News Without the Paper
I think James Suroweicki’s column on the newspaper business takes a wrong turn here:
For a while now, readers have had the best of both worlds: all the benefits of the old, high-profit regime–intensive reporting, experienced editors, and so on–and the low costs of the new one. But that situation can’t last. Soon enough, we’re going to start getting what we pay for, and we may find out just how little that is.
This is wrong. As Felix Salmon says when you pay for the physical newspaper you’re not paying for the news, you’re paying for the paper. A newspaper is a big physical object. Creating it and distributing it on a daily basis is a hugely expensive undertaking. And subscriptions to newspapers are cheap — the amount of money being charged for home delivery of The New York Times or any other major paper only does a tiny amount to defray the costs of producing and delivering the object.
The problem newspapers are having with online isn’t that the readers won’t pay, it’s that the advertisers won’t pay. The reduced costs per reader make up for the reduced revenue involved in giving the product away, but a physical newspaper generates far more in terms of ad revenue per reader than does a newspaper website. Probably once physical newspapers all disappear, ad rates for news websites will go up somewhat merely because ad buyers won’t have as many options. But I think it’s plausible that even when everything shakes out online advertising revenue still won’t support the volume of staff that print advertising revenue once did. In that case we’re going to have to count on a mix of nonprofit media (ProPublica, Center for Independent Media, ThinkProgress, The American Prospect) and value-adding analysis by experts workers on an amateur basis (Brad DeLong, Greg Mankiw, Mark Kleiman) to make up the gap. That and, of course, increased productivity on the part of journalists — Google and email have made it much more efficient to research stories than it once was.
But in terms of revenue for for-profits, the action is all in the advertising — can people come up with ways to raise more money — not in charging readers.
56 Responses to “News Without the Paper”
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December 15th, 2008 at 4:32 pm
Newspapers also waste a lot of money in that a lot of what they publish every day is useless crap, or worse.
December 15th, 2008 at 4:36 pm
If Matt is right, it’s really a shame, and the information available to the public will really diminish (unless online operations can get funding to do the kind of reporting the major press does now). Carp about the NY Times if you will, but about twice a month they do stories that nobody else ever does (or only a few other outlets of the kind that get Pulitzers occasionally). And every day they do routine coverage that Matt is saying will just disappear, and will, I venture, be replaced by an inferior substitute. Really too bad.
December 15th, 2008 at 4:51 pm
The problem newspapers are having with online isn’t that the readers won’t pay, it’s that the advertisers won’t pay.
Well, no, the problem is that neither will pay!
The reduced costs per reader make up for the reduced revenue involved in giving the product away, but a physical newspaper generates far more in terms of ad revenue per reader than does a newspaper website.
This could just as easily be “The reduced costs per reader make up for the reduced ad revenue per reader, but a physical newspaper generates far more in terms of subscription revenue per reader than does a newspaper website.”
December 15th, 2008 at 4:52 pm
Lost revenues for classifieds are much more damning for newspapers than lost advertising revenue. There are always people willing to buy ads, but sometimes how much they’ll pay will fluctuate. Classifieds, on the otherhand, are free or almost in a lot of places craigslist, ebay, etc.
December 15th, 2008 at 4:54 pm
I think newspapers deserve a considerable share in the blame for the consistent underpricing of online advertising. Five or ten years from now an internet ad is going to be orders of magnitude more expensive per reader than it is now, but there needs to be a huge culture shift before that happens. Advertising buyers will have to recognise the value of micro-targeted ads with direct sale opportunities and instant feedback, instead of the old model of mass-marketed fire and forget pushing of brands, which only makes sense on broadcast media (in the widest possible sense, including things like billboards). Similarly newspapers will have to be much more creative about selling their readers to advertisers without annoying those readers or compromising the editorial. The fact that newspapers and other old media companies (especially in the US) have had to be dragged kicking and screaming into the internet age is in my opinion one of the main reasons that the cultural shift still hasn’t happened. It’s hard to convince your advertisers that online readers are worth the same as (or more than!) print readers if you don’t put your money where your mouth is. Moreover, newspapers aren’t yet (for the most part) actively looking for the sorts of adverstisers for whom targeted, product-based ads naturally make more sense than brand ads.
