Monthly Archives: January 2011

Newspapers are wrong to charge for essential content

Disclosure: To those of you who may be reading this and don’t know me, I have a vested interest in this debate since I am one of the founders and current owners of sacramentopress.com a local online only newspaper whose content comes from a mix of paid professional journalists and unpaid community contributors. I am a staunch opponent of paywalls.

Below is a line by line refutation of an article by Tony Pederson claiming that newspapers are right to charge for content. His article is indented and block quoted.

The announcement of a new digital strategy by The Dallas Morning News to charge for online and mobile access to content is welcome news for those wanting the daily newspaper to survive.

I don’t find it welcome news, this strategy has failed manymany times before. I don’t need the newspaper industry to survive, I need good local journalism to survive and the two are not intrinsically tied. Having said that I love our local paper and don’t want to see it fail.

Dramatic circulation and advertising declines in the last decade have created serious questions about the survival of the industry.

Agreed, however more serious questions exist about why the executives at major newspaper chains refused to acknowledge this change and even still are not taking the required drastic steps to change what they do. The innovator’s dilemma is almost certainly heavily at work here.

The history of newspaper companies and how they dealt with the Internet is hardly distinguished.

I agree yet again, but not for the reason Mr. Pederson is about to mention. When given the opportunity to tell the local stories and news in brilliant new ways, most daily papers only re-published their print editions online, often times refusing to link to any other relevant sources.

Virtually all newspapers made the decision in the 1990s to give away the news content.

True, but more importantly, false. There’s a great little sleight of hand in this very meager but important sentence which lays the logical foundation for the rest of the article. So let’s dissect it a little.

The implication of the above statement is that the newspapers gave the content away for free. This is not true in a very straightforward way (dozens of newspapers started with a paywall), and it remains untrue today in a less obvious way. It’s less obvious to people that the true cost they incur by reading originally produced content is giving part of their attention to advertisers. That attention has always been what newspapers touted to advertisers and what resulted in the bulk of their revenue.

Where they really failed is by giving away their advertising space for free. They just added it along with their print advertising mostly at no additional cost.

Those were the days when circulation was steady and classified advertising sections were fat.

Sort of– the fact is that circulation numbers have always been questionably reported and the basic notion that a company could be trusted to be objective to advertisers about numbers that directly impacted how much a company could charge for ads is dubious at best. Plus take a look at any major newspaper chain’s stock valuation and you will see that most of them peaked between 2000 and 2005.

In fact, it was assumed that the classified advertising would be a significant attraction for online users. Those were the days before Monster, eBay and Craigslist.

Again, the history is not quite right since eBay and Craigslist both started in 1995*, but they weren’t initially prolific it did take a while, so let’s say this statement is a wash.

 

And consumers remain interested in classified advertising online and there is little reason to think that a more compelling product than Monster, eBay or Craigslist couldn’t have been created by the newspaper industry. Others who didn’t have the tech muscle to build better platforms simply bought or partnered with them, capturing some of the lost revenue potential.

The larger miscalculation by newspaper companies, however, concerned an underestimation of what the Internet was. Newspaper executives thought the Internet was simply a new medium.

“Digitizing the news,” by Pablo Boczkowski gives you a somewhat different perspective on what newspaper executives thought. Considering the massive amounts various large papers invested in digital distribution technology before the web was even around, you get the distinct feeling they thought of the Internet as more than just a new medium.

Legacy media had always adjusted to new media such as radio and then television, and it was assumed that modifications in the way of doing business could produce continuing profits.

Legacy media, and by this I assume he means newspapers, had actually done a rather awful job adjusting to other new media. For many years before the internet existed the newspaper industry had been losing ground to other types of media. Even now, cable advertising is doing the more damage to newspaper revenues than the internet, and cable TV has been around for quite some time (Newspaper Economics, see slide 5).

In 1995 few foresaw what the Internet has become. MIT convergence scholar Henry Jenkins has correctly noted that the Internet has produced the first fundamental change in the relationship between the public and mass media since Gutenberg. The cultural shift has left newspapers struggling for revenue. The result has been staff layoffs and a significant reduction in print news content.

I agree that it has really been the cultural change that has been the hardest pill for the newspaper industry to swallow.

And I’m not familiar with Mr. Henry Jenkins (though I’m now intent on reading lots of his work), but at least in terms of being prolific, I first heard the comparison with the Gutenberg press made by Clay Shirky, not Jenkins, in his now famous blogpost regarding the fate of the newspaper industry.

Even so, newspapers currently have more readers than ever.

Yup, but why not link to a source on this one?

But the readers are online, and they’re not paying.

Again, readers rarely ever paid for content directly, they paid with attention and they still do. Look at the digital advertising revenue growth at all the major newspaper chains in the last five years, it’s actually fairly impressive (look at the corporate websites for Gannett and McClatchy, as well as the New York Times company).

Since the beginning of mass circulation newspapers in the 1830s, newspapers have essentially been manufacturing companies.

Yup.

