Sunday, March 01, 2009

Why media must charge for web content

First of two parts

Desperate to pump fresh revenues into their struggling businesses, Hearst Corp. and Newsday said last week that they intend to start charging for at least some of the content on their websites.

Judging from the terseness of the announcements, the statements seemed to be more aspirational than the result of lengthy and detailed strategic planning. But they’re a start. As Lao-tzu said, the journey of a thousand miles begins with the first step.

It’s a journey publishers absolutely have to begin. After years of giving everything away for free on the web, it won’t be easy for them to start charging for at least some of the content they spend small fortunes to produce. But there is no other choice.

If the news media don’t start getting paid for at least a portion of what they produce, some outlets simply aren’t going to be around to provide it. It’s already too late to save the Rocky Mountain News and probably too late to save the Seattle Post-Intelligencer and Tucson Citizen, which each face shutdown unless last-minute buyers emerge to rescue them.

So, free is not a business model that will support journalism produced by professional news organizations.

Because I have no faith in the blogosphere to replace the vital work of the professional (though admittedly flawed) press, I sincerely hope the traditional media will put a major effort into finding ways to get paid for at least a portion of their valuable content.

Emotions on this subject run so high that it is difficult for some people to have a rational discussion about it. So let’s talk about chocolate for a moment, instead.

Specifically, I have in mind the complimentary, foil-wrapped squares you get at the Ghirardelli store at Fisherman’s Wharf in San Francisco. The candy is free for a very sound business reason: The management hopes you will like it so much that you will buy several pounds to take home.

Judging from the long lines of tourists waiting to shell out $39.95 for gift-wrapped boxes of candy, it works. But I am sure even the most ardent advocates of free web content would agree that Ghirardelli would go out of business quickly if it let visitors consume all the candy in the store at no charge.

Now, let’s get back to the media business. While it would have been perfectly sensible in the early days of the Internet for newspapers to give consumers a taste of some content to encourage the purchase of more of it, it made no sense then – and makes even less sense now – to give away all of that expensively produced content for free.

As lovely as it would be if all the best things in life were free, the news media, if they are to survive, have to get paid for at least some of what they produce. That’s because the model that classically subsidized the production of journalism is irretrievably broken.

If it doesn’t get fixed, journalism as we know it will die off. While there are those who can hardly wait for that to happen, that’s not something I want to see.

Before pondering the way forward, let’s take a look at how we got to where we are:

The high cost of producing original content historically was subsidized at newspapers and other media by the sale of subscriptions and advertising.

With a few exceptions like Consumer Reports, which accepts no advertising and relies entirely on subscription sales, most of the media that sell advertising charge nominal subscription rates to build the largest possible audience.

This worked quite well in the pre-Internet era, when publishers for the most part were able to charge sufficiently high ad rates to subsidize the cost of content and make a handsome profit.

When the Internet emerged, most publishers committed the Original Sin of thoughtlessly giving away their content for free in the hopes of attracting millions of page views where they could sell the sort of high-priced ads that had built the value of their print franchises. This monumental strategic blunder resulted in three major unintended, and unfortunate, consequences:

:: By giving away their content on the web, publishers made it unnecessary for consumers to subscribe to the publications that generated the high advertising revenues that subsidize the cost of producing content. When advertisers saw audiences begin to shrink, they cut back their advertising. That’s why many newspapers have gone from typically being more profitable than Wal-Mart and even some oil companies to hanging on by a thread.

:: Publishers devalued their once-powerful franchises by letting anyone link freely to their content on the web. In so doing, publishers inadvertently subsidized the rise of any number of aggregators that have done quite well by selling low-priced advertising next to the expensive content that the publishers kindly let them have for free. The low price of the advertising on those websites is attracting ever-greater shares of the ad dollars formerly spent at the traditional media companies. At the same time, virtually unlimited ad inventory at competing online venues has driven down the rates newspapers can charge for both print and online advertising.

:: The wide availability of free content on the web quickly convinced consumers, who didn’t need much persuading, that content should be free. Apart from crossword fanatics like my brother in law who has to have a newspaper on which to write the answers, most consumers saw no particular reason to pay for a paper when the same information could be obtained more quickly and conveniently on the Net or an iPhone.

With the global economy in the worst shape since the last Depression, the industry finds itself having to undo the effects of its Original Sin at the worst possible time.

Can publishers do it? Dunno. Do they have to try? Yup.

Next: How to charge for content

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54 Comments:

Blogger -30- said...

Here's my concern over the whole "pay for content" model. Lets assume that we're talking about a publisher who is not simply grabbing at straws in a futile attempt to stay viable becuase that publisher is already out of business, he just doesn't know it yet. Lets assume a publisher that's really been thinking about this stuff, weighing his options, and decides to start charging for content.

What are they going to charge for?

What worries me is that I'm not sure that most newspapers have anything to charge for. Reviews? I can get those from my friends on Facebook. Columnists? Good Lord there's a whole blogosphere to choose from. Breaking news? Um, no. Insightful, indepth stories? Feature stories? The problem is most stories like this are for the most part timeless, and once published they lose their value, so why not wait for the free version?

So what then?

There is plenty of free content on the web. Most of it crap, some of it mediocre and, yes, some small bit of it top notch. Newspapers will have to compete with all of it and this means their content will have to compete with top-notch.

And I'm not sure it can.

9:00 PM  
Anonymous Paul Robinson said...

You are so wrong, I don't know where to start. Last week I wrote this though:

http://blog.vagueware.com/2009/2/23/business-models-of-news

That's a start.

Let's also deal with the fact that chocolate is a scarce resource that is hard to obtain. News is not. One article I read this weekend (but can't locate the link for) compared news production to the Zimbabwe economy - in hyper-inflation, devaluing its own value every day and therefore reducing the amount ads can sell for (hint: near infinite ad inventory you gave away for years and showed the exact CTR on devalues your future ad inventory sales).