Maybe it will take a much better AdWords-type algorithm before the change can happen, in which case we’re in for a rough decade or two, but I’m fairly optimistic that a new generation of executives will see things differently.
December 15th, 2008 at 5:01 pm
Bobbo, can you give an example of what you mean by “useless crap”? The model of your standard metro daily is to try to offer something to many different readers who are looking for very different things. This means most readers will see part of the paper as useless.
Beyond that, Matt’s point is well-taken. Suroweicki makes the same point about the collapse of the ad model before pivoting to focus on subscription revenues.
I believe the Detroit Free Press recently announced it would stop home delivery all but 3 days a week. Will be interesting to see how the impact on revenues/expenses shakes out.
December 15th, 2008 at 5:04 pm
In that case we’re going to have to count on a mix of nonprofit media … and value-adding analysis by experts workers on an amateur basis … to make up the gap. That and … increased productivity on the part of journalists…
Shit, we’re screwed. Given how many people already get all of their news from tv and gossip rags, and how much work people who want access to news will have to work at getting the same quality of information, the net result is that we’re going to be less informed.
December 15th, 2008 at 5:05 pm
The biggest problem for internet advertising is publishers cannot place the same volume of ads that you can get in a traditional paper. People still want newspaper content,just in a different medium. If an portable newspaper reader was developed (like the kindle, but better) and structured in a way that more ads could be placed on it, then the profitability problem would be lessened. There would no longer be the huge costs for printing and distributing the content and different types of advertising (targeted ads, video etc.) could be available. That is my hope anyways. More likely people will just keep reading the NYT on the internet for free and the industry is doomed.
December 15th, 2008 at 5:13 pm
The answer is forced integration of media companies. People won’t pay for online advertising, but they will pay for videogames. Sell the New York Times to Nintendo on the proviso that they have to field x number of reporters. Hey, it worked for the Mariners!
December 15th, 2008 at 5:16 pm
A century ago, the best selling dailies were the labor, ethnic, socialist, and other press, outselling the major city papers in much of the country. They were funded by subscribers and street sales.
It’s hard to argue that journalism has gotten better due to the advertiser-supported model.
However, it has been the case that what used to be the boss’ and city elites’ newspapers smashed their competition through sheer economy of scale, and somehow came to be seen as “objective” and ‘mainstream’ journalism rather than being what they always were, the newspapers of the regional elites.
December 15th, 2008 at 5:23 pm
@#3
right, your statement
in response to Matt’s statement
directly contradicts the underlying assumptions in Matt’s passage. Now, maybe Matt’s wrong, I don’t know the numbers - but your apparent reinterpretation is nothing of the sort.
Matt’s assertion was that the subscribers’ subscription payments don’t even pay the cost of producing and delivering the dead-tree format of the news paper, they only defray these costs - but that at present the advertising revenue from the dead-tree format is far, far more than the revenue from the online format.
In your comment, you state that “a physical newspaper generates far more in terms of subscription revenue per reader” - but Matt’s point was that the physical newspaper actually generates a net loss in terms of subscription revenue.
December 15th, 2008 at 5:38 pm
Matt, you are partially right. But the ONLY option for a news-gathering organization bigger than Josh Marshall’s is charging for content online, enough to cover the costs.
This will require firewalls and VIGOROUS enforcement of copyright. Bloggers such as yourself won’t like that, but tough luck.
Internet advertising rates will never increase. The Internet is too big, and advertisers are moving towards search engine generated links to their Web sites, which is even cheaper than display Internet advertising.
December 15th, 2008 at 5:51 pm
Finding a for-profit business model that works, that earns a return on the kinds of deep, sunk-cost investments necessary to create high-quality anything, is deeply problematic for lots and lots of industries.
For newspapers, I think, there was a kind of brief golden-age in the 1950’s into the 1980’s, when big city newspapers were near monopoly institutions. And, it was the monopoly that mattered. The monopoly provided the high returns that made it easy to fund a city hall reporter. And, the City Hall Reporter for the the Daily Paper acquired a lot of power just by being THE reporter. And, the publisher, who was typically the scion of a prominent family with major developer interests in the local city, gained power by having THE City Hall Reporter on the job.
