Wednesday, July 15, 2009

Putting the brakes on the Gravy Train

The free pass that newspapers have been giving their readers for years is on the verge of collapsing after a daily in Texas announced this week that it will begin charging people to read the content on its Web site. The New York Times is also rumored to be switching over to a subscription-based system. All I have to say about that is, "It's about time." I suppose I should say more because, well, this is a blog and people like opinions.

The internet has helped drive up readership, but it has come at too high of a cost. For way too long, reputable news agencies have been giving away their stories for free. I didn't study economics in college, but that seems like a poor business model. Now, the Texas newspaper's price of 75 cents seems a little high, but it definitely is a step in the right direction, and hopefully will spur more papers to do the same.

The toughest question that has surrounded the industry is whether newspapers can support their businesses by relying primarily on advertising revenue from the Web. Unfortunately, that has not worked because a disproportionate amount of money is generated by advertising in print edition. It brings an interesting conundrum that the inky-paged dinosaur is actually supporting the Web version, which is considered the future of journalism.

Many say a subscription-based Web site will not work because people won't want to pay a fee for content they used to get for free, so they'll get their news elsewhere. Those are valid points, but this should be considered a survival decision for journalism. People should expect to have to pay something for a quality product, and once every news agency turns to this model, then pay-to-read will be the only option for everyone. It worked for Steve Jobs and Apple, didn't it?

Of course, people claim blogs will continue to deliver quality news to the masses. But if that was the case, then we'd still think Sarah Palin's youngest son actually is Bristol's baby and that Barack Obama isn't really an American. Oh, wait... most people believe those blog-generated rumors anyway.


  1. This is a really good post... I want to respond to it, but I am not sure how, yet...

  2. This post was set up on a tee for you, E. It's all yours, because I'm sure you'll have a riveting argument about why people WON'T pay for their news. My main point is that newspapers are now at a crossroads, and they don't really have another option. But take your time, buddy, cause I have all the time in the world!

    And thanks for reading Celeste! You are a great photographer and I always appreciated your enthusiasm on my stories.

  3. Your post makes many good points. But, as I read it, it implies that subscription based Internet content is something new. There are many subscription based sites now, and have been there for a long time. In some cases, partial content is without subscription, but full access requires subscription.

    The business model with full suscription services make much sense, but will always be undermined by lowballers. How do I know? Other industries have demonstrated the same pattern. While some suppliers provide good products and/or services at a cost, there is always somebody willing to provide something similar, or in some cases, better, at a lower cost, or without cost.

    This is a characteristice of the free enterprise system we have, and, for the most part, enjoy. While somebody may have a good model for doing good work, and be profitable, somebody else will try to take some portion of the market. The underlying feature of the pattern is that the consumer is heavily cost-driven. When deciding what to buy, we make our decisions on many things, but I dare say that cost is often near the top of the priority list.

    Is getting news and information any different? Obviously, the subscription based Internet providers are making it work. But, are they driving for a narrow target audience (e.g. Barons, WSJ)? The mass consumer markets of news coverage covers a different audience. Will they pay? Yes, if a provider is their only source. But, they will never be an only source. Somebody else will always believe they can do the same thing, at a lower cost, thereby attracting an audience. To be sure, many have gone this route and failed. For every failure, there are others standing in the wing waiting to take their place.

    The Internet is an interesting medium. I'm not a history buff, but I can't think of another medium that has offered so much for little, or no cost to the mass consumer market. I'm not just speaking of news content, but other content as well. For some of us, it is our lifeline, despite getting three newspapers at the end of the driveway every morning. The strange facet of Internet, and many other technology advances, is they were intended to make life easier, giving us more time to ourselves. I've concluded the reverse is true. Technology has clouded our lives, giving us much less time to ourselves. Oh yes, we might have more facts and information, but so what? Reading good books with great wisdom and ideas, has taken a back seat to a multiplicity of opinions.