A wholesale change of economics around news is going to need to happen, but charging for the content is just nailing the coffin shut a little quicker.

2:21 AM  
Anonymous Anonymous said...

Alan,

But some newspapers already charged for access to the part of their content...but it just didn't took off. It didn't work.

I think that newspapers putting their content for free on the web is not an "Original sin", they just had to do it, otherwise their paper would not be read on the net. There wasn't any other possibility. Also, it is not exactly free, because they are displaying ads.

The issue here is, that WWW itself was built as a platform for free sharing of information, it's a cultural thing.

If media would start doing what you suggest, that would be their death...it would just lead to drastically reduced visitors number, nothing else. I think the correct way is that media websites have to improve their online presence (better content + better technology for serving it), increase the number of visitors, and thus make enough money with advertising.

3:33 AM  
Anonymous Ken Carpenter said...

A question and a comment . . .

Is it technologically possible to block Yahoo and Google searches into a Web site? My guess is that it's not only possible, but easy.

Newspapers, TV stations, radio stations, magazines, and all other content producers should put up "No Trespassing" signs on their Internet real estate to block "aggregators" -- thus devaluing the behemoths' search results and increasing the value of the original content.

4:12 AM  
Anonymous Anonymous said...

I understand the theory of charging for content and it makes sense. But there are strong practical reasons why the odds are stacked against this approach.

1) It has been tried in many places and abandoned. Recall NYT charging for its columnists. I recall the Columbus Dispatch declaring that it made no sense to give the product away and thus began charging for its online content. But they had to abandon that approach because people would just not do it.

2) It's very difficult to keep things behind a paid wall. For example, the Columbus Dispatch provides huge coverage of OSU football. But there are 3-4 blogs of decent quality doing the same thing for free. These sites pick up the same releases as the paper, or just paraphrase the daily story, and pump out the same general news. So why pay? And how in the world would you prevent folks from just cutting and pasting stories and pushing them out via email or 1000 other methods? The music biz has had no luck in this area and its much easier to move around a simple text story.

3) The answer you say is "compelling content." Well, your typical mid-market daily doesn't produce all that much that is just jaw-dropping unique. Most is routine stuff that is of modest value add on any given day.

4) This all assumes that people want things from "trusted sources" like newspapers. Well, unfortunately, there are a lot of people who reject that approach and will gladly subsist on Drudge material.

Its important to remember the big picture here - paying for content has long been a minor revenue stream for traditional papers compared to advertising. We are in an advertising, not a content, crisis. Why pay for an expensive classified when Craigslist is far more effective and costs zero? That is the locus of the problem.

5:41 AM  
Blogger Tom said...

We can spend all day trying to solve the problems of micropayments and other schemes designed to generate revenue online ... that's not going to keep our existing newspaper companies in business for very long.

Instead, I advocate "raising the drawbridge" - the print business model still generates more than 90% of a typical newspaper's advertising revenue and needs to be defended as long as possible. Instead of trying to monetize the traffic to your website, I believe you should restrict full site access to your print subscribers. Face it - most smaller community papers aren't going to be able to generate meaningful online-only subscriber bases (we can't all be the WSJ or Consumer's Report Online), so it's not important to try to play in that "space". If you require people to be print subscribers and then allow those customers full access to the site (you want them to be able to see any of the content you print, at any time and on any platform they choose), I'd guess you'd see the declines in circulation stop and possibly even reverse!

Just my 2 cents.

Regards,
Tom

6:08 AM  
Blogger Newsosaur said...

In re question from Ken Carpeneter:

Yes, it is technically and legally possible to prevent an aggregator from gathering or using content published at a newspaper's site.

This is not to say that papers ought to do this but only to say that it is possible.

6:33 AM  
Blogger tgd said...

The cure, I fear, will be worse than the disease.

Pay walls will simply kill traffic to the websites, with negligible impact on print circulation.

They will not cause ad dollars to magically return to print. They will not cause print circulation revenues to magically increase (not that circulation revenue has been a profit center for the past 30 years, anyway).

Nor will there be a spigot of consumer cash opening for our vital, irreplaceable web content - because it is neither vital, nor irreplaceable.

So: We'll have near-zero financial impact on the core business - and wall ourselves off from any future growth in the digital world.

These aren't religious beliefs, or guesses. These are based on the verifiable results of many such efforts in the past six years.

Alan, I share your frustration will the lack of innovation and the dire situation. But this isn't the answer, any more than playing defense when you're losing a hockey game.

I do look forward to Part II, however. When it comes to money, I'm agnostic. If you have a solid idea on how to pull off paid content, I'm happy to take consumers' dough.

7:48 AM  
Anonymous Anonymous said...

I never understood why newspapers, including the one I work for, haven't done a better job at making their websites an extension of their print product that is available to their paid, home subscribers. Either they gave away everything on a full-featured website, tried in vain to charge people for access to a full-featured website, or they built a horribly gimped website in an attempt to not give everything away yet pretend that they were embracing the Internet.

I've always believed that the websites should have been an extension of the print product, a place for all the extra content that the papers produce that doesn't make it onto newsprint. We send a photographer out to a hockey game or concert and at best 2 photos might make it into that day's newspaper. What about the 200 other photos that were taken? Stick those into a nice web gallery where they can be looked at.

Fine, you don't want to give that content away for free - so limit access to your paid, print subscribers and give those people some extra incentive for subscribing. It would have been much easier to transition those people from a print/digital combination to being strictly digital subscribers rather than trying to convince them from scratch to pay for your website.

Good luck trying to provide decent websites and content now that most papers have slashed the heck out of their staff and resources.