Competing news organizations in a broadcast environment suffer from a redundancy problem. There’s no gain from having numerous outlets, separately, report the same news — the redundancy is a waste. Municipal newspapers could lay off a lot of their redundancy problems in covering national and international news on the wire services and syndicators.
The internet has seriously undermined the economic basis for organizations like the Associated Press. And, the internet seriously exacerbates the redundancy problem. Even if something is worth doing, it may not be worth having eleven hundred people do it, simultaneously. And, the inability to concentrate resources into the hands of one person may prevent anyone from doing it really well.
The internet does a really good job of letting people, in whom the resources for specialized expertise have already been invested in some other context, gain access to a journalistic platform. And, that’s all to the good. But, that’s parasitic. The ability to concentrate resources is there, too, as well demonstrated by near-monopolies like Amazon, e-bay or Craig’s List, but the leverage for that kind of concentration has not been discovered, yet, for news journalism.
December 15th, 2008 at 6:04 pm
Has MattY ever worked at a newspaper? Specifically, the business side of a newspaper? If not, isn’t this entire post nothing more than him talking out of his ass?
Mike
December 15th, 2008 at 6:09 pm
Matt’s right about the economics, but he’s misreading the New Yorker item. Surowiecki’s last sentence doesn’t say that readers are about to start paying less than the value of their news, it says that they’ve always paid less than the value of their news.
Ginger Yellow, you’ve got a lot of smart stuff there — I totally agree that everything must be targeted from now on. But I doubt you mean to say that the value of Web ads will rise by “orders of magnitude” (100 times or more) in the next five or ten years.
Maybe, however, Web ads will become like 10 times more valuable, in which case things will pretty much be okay for content producers.
December 15th, 2008 at 6:24 pm
“Given how many people already get all of their news from tv and gossip rags, and how much work people who want access to news will have to work at getting the same quality of information”
Newspaper readership across all media (hardcopy, internet, mobile) has actually gone up, not down. The problem is that, as others have mentioned, the advertising revenues for internet eyeballs are lower than the rates used to be in the hardcopy eyeball era.
December 15th, 2008 at 6:53 pm
The thought of not having the local paper at the front door in the morning is a bit hard to accept. But of the 2 I subscribe to, one is in bankruptcy as a Tribune paper, and the other is for sale by McClatchy. I don’t use the internet for local news, but for Detroit (where I was raised) news and Washington/National news. Others obviously have other priorities, and that print paper at the door every morning may be a thing of the past. We can settle for Morning Joe’s non-news with the coffee. And probably start paying for more of the internet.
December 15th, 2008 at 7:04 pm
And, the internet seriously exacerbates the redundancy problem. Even if something is worth doing, it may not be worth having eleven hundred people do it, simultaneously. And, the inability to concentrate resources into the hands of one person may prevent anyone from doing it really well.
I think Bruce Wilder hits on something important here. The internet means that a local paper like the SF Chronicle is competing on an equal playing field with other information sources that render lots of what the Chron has to offer redundant. Why read about international/national news from the Chron website when I could read about it from an elite institution like the NYT? Why read about sports in the Chron when I can get much better coverage and features at ESPN.com? I don’t even need to go to the paper for Classifieds listings (craigslist), movie times, or comics anymore.
The only real, non-redundant thing of value that the Chron offers is local news about San Francisco–and I do go there for local news. But I don’t have to buy a whole paper to get it–I just have to access a small fraction of what they’re offering. And that means far, far less traffic overall.
Maybe local news providers will eventually find a sustainable business model, but I think before that happens they’re going to have to completely jettison redundant offerings that can’t compete with elite or specialized organizations.
December 15th, 2008 at 7:59 pm
“Even if something is worth doing, it may not be worth having eleven hundred people do it, simultaneously.”
Of course, the great majority of US papers don’t have people doing it simultaneously. They are conveyors of AP and Reuters reprints. The internet is a killer for this kind of cut-and-paste method of filling the news hole.