  4. Roger has some great points there... I'm going to try to expand on some of them with hypothetical situations and anecdotal evidence :-)
    First, subscriptions- As Roger said, it's all or nothing... you either have to have everyone charging the same amount (collusion) or the first mover is going to end up being the first casualty. How to do this legally? Well, I suppose you have to implement an electronic fee schedule at the top of the distribution pyramid... AP and Reuters has to take their content off the table immediately. I won't pay 25 cents a week to the OR to read AP stuff that is on Yahoo.
    Pricing- At what point does a nominal fee stop being nominal? At what point would you rather have a larger audience for free than a smaller audience for a nickel? This is going to be trial and error... and unfortunately, not many newspapers can afford many errors right now. I can guarantee, though, that as SOON as one newspaper in a town goes subscription (for an online version), the other paper is going to raise their rate cards and AGGRESSIVELY go after the instantaneous "former readership" of the competition.
    Side issue- online advertising has not yet found it's sweet spot. And this is the reason that you can't get the same revenues online that you can in print (or on the radio or tv)... until someone figures out a way to deliver online ads in a way that justifies a reasonable cost, online ad revenue is going to remain bottom line lagniappe. What's the most expensive ad space on a webpage? Banner? Skyscraper? Pushdown? Popup?
    Quick, without going to look, name ONE banner ad you recall seeing today. Just one.
    Did you draw a blank? Now, name one commercial you saw on TV this morning or heard on the radio... Empire Carpet and the 9020 car dealer.
    There are ways to make online advertising relevant to consumers, valuable to advertisers, and profitable to media outlets. Until they change the way they sell ads and the way they deliver them, online revenue is second fiddle, even as online audience doubles or triples that of the print audience.
    Here's another issue... the internet is, itself, an aggregation of media... and not every media outlet is struggling. Cable news is doing A-OK compared to networks and newspapers... so if you restrict the newspaper produced content that is available online, what's to stop Fox News from writing commentary on the same subject matter and making THAT available online for free? The last thing that newspapers want to do is drive more of it's audience away and to another medium (cable, etc). I mean, hell, I have a Rachel Maddow app on my cell phone that gives me entertaining political news content for free... if the content in that brand increased 100 fold and they charged 1.99 upfront and no subscription, they'd make a killing if it replaced recurring, though smaller charges... cont...

  5. Which brings me to another point... What's the point of a quarter a week subscription? 50 cents? 75 cents? It's not the cost that is the problem... it's the irrationality of the cost... I don't want to brag, but gentlemen... I can afford 50 cents a week :-) I can afford 99 cents for songs on iTunes, too... but it makes NO sense for me to pay for it... Yes it has worked... apple has sold billions of songs... but TRILLIONS of other songs are traded for free every day on the big old pirate ship that is the internet. The fact that apple has snared a single digit market share of the total flow of mp3's is great for apple... but there is no way that model would work in every 'ville and 'burgh from Bangor to San Diego. Once you have one that is "good enough"... there isn't any room for someone else to compete.
    So, it's not about the fee... it's the fact that it is ABSOLUTELY available somewhere else... in fact, by implementing a gate, so to speak, you are CREATING competition that didn't exist before... think about it... I could pay 50 cents a week for access, summarize, deplagiarize, and reproduce the content (in commentary form) on my website (not "news" but "good enough") and then advertise FREE INTERACTIVE NEWS AT
    (sorry... I had to)
    and then charge Angelo's 100 bucks a week to advertise on my site... where I am not bound by journalism ethics, so I can implore my readers to go to angelo's new restaurant up by the stadium and try their Pasta Sylvio with a delightfully refreshing Riesling in a hip and stylish atmosphere.
    So, while it would be GREAT to get 50 cents a week out of the 40,000 people who go to your newspaper website... you have to be REALLY careful that you don't end up holding a handful of quarters while basically stuffing someone else's pockets full of "hunnids n fitties"

    Sorry, had to break it into two posts because it ran long.

  6. Some quick things: Subscription-based services on the Internet are not new, but it absolutely would be new to the newspaper industry. Do you think if the P-G charged a fee to read its Web site, that the masses would flock to the Trib or O-R?

    And it wouldn't be collusion if every newspaper made a business decision to charge for its content. Tell me three other successful industries in the world that give away their product for free. Network television is the only one that comes to mind.

  7. Subscription based services are not new, you are correct... but they do generally serve a niche market, as Roger said (Barons, WSJ)...

    It wouldn't be collusion to decide to charge... but unless everyone started charging at the same time and charged the same rate, I doubt anyone will be willing to take the plunge first. I can see the PG and Trib on opposite sides of the pool saying "you go first, no you go, ok, on the count of 3... 1, 2, 3... you didn't go! You didn't either!"

    Network TV gives it away... so does Radio... and so do some print papers (does the almanac cost anything to get?)...

    You could argue, that to some degree, cable networks give it away... sure, you pay comcast for access to their library of programming, via the networks... but if cable went to a la carte pricing, I'd have maybe 8 channels... which means that I consider the other 150 channels basically free... that's incorrect, but in my mind, I am paying for the programming I watch... if I end up awake at 3am watching the golf channel, I don't feel like I'm paying for it.