8:23 AM  
Blogger Ashwin Sodhi said...

It's important that the industry approach this problem as not how can we charge for content, but WHAT'S BETTER THAN FREE? Where can we add value?

Because, as one anonymous commenter mentioned, the web is one big Xerox machine -- I might subscribe to Times Select or Newsweek so that you don't have to, and then repackage all its content on my FreeTimesSelect blog and cannibalize its readership.

What, then is a newspaper better than free? It's personalized. It's impeccably organized. It's customizable. It's convenient. What else?

I'm very interested in part two of this topic. I'm inclined to believe that, amidst all the heated debate, there is a place for paid news. I just happen to think there's not a lot of room on that lectern. And it isn't a great horse for the industry to put all its money behind.

9:06 AM  
Anonymous Tammy said...

Here's a radical idea - abandon the Web. Seriously, if papers, especially small- and mid-size ones, can't compete online don't bother. Throw up a page with contact info, maybe a couple "tease" story graphs and tell people to buy the paper to get the rest. Offer an electronic edition to print subscribers.

If your Web site is just a regurgitation of the print edition with nothing but AP updates, why cannibalize yourself?

Full disclosure: I work for a news Web site with no print edition. But I worked for newspapers and fondly recall their myopic visions of the Web.

9:14 AM  
OpenID rcade said...

"Publishers devalued their once-powerful franchises by letting anyone link freely to their content on the web."

I'd love to hear how a newspaper is going to find readers after it stops letting anyone link freely to its content. Actually, the better question is how readers will find the newspaper.

Without incoming links, newspapers don't rank in search engines. They will be outranked by smarter local information providers, resulting in their own irrelevance as an online source for local news.

I'd love to be running a local news site in any market where the major newspapers believe that linking to them is bad.

11:37 AM  
Anonymous melissa said...

I think it's ridiculous to say that professional media can't survive online without charging for their content. What do publishers make the most money from? Coin boxes? Subscriptions? No. From advertising. If big conglomerates were really willing to adapt to the changing face of publishing, they would learn to utilize the tools at hand to make money. If publications want to offer exclusive content to paid subscribers, it might be something a select few would be interested in, but trying to apply a print model online just isn't going to work.

11:38 AM  
Blogger Martin Focazio said...

There's a similar situation I went through about 15 years ago, and it all worked out well.

I used to work in large-scale post production for television programming - shows, commercials, and so forth. We were one of the top-flight shops in New York City, with all the latest equipment, the best talent, the best ideas, the best work. We charged serious money - thousands of dollars an hour - for our all-digital editorial suites and film to tape transfer facilities. Well, you can see where this is going, as the company - Editel/NY - is no longer around.
I bought a little gizmo for my computer a little while ago, it's a thing that lets me collect video via the USB port on my laptop. Bundled with the gizmo was some free software for editing video, and I tried it out. The software did more than one of our digital rooms did in 1992, and was simply bundled as a free bonus with a $79 piece of hardware.

So, what happened to the post production industry? It's still very much alive, but it's less about the aircraft carrier sized facility and more about a few talented people using cheap digital tools to create good stuff. The editors now can fly out to the set with the equivalent of a full post production facility in three equipment cases.

The industry fragmented, it disbursed, went mobile, became user-generated and, most interestingly, became larger. The demand for good video production talent is still there, the need for "programming" is still there, and there are still plenty of ways to make a living in the motion video production and post production business - but it's nothing at all like it was in the 1990's.

The number one thing I'll miss from the newspapers when they are gone is investigative journalism - muckraking. That's hard, important work, and while citizen journalism is exquisitely well tuned for capturing cops beating up 15 year old girls or images of people exiting a plane that somehow managed to land on water, it's less good at ferreting out a corrupt sheriff, figuring out where tax money went and uncovering hidden agendas. Yes, wikileaks and others are good starts, but they lack the focus and determination of an investigative team. If there's one place that will survive, in some way, it will be the investigations. I hope.

11:48 AM  
Blogger Mark said...

What is we separate journalism and journalists from newspapers? Kind of like separating the Church from faith. Who is to say that journalists can't survive in a post-newspaper world with more direct commercial relationships w/ their customer base? Music artists are starting to move this way and away from the bog record companies. As organizations, what is the newspapers value-add to the consumer?

11:53 AM  
OpenID MCM said...

The problem with "pay for content" is that you're building infrastructure that will hardly ever be used. It's like you own a 5-foot-wide strip of a really nice beach, and you're putting up a toll booth to keep people from taking a dip in the ocean. Sure, there may be some folks who will see that as a worthwhile investment, but most won't. They'll just use the rest of the beach. Meanwhile, you've got this toll booth to maintain and someone sitting there, on the payroll, waiting to collect a buck or two every few weeks. People will gravitate towards free, but you're going to invest in non-free. It makes no logical sense.

In that case, I'm tempted to agree with Tammy and say "abandon the web". Put up a print subscription page and stick with physical product only. You might be able to move your focus away from "breaking news" and focus more on commentary or depth (like a fast-paced magazine... somewhere between Twittered news and Time). That might be a viable option. For a time, at least. Until physical newspapers become oddities in a world of super-Kindles, and your production costs eat all your profits.

Maybe the better idea is to quit producing printed newspapers entirely. Do it now, before anyone else. Sell targeted local advertising, which will become that much more attractive once the paper-paper shuts down as an outlet. Stop splitting your focus and go with the business model with a future.

(You may need to invest in some light Print on Demand technology to send premium physical editions out to customers that don't or can't use computers. But that's just a stopgap measure, until generational turnover gives you an entirely tech-savvy market to access)

Or, more likely, find something in between. But to assume you can solve this problem with pay walls is only slightly less absurd than the other two proposals. Or MORE absurd. It's hard to pin down.