December 15th, 2008 at 8:02 pm
PS- for a hilarious take on what newspapers have to offer, see this from the WaPo’s ombudsman, Deborah Howell. It’s #1 on her list of 10 ways to keep a newspaper strong. Kidspost plus David Broder! That’ll keep those subscriptions coming!
(1) Exclusivity is a virtue. Readers can get breaking news in many places, but they count on Post reporters and columnists for reporting and comment they can’t get elsewhere. I’m thinking of features such as KidsPost, the Style Invitational, Federal Diary, In The Loop and Dr. Gridlock, and such top reporters and columnists as Dan Balz, Dana Priest, Steven Pearlstein, Sally Jenkins, Michelle Singletary and David S. Broder.
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/28/AR2008112802250.html
December 15th, 2008 at 8:03 pm
I’m more worried about journalists (me among them) being a dying breed. I’m talking about people who really know their beat and can report from a deep understanding of the issues they are writing about. Most small town local papers long ago gave up on paying anyone enough to keep good people around, and it appears the big city daily papers and the nationals are doing the same. Web sites pay even less, if they pay. I don’t think you will get a lot of quality journalism in one place, covering a wide range of issues, without paying journalists good wages, but I don’t see it happening, except when it is connected to a dying traditional news organization. Sure, there’s good sources for some news, like TPM, but there isn’t the breadth or depth of coverage unless you spend hours reading lots of sites. The future seems to be niche sites that specialize in one thing or another. So in the future, and now for many of us, I have to go to a sports site for that (but nothing local), a weather site, an international site, a politics site, etc. etc. For local news around here I feel practically in the dark. Our local papers, such as they are, are total crap now, just there to sell ads, and there are no good Internet local news sites. Three local papers used to have experienced reporters covering the news for this small town (25K) and you could read three or four pages of good local news every day. Now, they barely cover the facts of huge local stories, and when they do the facts are wrong half the time. I doubt there is three years of experience covering this town amongst the entire staff below the editor of the local paper, and she’s an idiot.
December 15th, 2008 at 8:45 pm
I just got my renewal notice for the Wall Street Journal. $149 for one year. My experience is that if I let it lapse, they’ll call and offer it to me for $99, which I will accept.
That’s six days a week, delivered to my door step in a not close-in part of Portland, OR. I have no idea of the economics for the publisher, but they ain’t making much money off of me.
December 15th, 2008 at 8:48 pm
If you want to see the future of the Newspaper see:
- Alternative Weeklies
- Daily Metro
These papers are free, but if you ever try to read one, you spend 5 minutes and realize that they offer no more depth than you get from an update on NPR.
But this leads us to a future question:
- What good will blogs such as this blog be without the underlying data from hard news gathering organizations. Case in point, much of the issues involving pre-war intelligence came not from the NY Times or WaPo, but from The Philadelphia Inquirer. If you argue that they should have focused on local news instead, you would likely have never had the investigative reporting which set that paper apart.
But this leads to another point ~ we have become such a hyper-capitalistic society, that we really do not have time to focus on news that is not going to be economically valuable. And for all intents and purposes, most local news (serious - read a local section of even most large papers and they cover frivolous stories that are merely filler) does not provide future economic benefits. This is why Murdoch (as much as I loath the man) understood the value of the WSJ. Even if it is econo-porn for business people, just having the requisite knowledge of the overall economy and business environment helps in client settings.
It used to be that understanding what was going on in your local community was important, but this was also a time when we were much more connected to our communities. But me - I moved to Denver 3 years ago from New England. While I like this community, I just do not have enough of a connection to necessarily value local news.
December 15th, 2008 at 8:53 pm
I should add that local news is often the victim of the fact that only so much occurs in a local community that is really interesting and important.
However, that being said, the two Denver papers rarely really take on serious investigative reporting. Such as significant reports on the impact of energy companies on the mountains, animals and the environment. Or serious investigative reporting on local politics (The Boston Herald is a great example of a local watchdog, even if it is politically geared towards slandering liberals).
