Newspaper watch: Why start charging for content now? You haven’t in 180 years.

 Posted by on 6 August 2009  Modern Life
Aug 062009
 

It’s something that I was taught in introductory journalism, lo these many years ago: the cost of a newspaper subscription barely — if that — covered the costs of raw paper and delivery. The actual work of producing the news was subsidized entirely by the advertising contained within.

Heck, I should have known that as a newsboy. I used to deliver the very same newspaper that I now work at, and I used to collect subscription monies from the people I delivered to, too. It wasn’t a king’s ransom, not by any means, not even for a 12-year-old, and while I didn’t keep even 50% of the money I collected, if I had stopped to think about it, even the efforts of a hundred paper carriers couldn’t have kept a newspaper afloat.

Nope, it was advertising all the way. Subscription costs do nothing but cover the cost of delivery.

By the way, that’s a model dictated by the laws of economics. As explained in a post over at News Futurist:

Newspapers: 180 Years of Not Charging For Content

As news now moves online, the same rule of economics apply: The price of a product in a competitive market falls to the marginal cost of creating and delivering one more unit.

For printed newspapers, the marginal cost was a little more paper and ink, maybe an extra block on the delivery route. Subscription fees never accounted for the fixed costs of producing the content: the building, staff, printing press, etc. That share of costs has long been paid by advertising and diluted by economies of scale.

The same economic forces apply online. And because the marginal cost of bits is nearly zero, the appropriate price becomes too small to bother tracking. Free is the result.

This would seem to make it very hard for newspaper who are hoping that they can set up a paywall of sorts, and perhaps all of their competitors will do the same thing, and everyone will rake in the money from readers who are desperate for their news.

Unfortunately, as the history lesson at News Futurist makes clear, that’s exactly what newspapers tried to do in the early 19th century. But, as public literacy arose in the 1830s, so did the “penny press.”

And any newspaper that tried to erect a paywall would just find itself undercut by competitors.

It’s an interesting argument, and backed up by tested economic thought. But there’s one workaround:

This is not to say some news providers couldn’t get away with charging online; but to do so they would have to have content so valuable and unique that they don’t face the competitive forces that pull prices down to the marginal cost of ~zero. And even if you find a specific niche and premium content you can charge for, you’re likely to face free competition once the word gets out.

So, what would those unique content models be? Everyone points to the Wall Street Journal as a successful subscription-based newspaper website, and that’s because they have a specific business-oriented audience and they have a product that’s so better than the competition that it’s worth paying for.

How could ordinary newspapers pull of a similar feat? I’m not sure I know, but there’s an intriguing idea in a blog at the Harvard Business site — Umair Haque says that “newspapers” should evolve into “nichepapers”:

A new generation of innovators is already building 21st century newspapers: nichepapers. The future of journalism arrived right under the industry’s nose. Nichepapers, as the name implies, own the microniche. (Here’s a nice, timely discussion of Nichepapers by Michael Massing in the New York Review of Books.)

Nichepapers are different because they have built a profound mastery of a tightly defined domain — finance, politics, even entertainment — and offer audiences deep, unwavering knowledge of it.

The post itself is a little over-the-top, but if you drill down to it, he’s not offering much actually new. What he’s saying makes sense. That is, offer a blend of solid information and interesting analysis. And focus on your strengths. Too many newspapers, these days, still offer pages of national and international news that’s at least a day old by the time it’s read. Too few readers care — they learned it all last night on the TV news.

Beat reporters, at one time, offered exactly the sort of “owned niche” that Haque is arguing for. I think he’s going to far in telling newspapers that they have to be the Huffington Post or Perex Hilton (two of his examples of “nichepapers). Newspapers have everything they need, they just need to bring it to bear better.

Oh, and here’s another thought — people who get involved in niche productions invariably care, and they make their readers care. Readers who care might be motivated to buy a subscription, even, if it’s modeled on “supporting the work that you care about.” That’s (partly) how NPR works. And it would definitely get around the free content model.

Grant Hamilton

  • Noto

    The trick is, is that local newspapers already are niche papers with the local news as the niche. You’re not going to catch what happened at Brandon Folk Fest on CNN.com.

