You Can’t Sell News by the Slice
nytimes.com
nytimes.com
"One of history's ironies is that hypertext - an embedded Web link that refers you to another page or site - had been invented by Ted Nelson in the early 1960s with the goal of enabling micropayments for content. He wanted to make sure that the people who created good stuff got rewarded for it. In his vision, all links on a page would facilitate the accrual of small, automatic payments for whatever content was accessed."
Source: http://www.time.com/time/business/article/0,8599,1877191-1,0...
You want to know this stuff only because you are aware of it - and you are aware of it only because you started reading the paper in the first place. If you never read a paper (because for example, you needed to pay to read it), then you'll not be interested in this news, and you won't see any need to pay for it.
People will pay for information, but they will not pay for news. People want to be aware of what is going on in general, and if this is available for free, they will use those sites.
The business of journalism is shrinking, and it will have to evolve fast. News will become more local, several cheap sources will be used to build a picture of a situation, and people will pay for more niche and more technical magazines (e.g Finance News).
These papers have a strong brand now, but those brands are decaying. They should work on making sure their brands are strongly available everywhere, so that when the reorganisation happens, they can still remain a recognizable name.
Yet newspapers have been charging for quite some time, and people have been paying to read them, up until they found cheaper, faster, more complete sources.
You're digging yourself into a hole of ignorance if you are only following what you've become accustomed to follow.
Newspapers offer the accidental, and I bet many people enjoy them for that reason. You read things you didn't know would be interesting until you turned the page and there it was.
It's not that there is a cost, it's that despite the cost newspapers are still increasingly inferior to, say, Google News.
Even worse, there are other mediums that can do exactly this! Newspapers need to focus on their quality, and remove the shackles of an outdated medium for once and for all.
Basically, he's saying that micropayments will not work because they introduce a transaction cost into the act of reading: you not only have to decide if you want to read (or skim) the article in question, you have to decide if it's worth x cents as well.
And that transaction cost kills the transaction before it happens, never mind the x cents that would have been transferred.
Yearly subscriptions to sites seem much better. I'd pay a subscription to the Times, though this certainly puts me in the minority. Heck, I'd pay a subscription to Hacker News, too.
In this case the internet is the catalyst for change; just like in the music industry and the movie industry. Shareholders should be demanding their respective CEO's have vast experience in the domain that threatens to defeat them, instead of continuing to twaddle along in a world that will die with the boomers.
I'd imagine 20-30% of this board would excel at the c-suite level of a newspaper. The rest of us would be more than adequate strategists and advisors. Why? Because we understand the nature of the medium that matters, not the medium that is already dead.
For example, my two cents worth:
What is it that local papers, including the Times (which is basically a local paper from a city many people enjoy reading about) do that the internet can not? Easy - they offer consistently high quality and in-depth analysis of current events. It's their editorial board that matters, really. They can't compete with timely news delivery. They can't compete with bloggers breaking stories. They can deliver a broader and deeper explanation of what events mean to the lives of others. They can provide opinions of well respected and well researched individuals.
If they were to truly leverage this strength, they would do the following:
1. Shut down their physical production lines, immediately saving millions of dollars a year. Move to online only format.
2. Move full time staff to consultant roles, and retain a small editorial staff of the highest quality.
3. Focus less on news snippets, possibly partner with companies that can already do this better than they can - Google news anyone? Newsvine?
4. Focus more on opinion, editorial and deeper feature stories that appeal beyond the 10 second sound bite. Attract readers with the higher quality that they can provide. (Again, there's a market in every local for this - the Guardian doesn't care about what city hall is doing in Buttfuck, Iowa, but the people living there sure do)
5. Either sell ads or subscriptions for such content.
Does this mean they can't rake in the revenues that they once did? Certainly. Does it also mean, however, that they'll remain relevant for the foreseeable future? Of course. Most papers have already conquered the biggest challenge to doing this - building a strong brand-related audience of readers. They've already got the leg up on competitors, and they don't even realize it.
First one for each market to do this well wins.
The christian science monitor has done this and successfully gone from being a very local to a world wide brand.
How are those businesses doing?
And yes, that is what I'm suggesting, that newspapers evolve into daily news magazines, albeit online. I understand that there won't be enough room for all the existing brands in this space, especially with focuses that aren't local. Such is the harsh reality of the free market.
But the history of mass media publications charging for content, as Kinsley describes, is a history of one failure after another.
The question is - how are those numbers broken down? Are these people who stumbled across the site and decided to subscribe because the content convinced them? Or because of the already existing brand?
Think of a paper just launching with no name, but that wants to go the pay route. How long do you think this paper will survive before running out of money?
The wsj is just moving subscribers from it's paper to the online, this is completely different from launching a successful pay website.
