This has been on my to-do list for a while but it keeps getting pushed downstream by other, more pressing issues. The volume of whining – along with the complaints about the whining – has gotten so loud, though, I figured I’d better take an hour or two and get it done:
“#23: Fix newspaper business.”
Pay attention. I’m only going to go through this once.
First, let’s set the table by debunking the hysteria about “journalism in decline” and what it means for the future of our democracy; journalism ain’t going away and neither are journalists. In fact, I will bet you that within the next decade, average compensation for journalists will be ahead of where it is today in real dollars and the number of people making a living – above subsistence levels – will be up as well.
Note the deliberate uses of the words “compensation” and “making a living” rather than “salaries” and “working at newspapers” because at least one thing amidst the moaning and groaning is true: newspapers (and magazines) as they exist today – lots of people gathered in a building to produce content that is principally physically delivered via a daily (or weekly, monthly) sheaf of printed paper – are doomed. It might take a decade or more to take down the strongest of the herd, but the hour of their death is fast approaching (I actually found a site – Newspaper Deathwatch – dedicated to chronicling their passage).
Or, in the words of Cypher, “It means buckle your seat belt, Dorothy, ’cause Kansas is going bye-bye.”
But, what’s killing the big, bad beasties of yore is not a change in human nature or some other cataclysmic shift in people’s behavior. To the contrary, people remain just as interested as ever in knowing what’s going on in the world around them, maybe even more interested than ever now that we live in a world that is increasingly one big tightly coupled network.
“Yeah, but…” I can hear you start to say:
“Yeah, but if that’s true, why are newspaper subscriptions dropping so far so fast?”
Fact: Yes, newspaper subscriptions are dropping, but readership is actually up when you count on-line and print readership. The New York Times has a paid print circulation of around 1,000,000; the New York Times web site logged north of 14,000,000 unique visitors last August according to Wikipedia.
“Yeah, but news consumers don’t distinguish between reputable journalistic content and the other stuff.”
Fact: Newspaper web sites are actually among the fastest growing sites on the Internet in terms of traffic. The Newspaper Association of America, the DC-based flacking group for some 2,000 newspapers, reported last October than their audience had grown 16 percent year-over-year. In other words, people may surf over to Drudge, to Smoking Gun and to TotalBullshit.com (don’t bother, actually, as it looks like it’s part of a porn-themed click-farm), but they are also hitting the mainstream media’s online offerings in record numbers.
And, you know what? Hitting a bunch of sites to get multiple perspectives on a topic, or to keep up with a fast-moving culture is a positive development. Drudge is a scumbag, it appears to me, but his site provides value to anyone who wants to stay abreast of politics or pop culture. Reading what Al Jazeera and Het Parool and Bob’s Blog think about the Dutch immigration issue is a good thing. Getting multiple points of view is a good practice to encourage in your kids and in news consumers as well.
Yeah, but how can we compete with the 57,000,000,000,002 bloggers out there giving away content for free and the 950,000,002 videos posted on YouTube and the 19,999,871 Tweets?
Fact: You can’t. And, you don’t have to. Start by recognizing that you are not in the same business with 99.9999 percent of all bloggers who are – for the most part – either irrelevant content creators (as in…“Today, I went to the Mall and exchanged my iPhone cover for one with a ‘Hello Kitty’ design…”) or are secondary content creators who exist only because someone else creates content for them to push against (as in…”Today, the Times had a fascinating article that…“).
“Secondary content creation” includes, by the way, almost EVERYTHING WRITTEN ON THIS BLOG. The SRC is – for the most part – in the opinionating business, not the the news reporting business. Rarely – Bill McAuliffe’s excellent post about the current state of being inside the Strib newsroom being a most notable, recent exception – do we create something that stands on its own.
(As an aside, even if 99.9999 percent of the blogosphere is full of nothing but wannabees and pirates that means there are still 7,000 sites or so producing high-quality, original content; just remember that a little competition is good for all of us).