December 15th, 2008 at 9:05 pm
Brad (#24) said: the two Denver papers rarely really take on serious investigative reporting. Such as significant reports on the impact of energy companies on the mountains, animals and the environment. Or serious investigative reporting on local politics
We frequently have that problem in the islands, too. A saving grace is that, say, Maui is too small to just not talk about some issues. If it’s right there in front of our faces, it doesn’t really matter if the local advertisers like seeing print inches on it or not.
I’ll also give the local paper credit for publishing just about every letter they get. That’s where most of the dirty laundry gets hung out for public view.
December 15th, 2008 at 9:29 pm
Sometimes I think the people on this board like to opine just to show how smart (or so they think) they are.
If revenues are down than production and SGA costs must fall inline. This includes the total number of personnel and/or the salaries of the personnel.
k1
ryanculver.blogspot.com
December 15th, 2008 at 10:49 pm
So, completely without any advertisements,
how much would a print-newspaper have to sell for,
and still break even over the long run?
Just curious. (i have no idea)
For bonus points, how much could a online-only
newspaper sell for, and still break even?
For the record, I get a online-version of the NYT
(image page by page copy of the print edition, via NewsStand).
It costs, currently, about $26/month. I don’t
know how long this version will last (versus the
other online flavor, TimeReader), but I’ve been
reading the NYT this way, since March 2003, or so.
That, and i get the printed Sunday Times, but no other
print-editions of any newspapers, including no local papers.
December 15th, 2008 at 10:52 pm
Matt, you are partially right. But the ONLY option for a news-gathering organization bigger than Josh Marshall’s is charging for content online, enough to cover the costs.
How do you know this? Not saying you’re wrong, mind you, but if you are correct, then the newspaper business really is a goner. People simply aren’t willing to pay Peter for something they can get for free from Paul. As long as broadcast media (which for the most part are profitable) maintain free websites where they post news stories (and generate ancillary profits), there’s little reason for consumers of news to access a newspaper website that charges a fee. Although I wouldn’t be elated to witness such a shift, if the big newspaper sites started charging, I’d get my online news from MSNBC, CNN.com etc.
Just as a side note, a lot of these stories are done without providing any statistics. I’d like to know if any newspaper sites out there are generating a significant share of their parent company’s revenues, and just how far they have to go. If, say, NYTimes.com is generating only 5% of the firm’s total revenue, it really does look bleak for them. If they’re now up to 25%, perhaps it’s not so hopeless.
The only real, non-redundant thing of value that the Chron offers is local news about San Francisco.
Is it really non-redundant? Do you mean to tell me the Bay Area’s TV affiliate’s don’t have websites giving away free local news?
I totally agree that everything must be targeted from now on. But I doubt you mean to say that the value of Web ads will rise by “orders of magnitude” (100 times or more) in the next five or ten years. Maybe, however, Web ads will become like 10 times more valuable, in which case things will pretty much be okay for content producers.
I see little evidence web ads will become ten times more “valuable” any time soon. Various targeting and precision marketing tools exist, and indeed have been in existence for a decade or more. What’s stopping a more robust rollout of such ads, or, to the extent they’re already being rolled out, what’s stifling the advertiser demand that would allow publishers to increase ad prices? My guess is the answer is that most people don’t use newspaper websites to do web searches, and search is the technology that is easily amenable to making money via targeted advertising.
December 15th, 2008 at 10:55 pm
So, completely without any advertisements,
how much would a print-newspaper have to sell for,
and still break even over the long run? Just curious. (i have no idea)
I used to work in advertising — specifically a firm that did a lot of newspsper print. Long story short, I seem to recall a newspaper rep telling me subscription revenue covered less than 20% of the newspaper’s cost.
December 15th, 2008 at 11:11 pm
Seems to me that you are all doomed, the blogger at least as much as the real newspaperman. I almost never see an internet ad, because I run Adblock, which is free and effective. If ad-blocking programs catch on, an internet advertisement will be worth next to nothing.
December 15th, 2008 at 11:18 pm
If ad-blocking programs catch on, an internet advertisement will be worth next to nothing.
