March 14, 2005

KEEP YOUR COW (via The Mother Judd):

Can Papers End the Free Ride Online? (KATHARINE Q. SEELYE, 3/14/05, NY Times)

Consumers are willing to spend millions of dollars on the Web when it comes to music services like iTunes and gaming sites like Xbox Live. But when it comes to online news, they are happy to read it but loath to pay for it.

Newspaper Web sites have been so popular that at some newspapers, including The New York Times, the number of people who read the paper online now surpasses the number who buy the print edition.

This migration of readers is beginning to transform the newspaper industry. Advertising revenue from online sites is booming and, while it accounts for only 2 percent or 3 percent of most newspapers' overall revenues, it is the fastest-growing source of revenue. And newspaper executives are watching anxiously as the number of online readers grows while the number of print readers declines.

"For some publishers, it really sticks in the craw that they are giving away their content for free," said Colby Atwood, vice president of Borrell Associates Inc., a media research firm. The giveaway means less support for expensive news-gathering operations and the potential erosion of advertising revenue from the print side, which is much more profitable.

"Newspapers are cannibalizing themselves," said Frederick W. Searby, an advertising and publishing analyst at J. P. Morgan.

As a result, nearly a decade after newspapers began building and showcasing their Web sites, one of the most vexing questions in newspaper economics endures: should publishers charge for Web news, knowing that they may drive readers away and into the arms of the competition?


The problem is that most of us still get a local newspaper every day. The additional content from around the nation and globe is fun, but hardly a necessity. If the SF Chronicle, or whoever, started charging for access to their site who would really feel compelled to spend the money? Especially when the BBC, VOA and others will still be posting thorough news coverage for free?

Posted by Orrin Judd at March 14, 2005 6:40 PM
Comments

You are correct that no one can start charging, but if I'm not mistaken the most succesful newspaper in terms of revenue from the web is the Wall Street Journal, which has charged for content from day one.

Opinion Journal - editorial page is excepted (and I may have had a tiny hand in that)

Posted by: BB at March 14, 2005 6:50 PM

BB:

It's a corporate write-off/expense account item.

Posted by: oj at March 14, 2005 6:57 PM

Newspapers are afraid of finding out how much we would be willing to pay for their unique content. Not much, they fear.

Since most of what they print is either wire service reports we can get anywhere or 'opinion pieces' which insult our intelligence, they are right to be concerned.

At last - something they've understood correctly!

Posted by: ZF at March 14, 2005 7:26 PM

They don't even understand the economics of their current business, and are trying to apply this misunderstanding to their websites. Most of the revenue comes from advertising; subscriptions basically cover the cost of paper, ink, and distribution. Since the cost of production and distribution on the web is negligible, to charge for it is suicidal.

Posted by: jd watson at March 14, 2005 9:19 PM

"...the number of people who read the paper online now surpasses the number who buy the print edition."

It'd be interesting to know what percentage of eyeballs they're getting come via bloglinks. In my own case it's a rare occasion that I directly access a major media website anymore. Perhaps they ought to be paying the bloggers for referals.

Posted by: MB at March 14, 2005 10:21 PM

Localism by newspapers is really the only thing that can drive paid content, since it is a more specific service, similar to the financial information offered by sites such as the Wall Street Journal.

The New York Times, or the Washington Post, or any other paper can seek to get people to pay for access to their story on the Lebanon protests, or the Atlanta court slayings. But there are dozens of other sites where a reader can go to get roughly the exact same information for free. It's only when you get down to the very local level that a reader's choice of available options diminishes, and the scarcer commodity provides potential value to the papers by being able to charge for their information.

Of course, someone can still come in and undercut you, by providing that same local information for free. But then the new competitor has to figure out how to support their own web site financially while paying people to cover all this stuff (I suppose you could substitute a network on bloggers to report the local new to some type of open source website, but getting people to voluntarily get up at 2:30 in the morning to blog/report a five-fatality accident on an icy highway in the dead of winter isn't something folks are likely to do for free).

Also, as with the case of the big stories having mutliple sources online, the bigger the city, the more potential rivals there are going to be. That's why a multi-newspaper city like New York is likely to maintain it's free news websites longer than cities where the newspaper is in a monopoly situation.

Posted by: John at March 14, 2005 11:03 PM

Tell Bill Keller that I haven't paid for the WSJ twice and I am notgoing to do it for his rag.

Posted by: Robert Schwartz at March 14, 2005 11:31 PM

JD Watson is correct. Ads are the revenue source for newspapers and periodicals. The proof is simply that both are willing to dleiver their products tp you at a loss if you will commit to receiving them for a specified time.

It must have been hell for the scribes, facing down the printing press...

Posted by: Seven Machos at March 15, 2005 12:00 AM

What we need is a good micropayment system, but no one has been able to make it work.

Posted by: David Cohen at March 15, 2005 11:19 AM

John is repeating Lileks's argument, which I agree with, for localism.

People buy papers for local news and for the ads. I mean, how many women buy Vogue for the stories?

Internet ads so far just don't match up, and I don't see how they ever can.

One of the local guys I work with, whose father edited the paper, too, really sweats the honor roll lists and military enlistments. 'Nobody cuts out and saves the stories about Bush's budget,' is how he puts it.

Posted by: Harry Eagar at March 17, 2005 4:47 PM
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