Consumers have never paid for news

16 08 2009

In his first of “Five Key Reasons Newspapers Are Failing,” Bill Wyman delivers a powerful argument against pay-for-content as a viable business model for newspapers: Newspapers don’t sell news; they sell readers.

The full article is a worthy treatise on the causes if not the solutions, and he admits as much at the outset:

After 30 years in the industry, I know enough to know I don’t know what it should be doing. But if we’re talking about the state of the industry, and we’re not acknowledging the issues below, we’re not fully looking at the roots of the problem.

Rats. I hate that. I have been putting faith in Walter Isaacson’s theories espoused in TIME early this year about micro-payments being the salvation of the industry. Here’s Wyman’s take on that:

It’s shocking that a fundamental lack of understanding of these aspects of the business has been the basis of some of the most high-profile writing about the state of the industry. Walter Isaacson was the managing editor of Time and the CEO of CNN; in a recent cover story for Time on the daily newspaper crisis, he based his argument on the following assertion:

“Newspapers and magazines traditionally have had three revenue sources: newsstand sales, subscriptions, and advertising. The new business model [i.e., web publishing] relies only on the last of these. That makes for a wobbly stool even when the one leg is strong. When it weakens, the stool is likely to fall.
Isaacson didn’t provide any figures. It didn’t occur to him or any of those high-paid Time editors who shepherded his essay into print that the money generated by newspaper subscriptions—$5 or $6 a week in most cities—could hardly be called a leg on a stool.”

Think about it for a moment, and you realize those paltry sums couldn’t come close to making up the cost of merely printing a newspaper and then delivering it by hand to a subscriber’s doorstep seven times during each of those weeks.

Nor can a company make money in 50-cent increments by sending union employees out in gas-guzzling trucks through gridlocked streets several times a day distributing to hundreds, even thousands, of newspaper boxes over scores, perhaps hundreds, of square miles.

That issue of Time was still on newsstands when the editor of The San Francisco Chronicle, which had been losing $1 million a week for years before the current recession hit, was telling his readers that it cost the company $10—10 dollars—to deliver a Sunday Chronicle to their homes.

He didn’t explain his math, but let’s give him the benefit of the doubt. And let’s say that the smaller average weekday paper costs less, maybe $6, to print and deliver. In other words, if we can trust his figures, it might cost the Chron at least $45 a week just to print and deliver a single subscriber’s paper. The paper is currently offering eight weeks’ delivery to new subscribers for just under $8 a week.

Back to Time magazine. Isaacson’s logic took him to this assertion:

“In an advertising-only revenue model, the incentive is perverse. It is also self-defeating, because eventually you will weaken your bond with your readers if you do not feel directly dependent upon them for your revenue. Newspapers will end up producing a lot of sections about gardening and home improvement, which advertisers want, and getting rid of their book review sections, as the Los Angeles Times and Washington Post have done.”

Isaacson, thinking he was offering an analysis of the current business situation of newspapers, was actually describing the previous one. Didn’t newspapers “end up producing” sections about gardening and home improvement decades ago? As for those book review sections, they were gone as well; the ones he mentioned were about the last two remaining of the 1400 daily papers in the U.S. In other words, that “bond with readers,” financially speaking, Isaacson talked about never existed.

It was sacrificed to Wall Street. Those book review sections were early roadkill in the companies’ drive to cut back content and prop up the industry’s comically high returns.

Of course, it’s always much safer to proclaim why things won’t work than to find something that will. Nevertheless, it’s a pretty deflating article, I found.

By the way, here are Wyman’s other four reasons newspapers are failing:

2. Newspapers are the product of monopolist thinking

3. Timidity doesn’t work on the web

4. The staffs of the papers, from management down to the reporters, deserve a big share of the blame

5. Newspaper websites suck

 

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One response

17 08 2009
matthew_frederick

I love the suggestions he puts at the end. Hyper-local seems to me where newspapers should go.

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