the Liberal Party just undermined the climate change skeptics.

If you live in Australia, it’s hard to have not been exposed to the turmoil sparked last week by the factional fights within the Liberal party over the ETS/CPRS legislation that was defeated in the senate today. With the leadership spill driven by the climate change skeptics within the party who believed that Malcolm Turnbull was doing the wrong thing by brokering a deal with the Labor party over the ETS legislation, believing the science needed more analysis or at the very least, needed to wait until after the United Nations Copenhagen climate change conference. The Liberal Party has in the process of electing their new leader Tony Abbott just ruined the best chance the climate change skeptics had in clawing back this issue from the hands of the Labor party.

Given the Liberals poor showing in the polls even before the ETS issue erupted (Worse than at the last election) the Liberals were likely to lose their majority in the senate at the next election. The Liberals only have a majority in the senate still due to the half senate elections cycle and the large number of seats Howard won in the 2004 federal election. With this in mind, the path Turnbull took in regards to the ETS was very sensible, he understood the likelihood of losing the ability to block the legislation after the next election, and regardless of his position on the science behind climate change knew that now was the time to negotiate a deal that would best serve his constituents. This opportunity existed because the Labor party is keen to be seen as a world leader with the ETS  and use it for political gain  around the Copenhagen conference, the time was right, Labor wanted action on the legislation before the next election, and the Liberals held the majority in the senate. But instead, by imploding over this issue the Liberal Party has ensured that after the next election, the Labor party will be in a position to pass whatever legislation they want without amendment.

While the climate change skeptics in  the Liberal Party never held a strong enough position to block the legislation past the next election, they held a strong enough position in the short term to win a number of important concessions from the Labor party to benefit their members. The Liberal Party has squandered this position, and ensured the worst possible outcome for their members and the climate change skeptics alike.

Tiger Airways: Why treating customers like farm animals helps build their brand

In a recent trip to Melbourne, I thought I was taking advantage of Tiger Airways extremely low prices and landing myself a great deal on airfares. Sure the process seemed smooth enough (despite the extra wait time required at Sydney terminal before the flight at check in). The flight itself was straightforward and the extra fee we chose to pay to get seats in the exit row was worth it for my 6’4″frame.

Although once you add in charges for ‘extra’ luggage (above your included carry on allowance) and the ‘exit row’ suddenly the $25 ‘bargain’ tickets no longer look like such a bargain (Approaching, but not quite at VirginBlue or Jetstar rates for a comparable flight). This was not entirely a surprise, as there is always a catch somewhere, and we felt like taking a punt on a new airline “for the experience”.

What was a surprise though, was how Tiger Airways treat their customers once they arrive at their terminal (T4) at Melbourne Airport (Tullamarine).Tiger Airways Terminal Melbourne

The baggage claim area for Tiger Airways was essentially a tin shed with chicken wire walls on a concrete floor.

Tiger Airways Terminal Melbourne

The exit to the terminal/baggage claim area.

I couldn’t help but feel like I was being herded through the terminal like a cow to the slaughter by Tiger Airways. What was interesting on reflecting on the experience was that Melbourne Airport is Tiger Airways primary hub for operating in Australia. This struck me as odd that they would construct their premier hub in Australia in such a cheap and nasty way.

On further analysis though, it is entirely reasonable for a cut price operator in any industry to ‘dress’ the part. If the visual cues when flying Tiger are true to the sense that you are saving money, this reinforces the purchase decision and acts as a feedback loop to solidifying the perception that the customer has managed to purchase a ticket on the cheapest airline around.

Does this ‘build’ Tiger Airways brand? It certainly acts as an important differentiator to the other airlines offerings in Australia, that in itself is important in carving out a niche  for the brand against a market that has two strong ‘value’ offerings in Virgin Blue and Jetstar. Being ‘value’ isn’t enough of a differentiator. But being ‘cheap’ is. I’d call it a success, though I’ll be flying another airline next time.

Why Rupert Murdoch’s decision to charge for content online could save the news industry.

After Rupert Murdoch made the decision to charge for online access to content across his suite of newspapers online properties, there was considerable consternation across the Internet. With many armchair pundits in the blogosphere/twitter-verse crying foul at the idea of charging for content online that was previously available for free, citing their own usage expectations and a belief that the content isn’t worth paying for given the perceived drop in journalistic standards and cost cutting amongst newspapers. While I have considerable time for the case against changing to a cash for content mode, I believe in Murdoch’s case it has merit and might actually save the hemorrhaging news industry. Here’s why;

Charging for content online suddenly makes printed newspapers relatively less expensive

So you are running a newspaper company, what is your biggest cost? Sure journalists salaries figure in here somewhere, but it is the actual printing presses and distribution networks that are the significant cost centres in a newspaper operation. With declining readerships of actual newspapers over the last 10 years, advertisers are paying less for space than they used to, and less income is coming in from actual newspaper purchases and the fixed costs of running the printing press aren’t getting any lower and such make up a larger proportion of your total operating costs.

In order to make purchasing an actual news-‘paper’ a more attractive proposition for consumers, one way to drive that change is to make other sources of news relatively more expensive. If you charge for the online version of your newspaper, the actual printed version becomes an attractive option for consumers who had moved to the previously free online alternative. This will drive a percentage of readers back to the paper version and patch up the hole in the traditional newspaper component of Murdoch’s enterprise. For how long, this is debatable, but in localised markets where Murdoch’s papers have near monopolies over content/distribution, it will have a larger effect than in more competitive geographies.

Murdoch doesn’t own the entire news industry, many news sites will remain free and become profitable (or at least, lose less money)

Assuming that all the readers of Murdoch’s online properties do not continue with the site in a cash for content capacity, their eyeballs and the advertising revenue they represent will venture elsewhere. What this means is that free online news sites that were really struggling to meet their costs with a drop in online advertising revenue (exacerbated by the GFC) will be able to stop the revenue bleed with a greater share of the news audience. This ‘tiering’ of the online news audience is good for everyone provided that Murdoch can make a compelling value proposition for readers of his sites to pay for content that they unable to find elsewhere (Ideally, shifting the focus to quality journalism in lieu of the click generating sensationalism seen now).

Will all this save the news(paper) industry?

Maybe. In the long run the competitive forces of citizen journalism and sites such as wikinews will continue to place downward pressure on the operational costs of running a newspaper. With the costs of distribution online almost zero there is nothing stopping an upstart news operation running out of a garage to unseat a large monolithic operation such as News Corp if they can’t continue to offer a decent value proposition while charging for content.

At the very least, this decision will breathe some life back into printed newspapers until some industry shake out has occurred and people adapt to the new online news landscape. This might just buy Murdoch some time to regroup, will it be enough?