    It's not a matter of if the PG charges a fee, would people go to the Trib and the OR... it's a matter of if the PG charges a fee, would people still go to the PG... It doesn't matter AS MUCH where people go instead... as much as it matters that they aren't still here with you... And people aren't limited to other regional outlets... some might go to the trib, some to the OR, some to, some to, some to, some to, some to, some to, some to the, some to

    And on another note... if newspapers care about the value of the information that they put out... if a newspaper is a better source than a blog... they should want to do everything in their power to ensure that THEY are the first and most accessible source of information... If something's going on in washpa... I really don't want to have to get it from Cody Knotts' myspace page just because I didn't go through the rigamaroll of paying a quarter to access the OR

  8. I think the P-G has carved such a niche in the market with its breaking news, blogs, comment boards and videos, that people would pay to use the Web site. And with titans like the NY Times thinking about a subscription fee ($60 a year sounds like a bargain to me) then it's only a matter of a time before others follow its lead.

    And I wouldn't classify radio and newspapers as "successful industries" so I'm still kinda waiting for a couple more examples.

  9. I am not familiar enough with the PG to know whether or not I would pay to use their site... 60 a year IS a great deal for NYT content... but that comes back to the Apple argument: how many individual entities can the market support? 60 bucks a year for the NYT is great compared to 6 bucks a week to get it delivered... But not many people are going to pay 60 bucks a year for the NYT, 40 for the Washington Post, 50 cents a week for the OR, a dollar a week for the PG and 20 bucks a year for the Cleveland Plains Dealer. I don't think people are as loyal to their source of information as they may have once been... Does it matter if my info comes from as opposed to THE new york times? I dunno?

    I would argue with you that radio isn't a successful industry... but if you want the 600lb gorilla of "given it away"... Google.

    Which, incidentally, might get a boost from newspapers setting a barrier to entry (fee)--- since the information will still be available... but to find that NYT article, you might have to google "krugman" rather than just going to

  10. A couple of more things came to mind when I was away today ...

    I know this will sound harsh, Mike, but the field of journalism bears some of the responsibility. Let me explain why I believe this to be the case.

    In the past ten years, journalism has taken a turn in the road. Perhaps the problem of which I speak has always existed to some extent. The problem: Media editorialism.

    In recent times, the bias has become more and more blatant. Consumers of news have become more and more skeptical of the true story. They already have a mindset about the author's agenda BEFORE reading the piece. This is not nearly as true in the beat pieces you were doing at O-R. Rather, I speak about the pieces on political news. But, it certainly can creep down to local stories as well (e.g. TRAil).

    The skepticism in the reader base has led many other journalism wanna-bees. They see stories being poorly written from an unbiased viewpoint, so think "I can do just as well from another viewpoint." The respect for the field of journalism has dropped. What formerly was done as news pieces have too often become opinion pieces. Consumers recognize this easily with so much greater access to the same news from different sources.

    Coupled with what I wrote a couple of days ago in another thread about opinions, far too many people believe their story is just as valid. In some cases, a blogger's story may have more truth than that of writer who gets his work published in newsprint.

    As I stated in the other post, opinions have come to have just as much weight as truth. The blogosphere has given so many more an opportunity to express themselves. The blogosphere is an answer to the insatiable appetite for opinions. As quoted in my other post, "... opinions, I want lots of opinions," or words to that effect. That tells a huge story. Truth of the news is sacrificed on the altar of opinion pieces, which can come from a variety of sources. The appetite for true news, trustworthy news has dwindled, as people square off in ideologies.

    My point in laying this out is to show one perspective of why print newspapers no longer have the same appeal. The turn-around cycles on printed copy is very long, compared to opinions on the web, either from sites that pretend to be hard news sites, or from those who have an agenda to advance.

    Do I like this turn of events? No! Our socieity thrives more on emotion brought out be opinion pieces, than enlightening themselves through hard news. Sensationalism sells well, but dry and detailed explanations of a situation or story is left unread. People now live with a "microwave" mentality. "Whatever I do, it must be quick, so that I can move on to the next thing...." People have no interest in digging deep, rather are interested in quick, shallow explanations, even those that include a bias.

    There are other aspects of this topic, such as talk radio, and web interactive discussions (e.g. Talkshoe). I've leave that for another time.

  11. Roger makes a great point... "facts" don't stand on their own anymore... they primarily play a supporting role in an argument.

    However, there are two types of "facts" at play here... On one hand, you have facts and figures... quantitative measures of something (Sweden's GDP is $338.5 billion).

    On the other hand, you have a record of events... "Carmichaels SB doesn't approve dean position"

    For the latter one, we need a "news" organization, abiding by journalistic standards, to report the "fact" that Carmichaels school board didn't approve the dean position... For the former, we need a user accessible database that a government employee can import a spreadsheet into...