12:03 PM  
Blogger 10ksnooker said...

Charging for content will not work. It's like software, finally the makers found giving it away and fostering a community to buy support from you was far better.

google has the newspaper model locked down.

12:41 PM  
Anonymous Anonymous said...

Newspapers brought this on themselves by proudly repeating the mantra, "we do not inn-o-vate" for at least as long as Gutenberg discovered moveable lead type.

Their years of corporate and professional arrogance has now come home to roost. I look at the Op-Ed pages of the New York Times (the grey lady herself may not make it past midyear) and think, here are 300-1,000 comments to the likes of Krugman, Rich, Brooks and not one of them deigns to leave their throne for a moment to converse/dialogue with a reader.

For years newspapers were about 1-way communication. "Sit down, shut up, open and your ears and listen because 'I' have something to say to YOU" and I don;t have to listen to YOU! indeed I am accountable to no one ever.

It's like that Lethal Weapon movie where the South African stands holding his passport at the end of the film and says with a smirk "diplomatic immunity", Danny Glover pulls the trigger and says, "it just got revoked."

That is what is happening to newspapers and they are being replaced by very good content sources. Little sympathy (and I write freelance for many of them) from this chair. Things change you don't, hello dinosaurs.

1:08 PM  
Anonymous Vin Crosbie said...

Er, Alan, are you at all aware of how infrequently daily newspaper content is used online even when it is 'given away for free'?

For examples, Nielsen//Netratings reported during mid-2007 that the average user of NYTimes.com visited only 4.05 times per month (which is about once per week), saw only 27 Web page during all those visits, and spent only 20 minutes and 20 seconds on that site all month long. The average user of the Washington Post: 3.2 times per month, 16 Web pages, 14 mins. 14 sec. The WSJ: 3.92 times, 20 pages, 9 min. 55 secs. The San Francisco Chronicle: 2.26 times per month, 8 Web pages, 4 minutes 55 seconds. Moreover, Editor & Publisher has been reporting that those numbers have been steadily shrinking since 2007 at most newspapers.

Although 'given away for free,' newspaper Web sites are used less often, less thoroughly, and for less time than the printed editions. Worse, the Pew organization reported last week that the overall number of people using newspapers in print plus online has shrunk during the past two years. Yet you want to start charging for content that increasingly less in demand and less and less used even though it's free? Oh, yeah, that'll help!

The problem for newspapers isn't that they're not charging online, but that their package of content is no longer in demand in print and is even lesser in demand online. To paraphrase Bill Clinton's campaign, It's the Content, Stupid! Charging for something that consumers are abandoning when it's free is an absurd business move.

Plus, let's remember Economics 101. The reason why newspaper Web sites aren't charging isn't volition. It's not that they don't want to or haven't tried. It's because the supply & demand situation has radically reversed: Fifteen years ago, consumers only access to daily changing news in text were the one or two (or in few American cities three) local daily newspapers. But consumers now have online access to the daily changing texts of every newspaper's Web site plus those from TV, radio, and news magazine Web sites, too. Consumers might have paid 50 cents per day when they only a choice of one or two suppliers. Yet the Principle of Supply & Demand dictates that the value consumers are willing to pay now that they have a surplus of suppliers is miniscule, virtually nil. It's economics that set the price, not publishers' unilateral decisions.

Newspaper companies should have begun facing these changes ten years ago rather than trying to preserve the past. They're now in grave trouble due to their failure to do so when they had time. Charge their CEOs with dereliction; don't try to charge the consumers for the companies' failures.

1:15 PM  
Anonymous D. Scott said...

How about a content surcharge tax or content service fee, say 25 cents, in phone bills that will go into a pool of cash to help newspapers? Most telephone bills already contain fees, such as a carrier cost recovery fee and afederal universal service fee. If newspapers as the Fourth Estate are considered an essential pillar in America's democracy, I think this is a possible option for review to keep newspapers from dying a death of a thousand cuts.

D. Scott

2:07 PM  
Blogger ChannelingHemingway said...

I have to say - and I do work for a newspaper right now - that the Original Sin was not giving away content. Instead, it was refusing to believe the inevitable. I can't even remember the hundreds and hundreds of meetings where the young or anyone with any vision (in very short supply at every newspaper I've ever been at) wouldn't have been totally ignored.

Newspapers did this to themselves. Trying to put a wall back up after it has been torn down is impossible. It didn't work in Berlin, it isn't working in the Southwest and it won't work with newspapers.

3:00 PM  
Anonymous John Clinton said...

Alan,

On a lighter thought for a moment, let's get back to your chocolate analogy. The next time you have the urge for a foli-wrapped Ghirardelli square, skip Fisherman's Wharf had head up Interstate 5 to Lathrop. There you will find the Ghirardelli chocolate outlet. Offerings are the same as you'll find in San Francisco but at discounts exceeding 20 percent. Furthermore, the outlet "greeter" doesn't just offer a foli-wrapped square but an array of Ghirardelli favorites.
Oh, and tell your brother in law that many crosswords can be downloaded for free from the Internet. The Chronicle's puzzle is from the Los Angeles Times and can be found daily at: http://games.latimes.com/index_crossword.html?uc_feature_code=tmcal.

3:03 PM  
Anonymous don said...

Wow, so many misinformed comments ... so little time to introduce facts.

But, let's start.

"What worries me is that I'm not sure that most newspapers have anything to charge for ...."

Then you're really not part of the newspaper's target market, and - respectfully - your opinions aren't very relevant to this conversation.

If everything you need is at Facebook, hang out there. Personally, I'm not terribly interested in my friends' reviews ... I'm interested in a professional critic's observations.
As for insightful and indepth stories, local stories, state stories, regional stories - well, newspapers are still the best source, many times over. Blogs simply aren't news, youtube is entertainment, "citizen journalism" is the great lie of this decade.