This assumes most people are bothered by ads. I’m not crazy about pop-ups, and like lots of folks I block scripts, but non-obtrusive ads don’t bother me very much.
December 15th, 2008 at 11:20 pm
If ad-blocking programs catch on, an internet advertisement will be worth next to nothing.
Semi-FYI: I don’t use AdBlock so I don’t know, but you’ll probably still get targeted ads when you do a Google search.
Those targeted Google ads, believe it or not, are considered the main threat to traditional ad media. Web-banner ads are something of a sideshow in comparison.
December 15th, 2008 at 11:50 pm
Well,
that assumes that banner & pop-up ads are the only types. Advertisers and marketers are a nefarious lot. They will find ways (including paying search engines as well as embedded ads) to reach your eyeballs.
Where I think you are correct is that the blogger as we know it is dead. That free-lance blogger, mooching off of the reporter who was up until 1:00 AM in order to get the story are dwindling.
It will mean that bloggers are going to either have to join organizations which are funded specifically for investigative reporting (which benefits wealthy individuals and corporations) or take on the role such as the bloggers are Footnoted.org (whereby they spend countless hours pouring over government and other documents via Freedom of Information requests).
Matt might be able to make the transition, but certainly not the likes of McArdle (a lazy hack if there ever was one).
December 16th, 2008 at 12:08 am
Where I think you are correct is that the blogger as we know it is dead. That free-lance blogger, mooching off of the reporter who was up until 1:00 AM in order to get the story are dwindling.
If all the print newspapers go bust, both Matt and Megan will still be able to get news to comment on from CNN, C-SPAN, and other bloggers.
December 16th, 2008 at 3:01 am
If all the print newspapers go bust, both Matt and Megan will still be able to get news to comment on from CNN, C-SPAN, and other bloggers.
CSPAN generates lots of content but has a very narrow focus. CNN lifts most of it’s stuff from newspapers, either directly or from local television stations that are lifting stuff from the local newspaper. AP doesn’t have brigades of reporters out in the field, they use stuff… from local newspapers… the other bloggers are getting stuff… from their local newspaper..
December 16th, 2008 at 9:50 am
I think newspapers will in fact survive, tho they will be
plastic instead. Researchers are working on flexible screens that would be easy to fold and place in one’s briefcase.
I can see where each morning, one would plug the plastic screen into a Web site and download the entire “newspaper.” You would navigate between pages and jumps by merely touching the screen.
So basically it would be the high production costs — newsprint, press, distribution — that would basically be done away with.
December 16th, 2008 at 10:19 am
One of the benefits to printing a newspaper is the advertising of the publication itself - we 12,000 papers acting as marketing in our neighborhood every week.
If we go on-line only, we’ll save on paper and delivery costs, but will have to add or beef up our marketing and advertising costs.
I rarely hear anyone account for this in the print vs. on-line discussion.
December 17th, 2008 at 10:14 pm
I hardly think that researching important stories that will have a large effect on society can be paid for by online ads and more efficient tools like Google. First of all, stuff that’s easy to find are easy to report - lo and behold the power of a blogger, who by the way cares less about making money than wanting to famous. This, by the way, makes a bad competitor for companies that actually want to make money.
Print ads are fantastically targetted, and pay off well for advertisers and newspapers alike. Online ads lack that targetting, and they are too often pushed aside. There are only so many eyeballs and so much time for reading, if ads are regularly being ignored, they hurt advertisers more than newspapers.
Real research takes time, money, and resources. I doubt that a search on Google would expose corrupt politicians and organizations. Efficiency and competition is great, but it also makes the lowest common denominator prevail. Remember, competition benefits those who consume, not those who create.
December 18th, 2008 at 2:24 pm
As I wrote to Jim Suroweicki, I don’t see why print media, including the New Yorker to which I subscribe, don’t just get real and set themselves up as charities ala NPR. They could have annoying fund drives & Palm Beach charity balls (if, apres Bernie, there ARE Palm Beach charity balls) and apply for NEA grants and such. For an appropriate donation, a charitable contributor could even get, you know, a hardcopy of the periodical mailed to his home.
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