Jun 17, 2008

The trouble with free

The fact that newspaper owners both smart and dumb have found no better medicine for their ailing bottom lines than to practice the medieval art of bleeding has led me to question one of the axioms of the modern newspaper business model: Giving away news for free will bring higher profits... someday.

I say this as someone whose job and lifestyle depend on free access. I gorge on media that I could never afford if I had to pay individual subscription fees. I have come to expect that a simple click will take me from the collected wisdom of The Atlantic to the collected wisdom of the New Yorker, from Time's Middle East updates to Politico's campaign coverage, from the New York Times to the Los Angeles Times to a sea of local papers and blogs in between. All without spending a dime. It's a fucking godsend.

It's also the death rot at the foundation of many small- and mid-size publications (which will, in turn, erode the quality of larger publications that they rely on the small guys to refill the talent pool.)

Why is free the problem? It's not strictly a financial issue. Rather, it's one of value.

Imagine you run a successful restaurant. You employ a healthy staff to do the jobs required to keep the place a going concern - creative cooks, attentive wait staff, charismatic bartenders, janitors, dishwashers, parking attendants, etc. Food is the game, the centerpiece of your business. The menu is your selling point, the chef your star attraction.

Then one day you discover your competition has started giving away food for free. They've decided they can make money on pricey cocktails, parking fees and fat tips. To stay in the game, you realize you'll have to give away food for free and hope you'll make up the difference on side businesses, too.

Whether or not you can survive on the bar tabs, how long will it be before great food and top chefs become secondary concerns? How long before you let the quality slip? How long before you hire a less-experienced chef to make it cheaper and faster? How long before you cut the kitchen staff, simplify recipes and lard on the trans-fats and salts to add flavor? After all, you're giving it away free. Sure, you might want to keep the menu as fresh and exciting as possible, but when times are tight and you're bottom line is shrinking, you fire the people who aren't bringing in the cash.

That's why even Las Vegas charges something for the buffet.

Now substitute news for food and you'll have a good idea of what I think is the mindset of the average newspaper owner these days. They look out into the newsroom and see all expense and no profit. They see cubicles full of welfare cases in waiting. News is no longer the game, nor the focus of the business. While we journalists talk about the intrinsic value of news, they talk about the cost of a newsroom that's not carrying its own weight.

Then there are the customers. Americans love to get things for free, but they're generally suspicious of anything that's given away. They often equate free with cheap. As the reader expects less and takes more for granted, the brand and the trust degrade.

So, what's the solution?

Monetizing the newsroom isn't the answer because a monetized newsroom is a compromised newsroom. It runs against the grain of credibility.

Instead, I think newsrooms will have to institute some type of subscription fee. I'm not saying the fee has to be a big moneymaker, but there has to be a more direct link between the news product and the bottom line. Otherwise, business owners are going to keep treating the news side like a bastard child.

But until the New York Times and Washington Post stop giving it away, I'm not sure how any smaller paper can charge a subscription with a straight face. Unless a new wave of city papers spring up ...that will require a healthy mix of guts and serendipity.

The other option is for rich fuckers to set up endowments and start treating newspapers like universities. I'm not going to hold my breath on that idea either.

9 comments:

Shintzer said...

I like your restaurant metaphor.

As many others before me have said, once you start giving it away, you can't go back. People -- including you and me -- get pissed.

excelsior34 said...

No you can't go back, but you can items that are not free.

Gary Scott said...

If excelsior34 is correct, and he/she may well be, doesn't that mean that for newspapers to survive they will eventually transition into a wholly different business? In the marketplace, you are what you sell.

excelsior34 said...

For newspapers to survive they are going to have to spend more money and yes they have to evolve.

Papers have to start and maintain sites that can compete with Monster.com, cars.com and the like.

Every other medium that tells the news has evolved, both radio and TV have evolved into 24 hour news cycles.

Advertising has evolved into things like Monster, the Recycler, Penny Saver and dozens of others.

Newspapers are still doing it the same and our greatest moment may be Watergate which 30 years in the past.

We have to evolve and start sites that can compete with the sites that are stealing our ad dollar.

If we are on the web, than the people who can update the web have to be a phone call away or better yet at least in the same building so locally NEWSPAPERS can become a 24-hour news cycle.

But news on the web should have a purpose of pushing people back to the print edition.

Anonymous said...

Rest assured, the newspaper business is evolving.

The bad news is that newspaper executives are going to throw journalism -- and especially journalists -- overboard.

Monetizing the newsroom is what will happen. It won't be through charging for news.

Newspapers will just get the news without a newsroom.

Newspapers will become a print version of the RSS feed. That, or newspapers will switch to the magazine model by relying on freelancers to supply content.

Gary Scott said...

I don't think a newspaper works without a newsroom. Theoretically, I can see how a newspaper owner might think he or she can get away with putting a paper together using wire, feeds and freelancers. But the problem no one on the business side wants to contend with is access. There's a reason why newsrooms are a more effective way of covering institutions than freelance. You gain a reputation, you have editorial and legal support, you have institutional memory and, most importantly, you have a brand.

excelsior34 said...

Newspapers without newsrooms is not evolution, its more like regression.

There are more than enough problems when you have copy editing in one location and reporting in another to just run a freelance game is going to lead to an AWFUL lot of moronic mistakes and i am talking mistakes in headlines.

and Gary is right, branding is everything. Sorry but newspapers have not evolved at all.

In fact I see nothing but regression,

1. less pages

2. Less editions, haven't seen an extra in a long time and every major paper used to have morning and evening editions.

Now we have morning editions only, for the most part.

3. More publishers that have NEVER been reporters. When I started 20 years ago, every publisher I ran into had been a reporter. Nowadays it seems more and more, publishers are former ad execs or businessmen.
Makes a big difference, businessmen only want the bottom line.

Ben Bradley, a former reporter, on the other hand led the paper when Woodward and Bernstein chased Nixon, what would a business man or ad man have done in that situation - they would have killed the story.

4. Less investigative, most papers do almost none and just fill with mostly wire stories and drop in three local stories tops.

5. Just because papers have web sites does not mean they have evolved. Those are evolving times, not evolving newspapers.

Anonymous said...

Gary, I wish you could be in a newsroom somewhere, in a management position, and making that assertion.

Sadly, the corportization of news has been going on for a long time. It's not a new phenomenon, so it has been going on for a couple of generations.

Newspapers went on the road to hell right about the time when they decided to make themselves public (make shares of stock available). Whereas the companies were once powerful local or regional enterprises, they were now able to grow into conglomerates. They added magazines and broadcast outlets to their portfolio.

Yet with investment money comes the "f" word. No, not that one. Fiduciary. Shareholders want as much profit coming to them as possible. This is when the era of the publisher coming from the editorial end came to an end. The corporate newspaper needed "money people" in management.

Editors tend to value news highly, but not in a way that they can articulate its monetary value.

The trouble is, neither can a "money" person. Anything not quantifiable is scary.

"Money" people can quickly and easily see revenue. They know where the ad money comes from, and who are the top performing sales reps. They can also see circulation figures and reader demographics.

What they cannot do is quantify the performance of a story in print. This is what they want to know, but cannot. With online stories, they can. They could see that Bob Byline or Sally Staffer's copy is getting the most page views. They cannot apply a similar model to print, because they do not know how a story, its layout or its position translates to readership.

What "money" people know is how much the newsroom bleeds from the liability side. They can easily see that Bob Byline and Sally Staffer each cost the company about $50,000 in salaries, benefits and taxes.

Ann Adrep, on the other hand, may cost the newspaper $50,000 as well, but she could be the top salesperson with the most accounts and the most new leads. Her work brings in $1 million in revenue.

The "money" person has Excel open and looks at revenue and expenditures, only there are no names available.

The advertising revenue will have a dollar figure. The newsroom revenue will have a ???.

A "money" person is, by professional education and experience, bound to put a number in place of those ???s. It could be as much or more than revenue or circulation. It may be 0.

The "money" person -- let's call him Numbnuts Singleton -- believes it should be 0 until an audit can reveal otherwise. Numbnuts then sees all liabilities and recommends that the newsroom be shut down.

Numbnuts may have a functioning IQ of his waist size, but he has enough sense to realize that people won't pay for an all-ad paper and something has to fill the space.

While he's not twiddling with Excel, Numbnuts surfs the Net in his spare time. He reads the blogs written about the community where his newspaper operates. He keeps up with them through RSS feeds.

Then, a brainstorm! Numbnuts discovered a way to save money and put a figure in place of the ???s.

He could close the newsroom, and he could just re-run content from the bloggers. He would then compensate them based on a market rate: how many readers clicked on the online version of his story, and in print, calculate the ratio of newshole consumed to available newshole and then multiplied by daily circulation. Best of all, this model results in content expenses that were 1% of payroll.

Numbnuts has become the most despised man in the community, but investors see his 1% miracle and have more confidence in the company. They put enough money back into the company to pay off expenses and grow the business.

Other chains do the same.

Still don't think this can be done? This is probably some MBA student's college thesis.

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