Tuesday, April 12, 2005

The never-ending introductory offer

Our leading newspaper companies intend for now to continue providing the free meat and potatoes for the gravy trains operated by Google, Yahoo and other major online aggregators of their content.

In so doing, they curiously are serving an elegant blue-plate special to the guys eating their lunch. As reported earlier, Yahoo News draws three times more traffic than the New York Times, the highest ranking newspaper site among the top 10 destinations for online news. The NYT ranks as No. 5 behind Yahoo, CNN, AOL and MSNBC.

The willingness of newspaper publishers to permit the use of their content without compensation runs contrary to the decision of Agence Presse France to force Google News to pay royalties -- or else. Perhaps inspired by AFP, the Associated Press is negotiating a license with Google News, according to the Los Angeles Times. If the AP is successful, the publishers may reconsider their generosity

In the meantime, however, Reuters, the New York Times Co., Gannett, Knight-Ridder and other major publishers are not pressing for compensation from the online biggies.

"The[ir] use of our content drives traffic to our sites," explains Tara Connell, vice president of corporate communications at Gannett. "It works to our advantage at this time. If we were to license or sell our content, we would not necessarily increase traffic or improve the incentive to go to our sites."

Reuters and the newspaper publishers rely on referrals from the dominant online publishers to build the traffic that enables them to sell more ads on their own sites. "Our web site revenues are predominately advertising supported," says Susan Allsopp, the PR chief at Reuters. "Google News is an important driver of traffic to our site."

With soaring online revenues playing a formidable role in propping up the otherwise desultory sales of publishing companies, it is understandable that publishers are afraid of asking to be paid for their work. Online revenues, for example, contributed as much as 47% of the increase in ad sales last year for both NYT and Knight-Ridder.

If Yahoo and Google were forced to choose between paying royalties or eliminating links to the publishers' web sites, they just might tell the newspapers to get lost (especially if they cut a deal with the Associated Press, which has the rights to reuse the content of every news organization that belongs to the AP). Without exposure on the online mega-sites, web traffic and ad sales would nosedive at newspaper sites.

The newspapers have to live with the online aggregators because they can't live without them.

But the bargain is lopsided, because the newspaper companies pay a much higher price to draw traffic to their sites than do the online aggregators. While print publishers bear the full (and considerable) costs of producing original content, the online aggregators pay nothing for the material they liberally cull from newspapers to build page views and ad sales.

Why is the newspaper industry subsidizing an industry helping put it out of business by fragmenting its audience and fracturing its traditional advertising base?

The argument, of course, is that the content giveaway is an "investment" in building traffic on newspaper web sites. That also is the reason most newspapers freely publish their entire report on the web every day.

This makes sense if newspapers have a strategy to leverage their online audiences to build significant and additive new-media businesses, such as direct-marketing programs, couponing, paid premium content, shopping services and so forth.

Absent such initiatives, which haven't materialized in a meaningful way in the last 10 years, newspapers are squandering their most precious resources -- their valuable content and their cash -- for no good reason.

If newspapers don't capitalize soon on the decade-long, free introductory offer they have made on their web sites, then this epic investment may amount to little more than history's longest-running, biggest-ticket, going-out-of-business sale.


Anonymous Anonymous said...

The value cuts both ways, I think. What is the value of Google News driving readers interested in your stories to your site? The search engine, for me, is always a mere portal, and while I may visit it frequently, it's always as a way toward somewhere else.

2:46 PM  

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