I have no doubt that new papers would find it near impossible to draw paying subscribers online, but they'd find it totally impossible to profitably put out good original content via ad revenue. I'll take nearly impossible over totally impossible any day. People used to think it nearly impossible that the Japanese could succeed in the car market.
I'm assuming this Op-Ed was aimed at the NYT itself, given the news yesterday. They almost certainly need to charge, and their content is of the same caliber as WSJ (and has impressive demographics) so they can get away with it.
It won't work for local papers, of course, they're just doomed. But those are irrelevant anyway. They're merely a bunch of AP/Reuters stories with a little poorly written sports commentary and a police scanner tied in. Nobody under 60 will miss them.
What's real journalism? Opinion pieces? I think Michael Arrington knows a lot more than most tech NY Times writers. Interviews? The info comes from the interviewer. Sending reporters to the Congo to cover some local conflict? Well, the Congo has local newspapers, and they are covering the conflict there extremely well. And their coverage is also available online to be mixed and matched.
"Real Journalism" cannot be supported by ads - this does not mean that the alternative is a pay system, it means that "Real Journalism" will die. The information monopoly is dead, and that's a good thing.
A newspaper is a combination of opinion pieces, current affairs and analysis. Opinion pieces can be purchased from freelance experts, current affairs can be mashed together from more local and accurate news, and analysis can be done by people who actually understand the topic.
Sure, you don't want your favorite newspaper to die, but there were people who wanted carriages to last forever. You're one of the technologists, accept the new reality.
If you think that the new reality is blogs replacing quality journalism, and that doesn't scare you, then you're either selling quality journalism short or you just don't know what it is. Enough people always will that it will have a market.
I realized this when the New York Times had better analysis pieces about cultural happenings in my city (Pittsburgh), than I've read in the local on-line paper. Their best sports writer just retired, too.
But most newspapers aren't selling news - they are selling entertainment. I don't pay to find out the death toll in some plane crash the day before - I pay for a newspaper to read columnists, editorials, cartoons. That's why sunday papers are the largest and most profitable.
It's like the difference between paying to watch a movie and reading the plot summary fro free on IMDB.
Given that the financial climate will presumably lead to some corporate cost-cutting, there's probably an opportunity for someone to undercut the incumbent business-news providers (WSJ, Bloomberg, Reuters) in the next two years.
I guess the value of our eyes looking at ads printed on paper for a year is much higher than $79?
I'm not saying that they couldn't be leaner, but let's try to keep some perspective.
If you are just doing lazy, surface level reporting on things that a horde of citizen-journalists are going to throw onto the web for free anyway, you might be screwed.
A Real Web Newspaper? No. They will be much, much better than that.
(I'm not trying to be antagonistic, just interested.)
I don't think consumers will find much value in a 'real' Web newspaper, because the web has so much more to offer. Real-time news, real-time sports scores, live video feeds, user interaction, the list goes on and on. Newspapers have always been an imperfect media outlet restricted by their medium and distribution. The Internet promises to alleviate many of these issues. This is why I believe it is quaint to hope that we will someday have "real Web newspapers."
So far, news on the Web hasn't matured in the same way. Most news is still delivered as straightforward text (newspaper model), or else video (television model).
What's an example of something that truly uses the Web medium? Here's a piece in which the (UK) Guardian uses Flash to show the history of the Arab-Isreali conflict: http://www.guardian.co.uk/flash/0,5860,720353,00.html
1) The Bricks Are the Problem: "In theory, a reader who stops paying for the physical paper but continues to read the content online is doing the publisher a favor."
Mmhm. They said this about store-based retail, too. "Stores can operate more efficiently on the web, and will take over because they don't need the bricks and mortar!" What happened? Well, for starters, we found out that people like to shop in stores. We also found out that logistics, customer service and returns are always significant fixed costs, and the absence of bricks and mortar doesn't necessarily make them cheaper.
2) Race to the Bottom: "every English-language newspaper is in direct competition with every other. Millions of Americans get their news online from The Guardian, which is published in London. This competition, and not some kind of petulance or laziness or addled philosophy, is what keeps readers from shelling out for news."
...and last I checked, the Guardian has the same problems as everyone else in the business. I guess the Utopian ideal here is that every newspaper on the planet gives their content away for free, until they all simultaneously combust in a cloud of bankruptcy lawyers and rainbows.
More seriously: the end-game here is not a world where we have the journalism quality of the New York Times, the Washington Post, and the San Francisco Chronicle, only online and free. The end-game is Gawker and TechCrunch. Sound like a fair trade?
3) Everything Is Different Now, Man: "And the harsh truth is that the typical American newspaper is an anachronism. It is an artifact from a time when chopping down trees was essential to telling the news"
This is not "harsh truth" -- this is 95% wishful thinking, 5% fact. The 5% fact is that there is another way to access media, that has both benefits and drawbacks. The other 95% is that the Silicon Valley, VC-for-everyone corporate culture has infected media, and given it a business model as unsustainable and wasteful as a midnight candy bar delivery from Kozmo.com.
People still like to consume media on paper. It doesn't require electricity, can be done without the aid of a machine, and can be archived easily, by anyone. Granted, the type of content served by traditional media is shifting, but that doesn't mean that newspapers and magazines don't have a future in the Brave New World of digital media.
More importantly, the internet hasn't made it free to produce good content. We all like to dance around this critical fact, pretending that if we just spend enough money on viral loops and news aggregators, we'll be able to reproduce our current media offerings. But we conveniently neglect to notice that many of the interesting articles we read on Digg or news.google are produced by reporters who are being paid by the old media. When it dies, so does the content that powers whizzy web-2.0 social media.
Both of those extremes are easy to monetize... Now that I think about it, I'm not sure how financially stable Gawker and TechCrunch are.
But my point is:
Popular rags are cheap to produce and can live off ads.
Intelligent content, on the other hand, can find paying cosumers.
I think the problem with the NY Times and others like them, is that it's hard to find a sustainable business model for the middle ground that they are on.
-EDIT-
Yet a third way is a non profit news paper like The Irish Times, funded by a grant I believe.
I hear the Seattle PI is going into chapter 11, if I was stinking rich, I'd turn it into a non-profit.
There's no restriction in non-profits that they can't make money and pay people ridiculous wages. I mean IIRC Oxfam in the UK paid like £400,000 (probably near $800,000 at the time) for a marketing firm to do an advert. It's just the company doesn't get taxed, so long as all the 'surplus' goes back into improving the business, however all their workers can still earn an income and will still pay income taxes.
I mean imagine how many people would buy a newspaper subscription if you got a tax receipt from it!
Oh yeah. You want to get rich. Not "well off" but rich.
Question answered.
The people who start and run newspapers are NOT the same kind of people who want to be reporter when they grow up. One of the fun aspects of the whole "save the newspaper" conversation is that the loudest people in it, the reporters and editors who appear to be at the center of it, are in fact marginal players in the game and quite possibly have little idea what they're talking about.
How many editorials and op-eds do we see from the people who run the ad sales teams? From publishers? Very, very, very few. What does a beat reporter know about saving their newspaper? How many business reporters have actually ever run or started their own business?
You can't get a tax receipt for "services received".
Is there something about newspapers that makes the non-profit model not work as well as it does for broadcast?
When your looking at NYT or Facebook you are interested in their content when you using Google your looking for something. Put another way, how effective would advertising be when inserted in the middle of a phone conversation?
You are probably right to an extent- but a lot of times people are browsing FB to waste time. If they are looking at the profile of some girl they like, and an ad shows up for the new album of one of the bands she likes- could that not potentially be an effective ad? (This could be a friend, who has a birthday coming up, and FB could suggest presents based on your friends preferences). I really think that FB just needs to adapt their ads better. I hope they get it figured out and prove everyone that thinks they aren't worth 15 billion wrong!
It could be middle ground in terms of penmanship, but neither TC nor Economist can be a daily news source. Daily, with general relevance. Different function IMHO.
Why do I need the middle ground?
Granted, Economist is probably closer to NYT, in terms of scope, but I still don't see how NYT sits between the two as the optional "middle ground."
I think your over applying the extent of Silicon Valley's effect on the thinking of managers around the world. I don't want to go on about the underlying truth. But basically whatever newspapers were making money from, they can't make money from it an more. Not as much anyway.
Papers get competition from blogs & Facebooks & whatever. People's taste & such is changing, but that's not the centre of gravity. Classifieds are no longer in print. Newspaper ads sell for less. That's it. it's not that complicated. Think of newspapers as grain farmers. The price of grain has dropped. We can speculate why (it's got something to do with online media). We can complain that those going out of business made the truly great grain & all our pasta will taste like crap from now on. But that's all fluff.
Papers sell ads. They are no longer as valueble.
I'm in agreement with you about the piece in general, but this specific point isn't silly. Newspapers readers haven't ever paid for the content: the advertising has always paid for that. If readers were footing the bill for the content generation, a copy would cost $10. It's this fact that also allows freesheets to prosper, when the reader pays for nothing at all.
I'm surprised at you rejecting that. It's usually the uninformed who think readers pay for the content.
http://onthemedia.org/transcripts/2009/02/06/03
Moreover, the NY Times' most recent 8-K shows that 30% of quarterly revenues were from subscriptions (subscriptions were up by nearly 4% from the previous year, by the way). That's $234 million in revenue in the fourth quarter alone:
http://google.brand.edgar-online.com/displayfilinginfo.aspx?...