"Why not wait for the free version?" Well, there's the exact point: Let's take the free version away (and tie up pirates with heavy-duty litigation). Perhaps "information wants to be free" will be revealed as the self-serving tripe that it is. OR, perhaps y'all are right & nobody will pay .... but in that case, we're no worse off than we are now. Because serious, professional journalism is dying while the self-absorbed jackals of the "new media" bray gleefully, but without any ability to replace what the much-hated newspaper does for its community.

4:33 PM  
Anonymous Anonymous said...

Is my math wrong? I just took 100 million subscribers times 25 cents and came up with $25 million dollars. Multiple that by 12 months and you have $300 million dollars. Two years ago that was the ad revenue for the newspaper I work for. One newspaper.

So, how do we divide that up amongst all US newspapers in a way that keeps more than a handful of them in existence? Just wondering.

4:36 PM  
Anonymous Anonymous said...

Newspapers' problem isn't charging for content vs. not charging for content. The business model was irrevocably broken with the disappearance of the monopoly on classified ads. Virtually zero news sources have ever charged enough to cover the cost of generating the news. They have always primarily been supported by advertising. Charging money for a subscription is simply a way to garner eyeballs that were higher-value for advertisers.

The Web is a marginal improvement in convenience over printed matter for delivering news. I'm not sure yet if it's more effective or not. But the rise of eBay and Craigslist will not be reversed, and that's just a huge amount of revenue that's never coming back, because the Web (combined with the network effect of having huge numbers of dedicated users) is a truly massive improvement over print for buying and selling things and finding employees.

5:40 PM  
Anonymous Bruno said...

The only way charging for content would work is for all news outlets to agree to charge for news at the same time.
One of the arguments against charging for content is that if one newspaper web site starts charging, then news consumers will just turn someplace else to get their news. But if all news outlets -- newspapers, television, radio -- put their web content behind a firewall, then where would the public turn for news? Sure some content would be available for free, but consumers would be forced to pay for the kind of valuable news that outlets provide, at great cost, everyday.
The one organization that all news outlets have in common is the Associated Press. Instead of working against the news industry, the AP should work on its behalf, much the way Apple I-Tunes works on behalf of the record industry. The AP could take consumers' credit card information, give them a choice of news outlets to subscribe to, and charge a small processing fee. The model exists, no need to reinvent the wheel.
Of course, this might raise anti-trust questions and would also require newspaper publishers to agree to work for their own common good, which seems unlikely given their competitive nature.
Unlike the record industry, the newspaper industry never valued its intellectual property. A news article is a commodity, just like a pop song. There's absolutley no reason why consumers wouldn't or shouldn't pay for it, especially if it became a rare commodity. The ubiquity of news on Google and Yahoo, often delivered through the AP, devalues news.

5:55 PM  
Anonymous shyam somanadh said...

Good luck trying to make money by cutting off your traffic from content aggregators.

If you can provide the user with decent enough value, they will pay. But we focus too much on ‘how do we make them pay?’ part of the story than addressing the more crucial question of ‘why would they pay?’

Value in any form of content is a factor of uniqueness/exclusivity. If you get the same degree of satisfaction from multiple sources at a near-zero price point (we often discount the access cost in online), one of the sources going paid will only result in that source dying an immediate death.

The way content is produced in digital media these days, I can easily bet well over 99% of it is non-exclusive, meaning that outside of value to advertisers by means of audience reach, the content by itself has little value. Meaning, you can’t really charge for that stuff. That is part 1 of the breakage in the content model.

Part 2 of the breakage in the model is in how that non-exclusive content is produced and distributed. Amazingly, there is zero economies of scale here. The 51st unit is quite often a lot more expensive to produce than the 50th unit. In such circumstances, producing exclusive content actually costs even more, meaning that to recover costs, subscriptions would have to be much more than micropayments.

More detailed version here: http://lin.cr/fvw

p.s: Interesting. The blogger captcha for this comment was 'bailing'. Too much context, eh?

6:31 PM  
Blogger T Heller said...

Paul Robinson exclaimed: "chocolate is a scarce resource that is hard to obtain. News is not."

I guess that depends on one's meaning of the word, 'news', eh?

----

In case no one has noticed, people have been paying for newspaper content on the web all along -- via their monthly ISP charge.

If newspapers were to begin charging for their valuable content (i.e. the news, not celebrity prattle), then the Comcasts and AT&Ts of the internet world wouldn't be able to charge as much as they do. People pay for *content*, not for *access*.

7:06 PM  
Anonymous Steve Ross said...

rThe "mostly advertising revenue" model works, except when there is a recession... and this recession is so deep, maybe no model will work. Just for the record, NAA data can be used to calculate the following:

Advertisers have been willing to spend an ever-increasing amount per subscriber, even as quality has tanked. In 1994, newspaper
advertisers spent $548 per print subscriber. That figure jumped 61 percent, to $926, in 2006 before
falling back to $885 (of which more than $800 was allocated to the print product) in 2007. Even after inflation (using CPI-U and not adjusting for newspaper quality), the 2007 number was $633, a rise of 16 percent in "1994 dollars." The peak, using either
inflated-adjusted or current dollars, was in 2006, just before the recession took hold. In 2006,
inflation-adjusted per-subscriber revenue was 24 percent above 1994.

Newspapers should be collecting, and selling, in-depth local data -- the one thing for which there is little or no competition, but that aids local reporting and local economic development. But that data would cost them money to collect, wouldn't it? And reporters -- unlike most metro daily reporters today -- would have to be dedicated to local reporting, wouldn't they?

7:30 PM  
Blogger chuckl said...

