As background, I think there is too much defending the status quo and not enough curiosity about what will improve the market.
I am amazed that any business, including news, would approach a new delivery vehicle by offering their product for free first and then figuring out how to make money later or by banking on a 3rd party (e.g., advertisers) to fund it. The most sustainably profitable businesses sell and collect money directly from their consumers - they know when the product isn't delivering or their sales tactics don't work, and what they need to do to be more competitive.
Television and radio had no choice but the free/ad supported business model. There was no way to collect money from consumers. Now they are scrambling to re-negotiate re-transmission consent deals with cable providers to get their share of the consumer purchase pie because it has grown to be bigger than the ad revenue pie. If the guys who succeeded with the FREE/ad support model are scrambling to shift to paid, why would anyone conclude that FREE is a good model to emulate?
So you probably aren't surprised that I disagree with your conclusion that consumers never paid for the news. But I agree with your conclusion that media value comes from its power to contribute to individuals who are community builders.
Your analysis may be correct that consumer subscriptions are not enough to cover the costs to publish the news. But consumers perceive they "pay." Importantly, look at the reasons subscribers cancel paid subscriptions - isn't it because they think the writing is too biased and don't trust it any longer?
There was a time when subscriptions paid for the news and advertising was "icing on the cake." The day the news, and media in general, became dependent upon advertising to survive financially, is the day media's value to consumers began to erode. And this is also the time, maybe not coincidentally, that advertising's ROI disappeared.
I agree with you that news, and media in general, have a lot to contribute to sense of community. In fact, I think news should get back to providing the service of arming individual community builders with the ammunition to galvanize community - by providing reliably unbiased, fact-based reporting. The media who position themselves a source one can trust will be paid enough by subscribers to be more selective in their choice of advertisers. Maybe then, ad ROI may resume as well.
Chris,
This may be the best take I've read on this issue (and I've written about it a lot myself, most recently:http://stevebuttry.wordpress.com/2009/07/25/newspapers-demand-gimme-another-ball/)
And Katherine is mistaken in her notion that most people who cancel their subscriptions do so because of content. It's been a while since I've checked these figures, but for all of my career at seven different newspapers, most of the time the biggest reason for cancellation is delivery problems. And the comic/crossword thing that Chris mentioned will get more cancellations than most things you could do in the newsroom or editorial page.
Thanks, everyone for your comments here. I wanted to address a couple of points that Katherine made:
*You wrote: "But consumers perceive they "pay." Yes, they do think they pay. But the value of the product for them extends way beyond the journalism. As many of these other elements have been stripped away, the results has been a product of less value for them.
For the past two decades, newspapers' response to declining circulation was to cut journalists, size of stories, and number of stories. The result is a product that's far inferior to what it was 25 years ago. I can't think of any industry that's solved its problems by slashing the quality of the main product it offers.
*You wrote: "Importantly, look at the reasons subscribers cancel paid subscriptions - isn't it because they think the writing is too biased and don't trust it any longer?" I've found that, in fact, such things have little impact on readership. They do prompt a lot of comments and letters to the editors, but they rarely result in someone canceling, because that person still probably wants the comics, or the sports page, or the puzzle.
I think the main driver of circulation decreases have been massive demographics shifts. More families where both spouses work outside the home. Different familial patterns in the morning. The problem here is that in print, newspapers still deliver one product, in one format, at one time. And that product simply doesn't fit into people's lives anymore. That's why circulation started falling several years before most of us had even heard of the Internet.
Also, don't discount the fact that newspapers have been cutting unprofitable circulation for many years. The San Francisco Chronicle used to deliver the paper all over Northern California. Today, that makes no economic sense (and probably never did). But just because they stopped delivering to large parts of the state doesn't mean those people didn't want the print paper. It was taken from them.
Great post, Chris.
Another thing I've noticed, especially with local news (including free alt weeklies, which are about the only kind of print newspaper I ever bother to pick up anymore) -- readers consider ads to be content, too.
Seriously -- the ads in alt weeklies are generally informative, relevant, and entertaining. They don't suck as much as ads in metro dailies, national papers, or network TV or radio do. When people read alt weeklies, they look at the ads. They tear them out. They remember them. They're useful.
Ads don't have to suck -- and when they don't suck, they can be an important part of the content. This is true online as well as in print. That's where alt weeklies usually fall down, BTW -- their online ads typically suck.
I think it's possible to work with advertisers to craft better, more relevant advertisements online and in print/broadcast that serve the readers better and perform better. Advertisers -- especially for local news venues -- are generally part of the community, too. We've pigeonholed and even denigrated their content value for too long, I think.
- Amy Gahran
Dead on. Making money off any medium is all about intruding as cleverly as possible on a human interaction and finding a way to inject yourself into it. In other words, it's butting into a conversation and actually being able to change the subject.
