Monday, August 10, 2009

The Future of Journalism

A number of people--from Tyler Cowen to James Fallows--have taken to believing the online payments myth. It's the idea that newspapers are fundamentally fine--they just need to come up with smart pricing plans for their online content. People have always paid for news; newspapers just took momentary leave of their senses and decided to give up all of their content for free online. Once they come up with the optimal payment service, they'll start making money again.

This argument misses two big issues:

1) It's really hard to charge money on the internet. Information wants to be free. You want to be able to link to, and follow, internet links. It's costless to back between the New York Times and BBC. So why pay? That would be like one bar, on a street full of bars, suddenly charging a cover--you'd just go to the other bars. Even micropayments haven't ever caught on. To some, that's because we haven't come up with the idea pricing plan. To me, it's because people make a big distinction between something that's free and something that costs them money. For instance, I consume several cups of coffee a day now that it's free. Charge me, and I'll drink a cup every now and then.

Of course, there are some things you can charge for. But that's generally for the most specialized news sources that business are willing to pay for. That's why the WSJ keeps these gated, even as it opens up its editorials and blogs for everyone in order to generate buzz and links, and attract more people. If you're selling a unique news source that's essential for rich people, you're fine. Maybe even top news places like the NYT or FT can get away with charging for some content. Other than them, no one else can charge without destroying their use base.

2) Newspapers have never relied on subscriber fees to cover the cost of news. Even back in the glory days of news (which, let's be honest, were way worse than today in terms of global coverage, analysis, discussion, etc.--at least if you have some good blogs on your Google Reader), the cost of subscription covered just the cost of producing newsprint. The profits all came from advertising--especially the classifieds.

Newspapers cannot now, nor have they ever, managed to get people to pay more than the marginal cost of production. That this cost is now zero is not a big problem. The problem with newspapers is, basically, a problem with the changing nature of advertising. Had advertising revenue remained constant per reader as news migrated online, newspapers could have actually made more money by slashing the publication costs. In fact, advertising went down across the board--both lower advertising in newspapers (replaced by more direct internet options like mass email and Craigslist) and much lower ad revenue online than on print.

If they ever figure out how to turn pageviews into dollars, they can turn their pages into virtual gold mines. It's a difficult, perhaps impossible task, but the best minds in the industry need to be focusing on that, rather than on payments.

There's one solution, but you won't like it. We can revive the newspapers if we cede all privacy about our consumer lives. Targeted ads--Google's Adsense next to searches--are basically the only internet ads that have ever worked. If newspapers could go through your entire purchasing history, they could pitch ads for things you might actually want, rather than random things you would never like. And I think people would click on those--I'm frequently interested by Amazon's 'suggested items,' while I can't remember the last time I clicked on a banner ad. You could link it up with social networks to show you what your friends are buying--especially what the 'popular people' are getting--or mobile devices to give you suggestions on local spots to visit.

No comments: