Defense loses this ballgame

Most of what I hate about the newspaper industry was encapsulated in a single session at the American Society of News (not Newspapers! Really!) Editors meeting in D.C. a few days ago. An otherwise smart agenda took the inevitable detour down the rabbit hole with yet another discussion of pay walls.

Walter Hussman, publisher of the Arkansas Democrat-Gazette in Little Rock, flogged his usual paywall-as-a-defense argument: In a world where online users are worth less than print readers, he seems to say don’t bother with the former. “Why would I want to be platform agnostic when I can get (ad rates of) $40 (per thousand print readers) instead of $4?”

 I was reminded of two recent, similar quotes:

  •  An analysis ascribed to Washington Post president Steven Hills in a devastating New Republic piece on the paper’s woes: Post print readers are worth $500 a year in revenue; online readers are worth only $6.
  • Rupert Murdoch’s assertion that users will cough up for online content: “When they’ve got nowhere else to go they’ll start paying.”  

Hussman and Hills are both falling for the same “defense first!” mentality that has crippled innovation at newspapers. They’re implicitly assume print readership will stay the same forever (it isn’t ), and that print ad revenues will maintain, too (they aren’t).

Rupert is making an even bigger mistake. He assumes “nowhere else to go,” conveniently forgetting that his media empire was built on expensive printing plants and government broadcast licenses, each of which makes competition economically unfeasible.

Clearly, Rupe hasn’t noticed that those monopolies are gone (or maybe he’s blustering). Local television stations are emerging as real competitors  to newspaper sites in many markets. Some, like Allbritton Communications in Washington, are building separate sites to target niches and general news. And there are plenty of independent  local  sites, with new ones springing up all the time. On their own, they may not seem formidable. But enough of them in a community could ruin a local newspaper publisher’s day. No wonder potential entrepreneurs are licking their chops.

 (The ease of publishing via free services like WordPress  and Blogger are a key reason that “information wants to be free.” More on that, including some semi-geeky economic theory, another day.)

 If competition makes paywalls nothing more than defense (and the numbers sure seem to make that case), then what’s a better answer? What gets at Hussman and Hills’ arguments that print readers are worth more?

Let’s take this out of the emotional world of change for a second, and into the dispassionate world of math. Everyone remember the commutative and associative properties from third grade?

If your print readers are worth 10 times your online users, then work to get 10 times the number of online users. You’ll make the same amount of money. (Actually, you’ll end up with more – production costs are lower on digital platforms. No paper, no trucks.)

Daunting? Sure. Simply regurgitating your print product in digital formats won’t grow your audience ten times. No single product will, either.

But a network of niche products is part of the answer.

So is good app for the iPad (and don’t forget the waves of similar devices that are sure to follow).

It also means forcing the business side of the house to think clearly and execute.  And it means engaging in biz-side thinking ourselves.

If our goal is to grow our audiences again – not merely milk the ones we have – we have to engage consumers. We have to give them what they want, when, where and how they want it.

Yes, it’s not easy. Innovation never is.

But doing nothing – or hiding behind a paywall – merely guarantees a slow, lingering death for newspapers. That’s unfair to shareholders, to employees – and ultimately to the communities we serve.

1 comment so far ↓

#1 Bill Day on 05.05.10 at 8:39 pm

Paywalls and why newspapers are doomed

Doomed not because the concept of a paywall is broken (it is)

Not because content has no value (it does)

Not because consumers don’t/won’t support pay sites on the web (they won’t)

Doomed because the very idea that publishers see paywalls as a viable option means they are ignoring the structural problems that are destroying our industry. Walter Hussman’s lament that online readers are worth only 10% of print readers misses the fundamental point – print pricing is broken. A print reader was worth $40 last year – but they won’t be worth that much next year and even less the year after. Erecting a paywall to protect print revenue is like installing a deadbolt on your front door while the house is on fire – all you’re doing is locking yourself in…..

The sad truth here is that newpaper readers are no longer worth what they were 5 years ago, let alone 10 years ago. Newspaper profitability has been overwhelmingly driven by classified advertising – stacks of text listings distributed to discreet geographic markets. Having created an exclusive marketplace, newspapers rationally priced their themselves at a significant premium. A perfectly rational strategy when you own the market.

What publishers are willfully choosing to ignore is the impact of the internet on their pricing strategy. Print no longer owns the market on used car, homes, or job listings. Period. This isn’t a tomorrow challenge, this is a today crisis. The model is dead anywhere newspapers stacked text to let people search for information – from movie listings to legals to help wanted. Dead. Today.

That’s not to say all is lost. The audience newspapers deliver still holds tremendous value for traditional classified advertisers. The trick is finding a new pricing model and product offering that makes sense in a highly competitive marketplace. Instead of wasting time on paywalls to try and slow online adoption, publishers should be working on finding new classified models that make sense in a post-print era.

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