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Posted by on Mar 9, 2009 in Media | 4 comments

The Myth of Paid Content

I think that if I hear another newspaper person utter this phrase — no more free content — I will scream. It’s either that or shoot the guy. (It’s almost always a guy.)

The latest missive to feature this demand comes from David Carr, writing in the Sunday New York Times (tip). Howard Kurtz alluded to it when writing about the demise of The Rocky Mountain News, asserting that “newspapers feel compelled to give away their content.” It was also a theme at the “No News Is Bad News” event in Seattle in February.

Why is this demand driving me crazy?

The implication in the “no more free content” meme — that all would be right in the newspapering world if online readers would just ante up — rests on a false assumption. News and information consumers, in the main, do not “pay” for news content! In my lifetime, all mass media have “given away” their content. There are exceptions (Consumer Reports comes to mind) but the “no more free content” folks are not talking about niche magazines: they’re talking about local daily newspapers.

The Myth of Paid Content
Before looking at local daily newspapers, let’s look at other mass media. The only “cost” associated with broadcast television news and entertainment programming is buying a TV (or a computer with a TV card) and a sufficiently powerful antenna. The content is “free” to consume because it is supported by (subsidized by) advertising.

Let me say this again: broadcast television content is free. So is AM and FM radio content.

Now, let’s turn to newspapers, because that’s where the lament is loudest these days. (Local TV will be next, though, mark my words.)

First, is it possible to read the newspaper with no out-of-pocket cost? Yes, go to the library. Failing in that, go to a coffee shop or deli or restaurant and read an abandoned copy of today’s newspaper. Or go to a university, where copies of dailies are given away for free, one assumes to boost readership and thus ad rates.

Second, when you buy a subscription to a newspaper, are you “paying for the content”? No. You are paying for the delivery of the content. Maybe.

For example, a weekly Seattle Times or Seattle PI subscription is $5.00. (The Wall Street Journal? $3.49 for paper + web.) No one from the Seattle Times or PI or Wall Street Journal is going to tell me with a straight face that this covers the weekly cost of printing and distribution, much less the cost of the news staff. In 2000, subscriptions accounted for only about 20 percent of the newspaper industry revenue stream but newsprint alone was 15-30 percent of operating costs (Media Economics, p 114 and 116).

Newspaper subscribers are not paying for the news in the printed paper, we are paying for delivery (convenience). Single issue news stand sales: also convenience and delivery. The newspaper has been, effectively, giving the content away for decades. What, then, has changed?

Market Structure and Business Model
The newspaper industry in the U.S. could be characterized as one of local monopolies, with about 98 percent existing as the only daily in their markets (Media Economics, p 110). Advertisers used newspapers as a way to reach mass audiences, and, before CraigsList and eBay eroded the monopoly that was classified ads, about two-thirds of the content of a daily newspaper was advertising. Compare that with television (broadcast and cable), where the ratio is reversed: only about one-third of TV content is commercials.

Therefore, a sound argument could be made that the newspaper existed as a vehicle for advertisers, not for news. And when you consider that lifestyle, automotive and food section content is directly or indirectly linked to advertisers, it’s pretty clear that the “news” exists as an enticement to get newspaper readers to see ads.

Tell me how this means that readers were “paying” for content in the “good old days” model?

Between A Rock And A Hard Place
Subtract the percentage of news in a local daily newspaper that comes from a wire service. What’s left? Yesterday’s Sunday Seattle Times, for example, had two locally-produced news stories in the “A” section (three if you count the front-page photo); three locally-produced stories in the “B” section; one in business; and one in real estate. (I didn’t check sports.) The remainder (excluding opinion and columns) was wire stories. This means that today’s newspaper reader has less and less of reason to buy the local paper: its relevance has dropped off a cliff.

Because of the loss of classified advertising revenue, today’s newspapers are smaller, both the number and size of pages.

It’s not surprising that newspaper owners are shrinking the size of the printed paper. For each daily issue, most of the non-variable cost (news staff, for example) is wrapped up in the first newspaper to roll off the printing press. As a newspaper’s readership declines, the cost per printed paper rises; there are fewer papers to share in the cost of that first paper off the press. To reduce costs, your make that first paper smaller.

This attempt to “save” themselves into profitability has instead made the product less valuable. The predictable result: lack of relevance + less content = declining readership of the printed paper. It’s a vicious circle.

From this perspective, today’s financial problem is a lack of advertising — not subscription — revenue. The advertising-subsidized content model is not new, whether we are talking TV, radio or newspapers. But it is not working — and may not work — in the digital space, where advertisers can tell how well their ads work (unlike radio, TV and print) … where the advertising-content ratio is unlikely to approach the 2-to-1 level of pre-CraigsList days … where audiences are no longer “mass” but instead are “niche” … and where scarcity has disappeared, giving online news all of the characteristics of a public good.

The picture I’ve painted of a business model gone bad is painful, some would say grim. But the news consumer is not the bogeyman here, so stop blaming us. Instead, focus on finding a new business model that works in the digital world.

This post first appeared at WiredPen.