Great discussion and I follow your argument Alan, but I disagree entirely. Almost everything on a newspaper Web site is redundant in some way. The world and national news, the weather, the entertainment stories, the sports, the business, you can get that all somewhere else, and probably better, too. The only thing a local newspaper has that nobody else has is local news. A good local news organization can cover their area better than anyone. So why not return to the original purpose of a newspaper: to provide a community forum which encourages participation by the community. If you can engage your local community, the local advertisers will follow you online, especially those who cannot afford to run ads in your print publication. It's not all newspapers that are in trouble. Local and regional newspapers that provide a valuable and needed service to their local community are attracting readers and advertisers. You just don't hear much about them in the din of the collapsing big market newspapers. Provide something valuable for your community and give your readers the ability and tools to become part of the conversation and the community and advertisers will support you. It was always thus.

7:39 PM  
Blogger Robb Montgomery said...

News has been, for all practical purposes, FREE for decades. C'mon only the barest bones of production costs have been subsidized (At best) by the consumers. The rest by adverts.

The lion's share of Editorial's ambition has been paid for by advertisers who have paid to be in front of a large, captive audience.

Monopolies crush innovation. Monopolies exploit consumers. Monopolies make a lot of money.

Alan, this has little to with the efforts of aggregators, (who actually DRIVE traffic to newspaper Web sites) and has more to do with the fall of the monopolistic dominance of those who once bought ink by gallon and newsprint by the train car load.

7:49 PM  
Anonymous Mitch Ratcliffe said...

Alan -- the problem with "pay for content" without any change to what is delivered for the fee is that it is the equivalent of publishers saying they'll hold their breath until they die if they don't get the reader's money. They will die going that route.

While I don't agree with many of the comments here about news being a commodity, because that typically involves confusing news with rumor and repetition-without-adding-value, the supply has changed and the demand is different.

Unfortunately, this discussion tends to devolve to a "who got the news first" question, which misses the point of good reporting, sourcing and vetting of information. Timeliness isn't the only facet of value, and simply waiting to be informed at a lower price will eventually result in a lack of quality, since it won't be economically viable to do original reporting.

What people "pay" for is reflective, useful information, not just panicked reportage. TV gave us that is the idea of "being there" as events happen, but news assembles a coherent view instead of wasting (precious) time rolling out every new factoid as though it were a scoop.

I've proposed that deeper relationships between reporters and the communities they serve can lay the foundation of a viable economic relationship (http://blogs.zdnet.com/Ratcliffe/?p=381), and there is plenty of evidence that writers/bloggers/reporters who engage with their audience across many channels do establish careers in this market. I'm looking forward to hearing what you have to suggest, but I am pretty sure the answer will involve putting a face on the the worker producing the "news." That face will be part of the community, not someone reporting from the outside.

9:06 PM  
Blogger Jay Rosen said...

"If it doesn’t get fixed, journalism as we know it will die off. While there are those who can hardly wait for that to happen, that’s not something I want to see."

Next time you need "those" to make your argument could you please provide some names and links? Who are you talking about? Anonymous shouters in a comment thread? Who are the people who have said they can't wait for journalism to die off?

10:38 PM  
Blogger rjhawkins said...

Sure, back when the publishers controlled the print, the ink, the presses it was a cinch to charge for content.

It isn't like that any more.

You charge and the next guy will give it away for free.

Besides, from what I can tell, nobody is giving it away fro free, except a handful of nonprofits. Everybody else is trying the original TV model -- advertising supported content.

I can't wait to hear the charge-for-content crowd howl in outrage when the television industry -- now digital and in total control of the pipeline begins charging you through the scrotum for content. And they will, because they can.

Be careful what you wish for.

Feel free to start charging for your content, News-o-saur. Don't be so hypocritical.

Can't wait to watch your audience grow as you install a subscription program...

11:00 PM  
Anonymous Evil Pundit said...

Jay Rosen: Who are the people who have said they can't wait for journalism to die off?

I'm one.

Good riddance to you and the rest of the biased distributors of worthless propaganda!

I love this blog ... it's the best for schadenfreude.

1:29 AM  
Anonymous Anonymous said...

"But the rise of eBay and Craigslist will not be reversed, and that's just a huge amount of revenue that's never coming back, because the Web (combined with the network effect of having huge numbers of dedicated users) is a truly massive improvement over print for buying and selling things and finding employees."

Exactly.

Stop worrying about making money on the content. People are cheapskates. We want free stuff. If you offered me a free house, I'd take it. Free food? Every meal. People want free. We want coupons and discounts and sales and rebates. People are cheap and will not pay for things that are not either A) necessities like housing, food or utilities or B) luxuries we really want, like TV, beer, Blu-Ray systems, PlayStations, cars, etc. I say this as a newspaper reporter in his late 20s: If you're going to just give it to me, I'm going to take it and not feel guilty. If it vanishes, I'll find it somewhere else. And it will still be free. So let's get over the idea of paid content.

The key is making money off the businesses through ads. The business model needs to be adjusted somehow, but the problem is that the economy is so screwed up right now, who knows what the right strategy is. The answer may be that nothing is going to work for quite a while as everyone cuts spending. But what do I know? I'm just some guy on the Interwebs.

2:57 AM  
Blogger Alan Blanchard said...

For me, the argument calling for newspaper (information) companies charging for content online would be like our small weekly newspaper, The Clare Sentinel (www.clarecountyonline.com) increasing its yearly subscription to $200 per year. Papers charge significantly lower ad rates and generate less ad revenue via online advertising revenue, compared to print ad revenues of years gone by or even today. So then is the solution just to make that up by charging online subscribers something (some have suggested a micro-charge amount per story like the music companies' models) per story? But songs are compelling commercial buys, which can and will be played again and again ... how many times will one read a story about a tax rate hike, interesting senior citizen who sky dives or even a murder, etc.