Whether you're Google, Rupert Murdoch, or the local hardware store, there is always a way to make money from this, as long as you understand the nature of the interaction and how to make yourself a part of it.
"Content" will be monetized for the same reason it always has - people talk to each other through a variety of media, and there are smart people everywhere busy creating all kinds of interesting ways to do that, and other smart people thinking of how to butt in on those conversations and change the subject. Sometimes they're even the same people ;-)
This is a very awkward way to have such an important discussion by thoughtful, smart people. News is a catalyst for discussion. Discussion energizes the bonds that form community. What a vast opportunity gap for newspapers to capitalize on.
I think we agree on this.
Who pays? is the issue we don't seem to agree on and I think is at stake in the discussion going on Steve Buttry's blog (see above) is related.
Could we at least agree that there isn't any good existing data to tell us what consumers would pay for. There are two reasons. Most of the existing data was developed to defend the status quo. And, as most professional researchers will tell you, asking consumers to tell you what they would pay for will not yield many insights.
Couldn't we agree that media that sells directly to their consumers has a much better sense of what consumers value for than media that goes through a 3rd party or relies on advertising for support.
And couldn't we agree that whether news is a non-profit or for profit business, it needs funding.
And couldn't we agree that it is a lot easier to maintain the integrity of a news product when consumers generate enough revenue that the publisher can be highly selective about advertising and what they will do for advertisers.
Finally, and this may be the real issue behind the debate of paid vs. free, could we agree that consumers are smart enough to know that you get what you pay for?
Best,
Katherine Warman Kern
@comradity
Katherine Warman Kern
@comradity
PS I am working on a way to overcome the awkwardness of this discussion. Would you or other commentors be interested in participating?
"How do we reinvent local community on the web? And how do we reinvent the local marketplace online?"
Both of these are worthy questions to ask, but neither of these questions implies a business model. I can easily imagine a web site that has built a great community and created a great local marketplace, but still loses money. It's called MySpace.
Hi Chris,
I generally agree with you and your angle here. It's a lot easier for executives to play it safe with newsroom-friendly (and likely short-sighted) strategies like charging. That said, I'm going to play devil's advocate on a few points:
1. Not all newspaper businesses think charging online's going to make them money. The publisher of the Arkansas Democrat-Gazette claims charging for his online product has helped him stem the circulation declines other similarly sized newspapers have seen.
2. Sure, newspapers have charged readers to cover the cost of print circulation and distribution. But servers aren't free, and bandwidth adds up, and if you're getting 200K uniques a day that stuff has a daily price tag in the dollars, not cents. Is it okay to charge online to cover that cost?
I have responded to this post in my own blog:
http://stevebuttry.wordpress.com/2009/08/16/newspapers-original-sin-not-failing-to-charge-but-failing-to-innovate/
http://stevebuttry.wordpress.com/2009/08/16/newspapers-original-sin-not-failing-to-charge-but-failing-to-innovate/
Mark is right that this post doesn’t provide a viable business strategy but, Chris, I don’t think you’ve pretended to have the answers.
What you’ve done is to suggest the questions the industry needs to be asking, and I think you’ve given us the right ones.
One problem the industry faces is that it has generally settled for trying to replicate what it does in print on the web, without asking what newspapers actually do.
In other words, it believed newspapers were all about stories and features with adverts next to them, so it created websites with stories and features, with adverts next to them, and assumed that would be enough.
I know things are already changing, and we shouldn’t be too pessimistic when papers like the Daily Telegraph are beginning to innovate. (See http://my.telegraph.co.uk/ - a British example because I know British papers best)
But I still wish newspapers would do more to look at what is working on the internet (and what is perhaps failing) – Facebook and Myspace, Yahoo! Answers, Flickr, successful forums from Something Awful to mumsnet, and even games (World of Warcraft is a rubbish game on its own, it works because it offers social interaction) – and looking at why they work and the lessons to be learned from them.
I fear that many people are still trying to learn lessons from why print newspapers worked so well 20 years ago.
Chris,
Great post. Perhaps this is one of those times that a meme that has been ascendant will finally start to disappear.
Great post. Perhaps this is one of those times that a meme that has been ascendant will finally start to disappear.
People have never bought newspapers primarily for the news. Advertising came into newspapers when steam driven presses coincided with the growth of the mass market. "Yellow" journalism took advantage of the moraility play to gather eyeballs to sell to department stores to sell mass produced stuff.
This whole thing is only about 100 years old. Before that newspapers were many things, but I think Chris has it right when he says they build communities and enable commerce.
Unfortunately this is very far away from the celebrity journalism that started in the early 70's when the career path became Pulitizer then TV pundit.
It's most likely that the emerging solutions will be some version of back to the future.