    Now, here's where we have an accounting problem, and a supply/demand opportunity:

    An organization physical plants, employees, utility bills, health insurance costs, and raw materials to buy can't make money just on providing the "facts" of the carmichael's school board meeting... nor can they generate an audience big enough to sell enough advertising to offset the actual cost that is involved in delivering that product. They can, though, include reams of opinions (drawing on those static figures) that people DO want...and put it right alongside the school board reports. Because really, who cares about Sweden's GDP... if not for Swedes and people who will determine what percentage of GDP Sweden spends on, say, health care... and use that as a selling point for an agenda, an angle, an opinion on health care in America?

    To dismiss "opinion" as just some supposition that is not anchored in anything tangible is as disingenuous as dismissing evolution as "just a theory."

    Good opinions should be based upon good facts.

    Here's an opinion: The United States should adopt Sweden's single payer health care system.

    Now, here is a very important component of that... Here's WHY: Sweden spends over 2,200 dollars less, per capita than the US on health care. They spend 4% LESS, in terms of percentage of GDP, on health care while enjoying a life expectancy that is 3-5 years greater than that of the United States.

    Facts: per capita expenditures, % of GDP, life expectancy
    Opinion: determination that Sweden's stats are "superior" to our own, and the assumption that similar results will follow implementation here

    Of course, you could have a guy say that the Swedish diet, consisting of meatballs and gummy fish, is the key to good health and long life... and that it will be more expensive and less effective in America because America is not Sweden and their electrical outlets are funny and they are metric... cont...

  12. Whether you agree with positions on cable news or talk radio, the fact is, they follow THIS kind of model and make a shit-ton of money doing it... opinion, supported by facts (sometimes kinda sketchy... ie, joe the plumber and the API tapes that "prove" Obama was born in Kenya)... but regardless of whether you agree or disagree with this opinion or that opinion, the fact is that THIS type of information delivery absolutely is driving political discourse in America today... It used to be that the national discussion was drummed up by reporters at the NYT or Washington Post... Today, the discussion's momentum is propelled by Limbaugh and Maher and Matthews and Hannity and Maddow and Beck. Good? Well, in individual little segments, probably not... but when you take the sum of the bickering... when you take the charge, rebuttal, countercharge, rebuttal... eventually an actionable set of "Facts" is presented on both sides. Stuff comes into the national consciousness that otherwise wouldn't be there if not for the fact that it supports an opinion... Like I said, would anyone care what Sweden's gdp is if it weren't for the health care debate?

  13. It's funny, in the context of this conversation, that these two articles appeared next to each other on cnet this morning:

    "Free" isn't a four letter word-

    Google revenue meets expectations-

  14. Roger, thanks for your points about the bias of the media. Your post is a correct indictment about the media, although I take exception with some of the things you're saying.

    I think there is some confusion about media and journalism. And I think the problem about sensationalism and editorialism falls mostly on the media's shoulders. Look at Fox News and MSNBC... those are not quality journalist outlets. They are biased stations that shout opinions at each other, and constantly rip one another. Tell me the last time you saw KDKA and WTAE getting into a pissing match on their stations?

    Secondly, I need to come clean on what it means to be an objective journalist. We all hold opinions, but what separates a professional from an amateur is the ability to put aside those feelings to write a story. When I came upon a story - even one where I held a certain opinion - I did my best to wipe the slate clean and attempt to report from the facts that I had in front of me. I did my best because I wasn't working for a Republican or a Democrat... I was working for my readers, who paid my salary.

    Let me offer a different example to this discussion... Our soldiers and Marines certainly hold strong political beliefs, but they put aside those feelings when they are on the battlefield and follow the President's orders. They certainly are professionals, and have a job to do. So why does the public think that journalists are not just as passionate about their job objectively.

    I think the answer lies within the fact that the public does not like to read or watch stories that don't stroke their preconceived opinions. And that, in my opinion, is why our society is such a mess today.

  15. Good points, Mike. I'd also like to point out that a very high percentage of newspaper readers don't make a distinction between a newspaper's opinion pages, which are the opinions of those who run the newspaper, and the news pages, which should be devoid of opinion. Good reporters and editors are able to keep the opinion where it belongs, but people who want to see bias will see it no matter what you do. And a lot of people think newspaper folks are biased if they don't run a one-sided story that presents only that person's side of an argument. In other words, we're biased if we present a balanced story because by doing so we allowed a viewpoint that opposed the one a particular reader favors.