Alan Blanchard
Associate Professor of Journalism
www.cornerstone.edu/journalism
Publisher, Clare (Mich.) Sentinel

4:18 AM  
Blogger Ted said...

Alan:

I think you have failed to deconstruct the news business in your analysis of what they should do next.

News: an attractive element of an audience development strategy. See also sports scores, movie reviews, cartoons, and crossword puzzles

Business: something that makes money from the audience that has been assembled

There is a business model for selling news -- associated press and reuters have used it for some time. It is a B2B model in which you provide content to other businesses who then use that content to assemble audiences.

Currently there are 527 articles indexed by Google about the Kremlin's reaction to Obama's letter. I don't need 527 -- a couple would do. Certainly it would be nice to have one or two from news sources I "trust" -- your model of suggesting that a paper charge for its news would require an anti-trust coalition of news producers to all blockade their content simultaneously. If only one, or even if most, put their content behind a pay wall, I (and other readers) would just go elsewhere.

The real problem for the news business is that they haven't embraced the new business -- craigslist, match.com, meetup, etc -- there are dozens of experiences online that replace the classifieds and other newspaper monetization schemes. True innovation to improve the experience of readers in using those services could save the business of creating news in order to aggregate audiences.

Charging for news will simply cause those audiences to aggregate elsewhere.

6:11 AM  
Anonymous chris said...

Good post & good discussion.

It is my opinion that charging for online content will be a newspapers last desperate attempt at life...

Start charging and your traffic will drop significantly.

Newspapers need to stop thinking of themselves as newspapers. Instead, realize that there will always be a demand for local news. The question is, in what format?

Most city newspapers have a larger staff then all of the local television stations combined. Its now commonplace for a reporter to be carrying an HD video camera with them on the street.

I think most newspapers are pushing video, but they need to go even further. I see a future where all newspapers will have a 'TV' studio where a broadcaster will deliver the news. Where video 'personalities' will start being promoted and every day the website will offer two or three broadcast updates. Some of the updates will be full 15-30 minute broadcasts covering all the local news... much like the 6pm tv news we have now.

Its only a matter of time when everyones television will also be an internet portal. If they can stream and download their evening news, I think they would choose the newspapers production more often then not.

6:32 AM  
Anonymous Anonymous said...

There is simply nothing worth paying for in 99.9% of newspapers. Get over it, it's curtains more most of these guys.

8:12 AM  
Anonymous Joe C said...

1. NO ONE would have read this had you charged for it. That would've been akin to the preaching-to-the-faithful that happened at Jones Town and continues to happen in E&P. LOL.

2. Your piece is very wishy-washy. A solid, fact-based piece on the evolution of why charging doesn't work would've been more helpful.

8:24 AM  
Anonymous Anonymous said...

This is a good and valid discussion and one that could go on forever.
Unfortunately News organizations do not have a franchise on information, or even quality information. Newspapers could try to charge but since they don't own the franchise, people will just gravite to other places to get their information fix. It is unfortunate.
Consumers reports is non profit, so is NPR. I think perhaps Newspapers should consider becoming non-profit news organizations that let others capitalize (think the ultimate outsource) on the use of the information. If the news organization worked on a member basis, like NPR and then allowed other print style organizations to reprint the information (Think Utne Reader) a new more possibly localized print world could be created and Newspapers would realize their core excellence is news gathering and investigation. They still could have a member constricted web site if they wanted as well (just like Consumer Reports).
They might even be able to capitalize on the output and printing of the newspapers if they chose to run prepress and print serveces, since they already own the hardware. Today's Papers just give up the idea that the product is the paper and recognize it is the information.... Now how to get paid reasonably for that.

8:57 AM  
Anonymous Mark said...

"virtually unlimited ad inventory at competing online venues has driven down the rates newspapers can charge for both print and online advertising."

Alan:
This quote is the essence of the problem newspapers face. Free vs. paid web sites are a sideshow.

9:06 AM  
Anonymous Anonymous said...

This is a good and valid discussion and one that could go on forever.
Unfortunately News organizations do not have a franchise on information, or even quality information. Newspapers could try to charge but since they don't own the franchise, people will just gravitate to other places to get their information fix. It is unfortunate.
Consumers reports is non profit, so is NPR. I think perhaps Newspapers should consider becoming non-profit news organizations that let others capitalize (think the ultimate outsource) on the use of the information. If the news organization worked on a member basis, like NPR and then allowed other print style organizations to reprint the information (Think Utne Reader) a new more possibly localized print world could be created and Newspapers would realize their core excellence is news gathering and investigation. They still could have a member constricted web site if they wanted as well (just like Consumer Reports).
They might even be able to capitalize on the output and printing of the newspapers if they chose to run prepress and print serveces, since they already own the hardware. Today's Papers just give up the idea that the product is the paper and recognize it is the information.... Now how to get paid reasonably for that.

9:13 AM  
Anonymous Anonymous said...

Very few newspapers have dedicated their staffs to only providing content that cannot be obtained anywhere else. Most newspapers want to compete with the big boys or imagine that their web site, like their print product, must be the be-all end-all site for all the news anyone wants. The vast majority of American newspapers have not seriously attempted to innovate online, they have not even tried to explore how they could survive in a changing business environment. Now, with the help of people like Alan, they are making an argument that they only way they can make it is if they turn the clock back. I hear people at my newspaper complain constantly that it is those who cry innovation who have ruined the business model for newspapers. What we need now, many seem to believe, is powerful anti-innovators. We need government money, cartels, pay-walls, etc. etc.