    It was someone’s poor decision years ago to put National news in a local paper as filler to save on the cost of paying a dedicated local journalist to dig up something new & exciting.
    That kind of thinking steamrolled because why pay someone local a regular wage, when they can pay a service 1/8th that cost to have someone else’s news generated for them.
    Essentially cutting back their own quality and niche’s is what has allowed the “Evil Internet” to come in and take away their “easy, low-cost-news”.

  • http://www.absurdintellectual.com/ Grant Hamilton

    Well, I sort of agree with you that local newspapers have an easy-to-find niche in local news. And that’s something that, you’re right, bigger players just can’t offer. (I was going to mention that this seems pretty much the same as the “hyperlocal” buzzword-trend of a couple years ago.)

    But they still have to compete with other “news” or information sources, and these are all now online. Used to be, only the media had access to media releases, now the city and the cops and companies of all kinds put them on their websites, for any and all. And, as I’ve argued before, lots of people find swallowing the official line, to be enough news for them.

    I think newspapers, when they question and critique and contextualize the official spin, provide an irreplaceable function — but they have to sell their readers on that.

    Secondly, I disagree that newspapers have chosen to use filler instead of local news. I think, instead, that newspapers are holding on to the old tradition when they were the ONLY news source in town — before radio and TV. National and international news was a requirement, not filler. And as newspapers have suffered cuts, I think all the departments have suffered — there’s a lot less in the way of local, sure, but there’s less international and national, too.

    I think some newspaper needs to take a gamble on dropping their wire service subscription (these are mucho dinero) and using the savings to bankroll a few more local reporters and opinion writers.

    Similarly, if a newspaper was really willing to take a gamble, they could invest a ton of money in a kick-ass website, and then announce that they were phasing out the printed paper in, say, 5 years. My belief is that such an announcement would kick-start a community discussion big enough to educate people about how advertising finances the current newsgathering organization, and how advertising is going to be a big part of the website, and hopefully come up with some solutions that are financially feasible.

    But, there would also be enormous savings from shutting down the a) press room; and b) circulation department.

    Finally, and I was going to make this argument in the post, but it was getting long (and now this comment is getting long, too) I think Umair Haque makes an interesting argument when he says that newspapers are, even online, following an outdated model. The one-edition-a-day model, he’s right, isn’t appropriate for an online world.

    There needs to be a rethink in how to package stories online, where previous stories can be illuminated in context, and where they can exist in a growing package, sort of. Like a niche within a niche.

    (I’m thinking that some auto-tagging software might be a part of this solution, allowing software to display related stories about crime, say, every time a new update is posted.)

    I’m actually quite hopeful about the future of online news, but I don’t think I’ll be paying for it.

  • MPot

    I’m down with the nichepaper idea, as although I spend at least an hour every day reading news online, I still prefer paper – - especially for in-depth work that needs time to be digested. More local and opinion — and actual journalism — is the way to go.

    But “laws of economics”? Come on. No more legit than “laws of astrology”. Show me an economist who can use those laws to predict something accurately with better consistency than chance would allow. Economics is the alchemy of the modern world.

    Okay, that’s a side issue, hardly relevant to your post at all. Sue me — I’m an egotistical pedant. ;)

  • Noto

    Well I was basically describing the national news as the filler, for as long as I’ve been reading the paper I’ve never felt that national news (most especially the celebrity trash, that kind of stuff degrades any legitimate newspaper) should be in a local paper. While yes I agree its an old tradition, back from the days of horse and buggy before cable television. It should have been dumped years ago, in favour of generating something new and interesting.

    • http://www.absurdintellectual.com/ Grant Hamilton

      I agree — I think it’s long overdue to phase out the national and international news, except maybe as a “roundup” section or something, and to focus on local/regional news and opinion.

      That said, there is a certain segment of the population that associates national and international news with being a “real” newspaper, and if a paper went all-local, they would dismiss its relevance and impact.

      (But it doesn’t take much these days for, say, a photocopied coffeeshop handout to scan the web and paraphrase the Associated Press. National news does not a newspaper make.)

      Again, I think a newspaper would do well to advertise the fact that it is going to make a five-year transition, make some investments right off the bat, and then start cutting what is now used as filler.