What We’re Willing to Pay for Online

16 02 2010

Forgive the USA-Today-style headline, but a new report from Nielsen on attitudes toward paid Internet content may offer some hope for a revenue stream for online news providers.

Nielsen surveyed 27,000 across 52 countries. The survey showed that about four out of 10 consumers would consider paying for online newspapers, and one in three would consider paying for Internet-only news sources. Nearly half would consider paying for magazine content online.

Those numbers may sound unexciting, but consider that news consumers probably make up a modest portion of the general consuming public Nielsen surveyed. It indicates that there is at least a market for pay-for-content in news, though maybe a reluctant one.

The survey results, however leave many unanswered questions about a business model for online news:

“Regardless of what systems they choose, media companies will almost certainly not abandon advertising; and consumers will doubtless still see ads along with paid content. For the 47% of respondents who are willing to accept more advertising to subsidize free content, that may be tolerable. Yet it will probably not sit well with the 64% who believe that if they must pay for content online, there should be no ads.”

Counterpoint to death watch for newspapers

28 10 2009

Jonathan Knee of the Media Program at Columbia Business School opines in Barron’s that newspapers are doing just fine.

Until recently, many newspapers had profit margins exceeding 30%. By 2008, the industry’s average margin had fallen to the mid-teens. The speed and magnitude of this decline have resulted in wrenching changes in the way these historically stable businesses must operate.The continuing drama shouldn’t distract from real earnings power. Many newspapers still have almost double the profitability of other media sectors, such as movies, music and books — which have long struggled to achieve margins of even 10%.

Knee concedes that the Internet has hurt newspapers and that Web media deliver value that newspapers can’t match. But he notes that the downside to the Internet is information overload and says newspapers may or may not play a key role in guiding customers through the cacaphony. It depends on whether they join the race for solutions to finding and identifying credible, balanced, and researched content on the Web.

THE NEWSPAPER OF TOMORROW will indeed be very different in terms of how it is produced and delivered, what is in it, and how profitable it is. It will be part of a much more crowded and complex news and information ecosystem.

Operators must aggressively focus on cost and cooperation, designing truly distinctive offerings that leverage their advantages in this newly competitive landscape.

Policymakers currently have plenty of legitimate targets of their attention without worrying about the fate of newspapers or trying to keep change from happening. If they keep out of the way, news junkies in particular should anticipate an era of unprecedented plenty. And investors will be well-rewarded by backing managers who appreciate the continuing, if diminished, profit potential of this new environment.


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


FT editor says come on in, water’s fine

4 08 2009

This is rich. The editor of that venerable peach journal of capitalism, The Financial Times, urges other newspapers to hurry up and join the FT in charging for content. The editor, Lionel Barber, says:

“What I would say to the competition and to the rest of the world is that it’s getting late. If we move now we can assure ourselves of a prosperous future.”

Translation: “Don’t leave us hangin’ here, fellas.”

Further, he warns other newspaper editors not to compete on price, because that would be wrong. Some capitalism, there!

But I do think he’s right to focus on brand and business model, and the FT is ahead of the pack there. He doesn’t see ad revenue as the answer, although it ought to supplement paying readers.

Competing with the BBC is a prickly issue for private news gatherers in the UK, and the interviewer badly wants the FT to pick that fight, but Barber won’t go there. Nor will he attack blogs that cut and paste news content. He doesn’t see that as competition. He sees the players as those with big brands built on credibility and value. Lot of sense in that.

David Geffen looking to buy NYT, convert it to not-for-profit

18 05 2009

Newsweek is reporting this interesting tidbit. It could herald a new model for journalism.Geffen

So why is Geffen, having already sought unsuccessfully to acquire the Los Angeles Times and now reportedly eyeing The New York Times, so keen on stuffing his portfolio with an investment that seems dead on arrival—newspapers? Geffen declined to publicly comment on media reports that he recently tried to acquire a large stake in the financially distressed New York Times Co., parent of the storied newspaper. But two people familiar with Geffen’s thinking say the answer is simple: an acquisition of the Times wouldn’t be a financial investment. If Geffen were successful in landing The New York Times, said one of the confidantes, he’d convert it into a nonprofit institution. He would regard the newspaper, perhaps the world’s most influential journalistic enterprise, as a national treasure meriting preservation into perpetuity. His model would be the ownership structure of Florida’s St. Petersburg Times, which is controlled by a nonprofit educational institution, the Poynter Institute for Media Studies. “David would hope the newspaper makes a profit,” said the confidante. “But he believes that operating without the ultimate responsibility of paying dividends or necessarily having to be profitable is the best way to run an institution like The New York Times.” …

The New York Times Co. has been in virtual crisis mode for months, with precipitous declines in advertising and circulation and the burden with massive amounts of debt. The parent company has been so concerned about its plight that, independent of Geffen, it also recently considered converting to nonprofit status. “But the option is more complicated than it might seem at first blush,” Scott Heekin-Canedy, president and general manager, said last week in answer to a reader’s online query. “For a host of reasons we have ruled this out for the present.” Heekin-Canedy didn’t elaborate, however. “These were proprietary internal discussions,” a company spokeswoman subsequently told NEWSWEEK, declining further comment.

Watching Boston Globe developments with ambilvalence

4 05 2009

I can’t help rooting for a solution, however temporary, to keep the Globe on life support. It’s hard to imagine Boston without the Globe. But it’s become a shadow of itself, and the current concessions that the New York Times Co. is forcing on the Newspaper Guild can only accelerate the death spiral.

Note the lukewarm vote of confidence from the newspaper’s publisher:

While negotiations with the paper’s smaller unions have been relatively productive, the Guild, representing such a large and diverse group, has had to overcome deeper divisions. Still, most Guild members felt something would be worked out to avoid closure, according to Globe employees, and an email Thursday from Globe publisher Steven Ainsley lifted their hopes.

“By all accounts the talks have been substantive,” Mr. Ainsley wrote, adding that he thinks “we’ll emerge from this difficult period in better shape than when we entered it.”

On Sunday night, the Guild said that after “arduous deliberations” it had exceeded management’s demands for $10 million in cuts. “These tremendous sacrifices, across virtually all categories of compensation and benefits, are more than adequate to continue The Boston Globe’s mission of quality journalism,” the Guild said in its statement.

Viewing the situation as a “difficult period” from which we can emerge is part of the problem. It’s the end of the era for newspapers, and what will emerge for journalism has yet to take shape. But now is the time for creative evolution, not the prolonging of death throes.

I love newspapers and journalism, and I admire the commitment and courage of those still fighting the good fight. But you can’t cost-cut your way out of this problem. The work must be done on the revenue side and in building a viable business model.

Boston is the home of some of the world’s greatest minds in technology and business. I’ve got to believe that if there is a future for journalism, it can be born here.