Say you get all of that for newspapers. What will stop me from going to CNN.com for free news? BBC.com -- they seem less biased and more broad in coverage than most US newspapers. Hey maybe we could convince the search engines (who we have just prohibited from aggregating news) and ISPs to block all those non-newspaper news sites -- or, like China, at least the off-shore ones. What about local news? I don't get much from my local newspaper. The major metro I work for just closed most of their outlying bureaus, so they aren't even trying anymore. So the one thing I would go to them for (maybe even pay them for) they don't do well if at all. And in this new world order they aren't likely to start, much less improve.

There may not be a way forward for newspapers. But let's be honest, they really haven't tried very hard to find anything. Most efforts have been an attempt to re-invent the past like the ballyhooed Hearst electronic news reader. The time, money and effort put into electronic paper would be funny if it hadn't cost millions (that could have been spent on other things, like local reporting) and won't ever see wide adoption (unless I can browse the web, make phone calls, listen to music and play games on one). I have to carry 50 pounds of gear daily for my job and I won't carry one of those things even if I got it for free (I can do what I need with my Blackberry).

Those e-readers are what newspaper folks see as safe innovation. Lock up your audience with a proprietary device that serves them subscription-only fare. Most US newspapers have been playing it safe for decades, banking 30 percent profit margins and plowing little or none of it back into their core product. When they had a chance to change they refused (why the rock the boat) and that moment has passed.

What they are doing now is writhing and moaning as death approaches. They are rushing off to Mexico for drugs that aren't FDA approved. They are cutting off their arms and legs in the hope of somehow saving a body that can no longer care for itself. Payment schemes, should the greedy folks behind newspapers ever be able to get behind them in sufficient numbers, are just more of the same. In all likelihood they would never have worked, but now they are almost certain to hasten the patient's demise.

I eagerly await the outcome of the new pay schemes newspapers are attempting. That will take the discussion from the theoretical to the hard, cold, bloody truth. Then we can move on.

9:49 AM  
Anonymous GuyPJarvis said...

Alan, you have definitely struck a nerve based on the wide array of responses - some emotional, some intelligent and some just omnipotent.

I think Tammy may have hit the nail on the head, albeit a radical concept...but a simple one which may be more grounded than some of the complicated solutions being tossed around.

Never a huge fan of Reagan's supply-side economics, it may very well take North American media companies to go OPEC-cartel-like and uniformly stop feeding those that are mowing their lawns, before we can start to build a new sustainable business model. This will be an armageddon moment, but there will not be any gain without considerably more pain. The difficulty however, like all cartels, is that success depends on mandatory collusion, and that outliers can spoil it for the group.

Time to wipe the slate clean and start over.

11:24 AM  
Anonymous Anonymous said...

Our local weekly suburban newspaper has been doing just fine (or was until the economy fell off a cliff) by giving the paper away for free (to its target audience) and charging for online content. All of the local news is exclusive, no wire stories. We're the number one source for local news (all sources) by a wide margin in independent, third party surveys.

1:00 PM  
Anonymous Anonymous said...

I voluntarily pay a monthly fee for an online news site that I consider valuable. On other sites I'll contribute to their all too frequent pleas for help, as for investigative journalism there was Dahr Jamail's reader financed trip to Iraq as an unembedded journalist. The argument for focusing on value is a good one, better I think than trying to cut open ties to the net. Whatever you may think of him, Alex Jones of GNC appears to have a running concern, not sure what model, if any, he uses.

1:29 AM  
Blogger Mike W. said...

Could it be that newspapers are struggling because of the product they are producing? Content will sell papers. Most newspaper are very left-leaning and they publish a lot of AP stories. More local news and less biased reporting would go a long way.

3:19 AM  
Anonymous Anonymous said...

News DOES NOT equal free content. I can get news anywhere and should not and will not be charged for it.

Also I assume that advertising would be removed under your plan, correct?

4:31 AM  
Blogger Shel Horowitz, author, Principled Profit said...

Couple of points missing so far from this fascinating discussion.

First, nobody's talking about the growth in readership the open model allows. I read stories frequently from newspapers across the country. In the past, I read my hometown paper and whatever articles my mom clipped out for me from her copy of the NY Times. Now, Google searches, Twitter links, blog posts all send me scurrying around the net to major (and minor) news sites.

Second, there's at least one newspaper using the subscriber-only model: The Daily Hampshire Gazette, of Northampton, MA (my hometown paper) has since it started its online version kept most of it behind a firewall. Which was pretty annoying until they cookied it, but now it (usually) remembers I'm a subscriber. And if memory serves me right, they do include a lot more photos, etc. than in the print version.

Call me old fashioned, though--I rarely go to the site. The morning paper is a welcome break form screen fatigue.

Shel Horowitz, blogging on the intersections of ethics, marketing,
sustainability, media, and politics since 2004, at http://www.principledprofit.com/good-business-blog/

4:42 AM  
Anonymous Anonymous said...

I read a lot of the comments, but haven't seen anything about "trust" of the news media.

I'd be skeptical of paying for a newspaper when they seem compromised and controlled.

I'd pay for BBC and probably specialized publications, but not a US newspaper.

8:52 AM  
Blogger Kris Tuttle said...

People will always pay for content if it is valuable, takes time to produce and is priced right. They key is valuable. For many a news story or oped is not worth paying for.

However, details, analysis a service that covers an area comprehensively that matters to me or by business is worth paying for.

For example lots of people subscribe to the economist magazine as an offline publication. The same is true of online services like Stratfor that provide valuable analysis and commentary around global developments.

Services like Stratfor end up partially replacing reading the NYT for people that care about global affairs.

Then the customer refuses to pay for your product or service they are being pretty clear. Either you find new customers who value the product enough to pay for it, get busy changing the product or take your lumps and shut down the business.

The idea that we won't have good journalism without newspapers is like saying we won't have good cars without GM.

2:27 AM  
OpenID sunnycrockett said...

Is paid for content the way forward for online media?

3:23 AM  

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