A product is printed at a central printing facility and then distributed to customers. The costs of production, distribution and newsprint have historically been the majority of a newspaper company’s expenses.

Again I agree, lots of good points made in this article. In fact production and distribution are so expensive their costs aren’t even covered by the retail price of the paper.

Now, newspapers have a chance to become what they really have seen themselves as all along, which is an information company.

They do have a chance, but do they really want to become that, or are they better off becoming the next great ad agencies? I’m not sure, but it is a great opportunity not to be manufacturing companies anymore.

The Dallas Morning News is in the vanguard of the change.

I pretty strongly disagree, I think pay-wall-pushing-papers are among the technological Luddites of the industry. But this guy is more likely in the vanguard as is his company, which last year proposed this shift in how the company is run.

The New York Times has announced it will make a similar move in the coming months. Other newspaper companies will follow.

Different pay wall system, but just as ill-advised. And while a few others may follow, when these pay walls fail as nearly every other similar one has (including a previous pay wall from the NY Times), I doubt we will see many more (at least for a while).

The Wall Street Journal, obviously a different type of newspaper, has successfully charged for online access for years.

Oft quoted, infrequently (or never?) quantified, this is a statement that may be true, but I have never seen detailed numbers with my own eyes. I hear this a lot, I have even parroted this statement, but I can few numbers to support it. In this YouTube video Dow Jones CEO Les Hinton mentions just under 1.1 million subscribers,” but questions still remain about what that means. Are these 1.1 million online only subscribers? How many are corporate subscriptions versus individuals which the Wall Street Journal is hoping to attract these days.

The paper’s iPad application is smooth, efficient and highly portable. There are the hard-core print addicts who will insist on holding a newspaper in their hands, but the iPad application is in fact easier to use and read. Finding stories is a snap, and there will be more and more converts, even among older readers.

I don’t own an iPad and have never tried the app. The reviews for the app on the iTunes app store though are less than favorable, for whatever that is worth.

Newspaper companies as recently as two years ago resisted the idea of charging for online access.

This statement is not entirely accurate. Many, several dozen metro dailies in fact, started out charging and slowly came around in the 90’s to not charging for their content. And even now, many such as McClatchy’s Gary Pruitt, still see paywalls as experimental at best.

The current move is a risk, but it’s one newspapers have to take to survive.

Paywalls are less a risk and more like jumping off a bridge hoping you will figure out how to fly on the way down. Newspapers can survive in lots of ways that don’t involve erecting paywalls, because they are surviving currently, albeit with some difficulty.

There are many media naysayers, insisting that Internet content always has been and must continue to be free. That’s not entirely true; users have always been willing to pay for some types of content. Pornography was the original killer app for the Internet, and still is.

I don’t insist that content has to be free, but news content, since it’s readily available and free to distribute widely is a hard sell when it comes to charging for it. And of course, as I have stated over and over, internet content isn’t free, it requires you to give some of your attention to advertisements.

Funny also that Mr. Pederson should mention porn, since free online pornographic video sites have been destroying traditional porn industries revenues. Look at Alexa and see if you find Playboy, Hustler or a big pornographic video company among the top 100 sites (hint: you won’t but you will find dozens of free online pornographic video sites).

If newspapers can provide content that is relevant and easily accessible and usable, people will pay. People will not pay for such common news elements as stock quotes, sports scores, traffic and weather. But specific, essential content not available elsewhere is another matter.

Two questions, is local content essential? I would argue that it is since I run a local news website, but it’s a bit of an uphill battle convincing younger people that it matters. And secondly is local news not available elsewhere? A quick look at placeblogger.com will reveal that 1000’s of individuals around the country are blogging about local news and events.

The question for newspapers is understanding what content readers will find essential. And how much readers are willing to pay for the access.

A fair question, and as much as I must accept that the answer may be some amount above zero, paywall advocates need to accept the fact that the answer may indeed be zero.

The Internet has produced a cacophony of news and information. Some of the content is highly relevant and useful. See The Huffington Post and even the Drudge Report. But much of the content is ridiculous and even dangerous. See WikiLeaks as an example of the dangerous.

This sounds like the problem is an overwhelming amount of data that is unsorted and badly curated. But things are getting better and they will continue to. I think saying that the internet is dangerous and citing Wikileaks as an example is quite the straw man argument. You could easily argue that unchecked extremes in current mainstream media cause as much or more harm to society than Wikileaks. Besides what exactly did Wikileaks due to harm anything? Robert Gates recanted his early statements about their harm to informants and Hillary Clinton in her speech on the subject stated no specific harm done. But that’s a whole separate blog post.

We should all hope the experiment to charge for online access works. We need the daily newspaper to sort out fact from absurdity. The newspaper has never been more essential to a vibrant democracy.

A vibrant democracy informs as many people as possible about the society in which they live not just the million plus affluent subscribers of WSJ.com. So for the sake of this country I hope we can find a way to keep content produced by journalists simultaneously free and paid for.

 

* Craigslist actually started as an email list and wasn’t on the interwebs until 1996.