For what it's worth, it's also easy to disprove the notion that people won't pay for content on the web. The New York Times was making upwards of $10M/year with its Times Select subscription service when it closed in 2007, and that was just for archives and editorials (not news content):
http://www.paidcontent.org/entry/419-new-york-times-to-close...
(Aside: How many dot-coms do you know of that are generating over $10 million a year in ad revenue?)
Now, I suppose you could argue that since these numbers aren't higher that subscriptions never paid for content, but I dispute that notion. Subscriptions were traditionally a significant source of revenue for newspapers, whereas the author of the editorial wants you to believe that they were trivial revenue streams, and that it's impossible to get people to pay for content in the New Media world. In fact, if you look at the numbers, it's pretty clear that the Times is suffering mainly from declining advertising revenues -- which if anything, is a great indication that they should be charging for content.
That's why I said that the editorial writer's point was silly. He didn't do even basic research to back up his assertions.
That said, even at their 1960s best I think it still stands that US readers "don't pay for content". They paid for less than half of operating costs by your figures, and this in what we now think of as a newspaper gilded age where competition was substantially less.
Now you may say that operating costs can be lower today, and would be vastly lower if the dead trees were out of the picture, and you'd be correct -- but it's still not a rosy picture for journalism if it has to depend on selling its wares directly to the public, instead of selling the public to advertisers.
It calls for a complete culture shift on both sides: journalism has in the past been subsidised so heavily by advertising that readers have never had to bear the expense of its creation.
That's the real problem, which the author doesn't really get across. It's not that people won't pay for online content at all, it's that they won't pay enough -- they won't pay enough to meet the costs of creating it, and they certainly won't pay enough to meet the current profits that persuaded investors to back newspapers. Yet without their regional monopolies, the media groups can't make enough from advertising to cover the shortfall.
That's why the talk is now all about alternative business models. It's just difficult to think of a plausible one, because by its very nature journalism burns up cash. It's somewhat similar to venture funding, in that you pay reporters and photographers good money, and often they come up with nothing and only occasionally hit the jackpot. To get investors to take those sorts of risks with cash, there has to be a good return. And for the sums that we're talking about here, the opportunity cost of sinking it into journalism can be very high indeed.
The difference is that the newspaper industry is quite evidently dying a slow death, because people aren't reading paper - at least at the same levels that they used to. (I read paper all the time to be honest, but less than my parents did - I don't have a weekly subscription - and more than my gen y colleagues do.) You can't ignore this fact.
The former problem is probably inevitable, but is at least a surmountable challenge with better technology; the latter is a symptom of unsustainable business practices in the technology industry that will eventually have to resolve. We (tech companies) can't keep selling content at a loss, and hoping to make it up in volume.
What do you do about the entire generation reaching adulthood who has _never_ had to pay for news?
I mean it's a quite dismal future, if everyone gets up in the morning and sits in front of a computer eating their cereal so they can read the news.
News, and likewise information, will become ever increasingly available. The first publicly available newspapers were government-published tablets posted in public places by Julius Caesar, the Chinese circulated news to court officials in the 8th century.
Eventually news will become more accessible through digital media, but this isn't going to happen anytime soon. Portable devices aren't ubiquitous enough yet and so news isn't freely available enough on digital media to take over the ultimately portable disposable newspaper. I can take a newspaper, read it at breakfast, on the toilet, on the bus, at work and then when I'm done with it I can discard it. Until I can do all the same, except discard it, with a digital device then the newspapers won't be destroyed, they'll merely recede.
Newspapers are going to suffer more from attrition than an assault. There's so many people who've read their news from a paper every morning, that's a habit that is largely unbreakable. You can't stop a 60 year old picking up a news paper. My father's in his 50's, has worked in IT since the beginning yet he still sits down with a newspaper. Newspapers won't die until their readership does. This gives the newspapers a long time to adapt to current technology and establish a brand amongst the younger age group in a fashion that allegories the elder age group.
The other assumption people make, is that news will become more refined and from local sources. This assumption is quite laughable, local sources are increasingly irrelevant. Yes it's good to get the news from your home town, however do you really think that matters anymore? I live in Canada, so why do I care about Obama in the US or Brown in the UK? Because they both affect me. I've been to a dozen countries and I know people from even more and this is becoming the norm in our current era of civilization. The whole notion of globalization dictates that we're going to begin caring about world events more and more as they increasingly affect us. Just look at the economic crisis, the US fudged the brownie, but it's affected nearly every country and person on the planet, so why wouldn't people be paying attention to news like that?