Instead, journalists need to learn how to use these sites and technologies and – even more importantly – the impulses behind them and the communities they create (and they are). Rick Sanchez at CNN is doing a nice job making Twitter part of his reporting and in strengthening his relationship with his audience (he’s up to 46,000 followers so far). Ditto how the MSM grabbed onto the on-the-scene coverage of the first minutes of the US Airways ditching in the Hudson when the only “reporters” on site were regular folks equipped with digital cameras and cell phones (see Mr. Keliher’s post on this for more details). These technologies and trends are making journalism better IMHO (especially on breaking news). CNN tried a potentially fun experiment at Tuesday’s swearing in by assembling thousands of pictures taken at the moment the oath of office was administered into a 3D montage of the event; not as cool as I’d hoped, but I suspect it succeeded well enough that will become a standard piece of how big events are documented (as opposed to the election night “holograms” that were lame).
These technologies – plus the Internet (which underlies everything) – are also causing journalists work a little harder to earn their livings and are – in the short term – costing jobs and earnings in their industry. Who needs to wait for each morning’s edition of the Star Tribune to know what happened in the last 24 hours when you get that news in real time from every direction? And, if we don’t need this sort of news from the print edition of the Strib, do we need the Strib journalists who report it, edit it, illustrate it and lay it out on the page? The harsh but honest answer is, “Not so much.”
Truly, though, this transformation – painful as it is on an individual level – is not a bad thing, any more than the rise of internal combustion engine displacing the use of animal and human muscle was a bad thing. Yes, lots of jobs in the calorie-based economy – groomers, saddle-and-tack makers, coachmen, horse shit picker-uppers – went away but they were more than replaced by jobs in the new petroleum-based economy. And, oh yeah, our overall standard of living has risen to incredible levels. The networking of our world offers similar opportunities (and challenges).
But…we still need – and want – journalists to tell us why it happened, what it means, who did it, what could happen next and how it relates to the other news of the day. We need them to add content in the form of explanatory illustrations, commentary from “experts” and contextualization so that we know that something has happened 36 times last year – or never before. And, we need them in more places than ever before; instead of one “cops” reporter covering the Minneapolis crime beat, wouldn’t it be cool to have 4 or 5?
The problem, in short, is not that people no longer need journalists or want what journalists produce; the problems are 1) the economics of the current model and 2) the distribution and display of content. Both will be fixed within the decade and the result of this process will be a “disintermediation” (yes, it’s a real word) of news gathering, reporting and distribution (including an erosion of the importance of the credential “professional journalist”) but ultimately more reporting, more coverage and better pay for working journalists.
The big losers over the long term? The people who own the means of producing journalism today: the Avistas, the Zells, the Sulzbergers, the Murdochs, the Slims. I ain’t losing a lot of sleep for them.
OK, it took too long to set the table – just like it does at home – but now that it’s laid out, let’s talk about Thing 1 and Thing 2 – economics and the distribution and display problems – and how I think they’re going to be fixed.
Thing 1: Economics
Newspapers have made their money from way back by selling their readers’ eyeballs to advertisers – display advertisers ho sell the stuff that fills in the spaces between the news content and classified advertisers who used to populate the big thick sections at the center of the paper. Subscription revenue for a daily newspaper is by comparison a relatively small stream and is largely there to subsidize the cost of home delivery.
Unfortunately, neither revenue stream seems to work in the on-line world. Display advertising revenue has not migrated on-line along with readers and classified advertising has been nearly killed with sites like craigslist, job sites like Monster.com and the auto sites. As far as subscriptions go, with the exception of the Wall Street Journal, no daily newspaper I’m aware of has successfully implemented a subscription charge (the New York Times has tried several versions but failed with each and there has been a general movement among newspapers to put all archived material – generally anything two weeks old or earlier – behind a pay-by-the-article fence). As a result, newspapers have ended up giving away their product (and an arguably superior version of it) for free on line.
At the same time, of course, print readership is in free fall which reduces revenue in the real world (but declining numbers of subscribers does very little to reduce costs, newspapers being – as Tony pointed out last week – a high fixed-cost business). This means advertisers won’t pay as much money for a smaller number of eyeballs, particularly ones that skew so old.
To survive this inflection point (which is a far-from-certain-thing; how many buggy manufacturers made the jump to automobiles, after all?), news providers need some way to capture revenue from their on-line readers who ain’t buying the cow today because they’re getting their milk for free. The all-you-can-eat monthly or yearly subscription model doesn’t seem to work so the solution is…
A micropayment scheme is one in which tiny payments – for purposes of this discussion, let’s assume less than 25 cents, but a purist would say a micropayment is less than 1 cent or the smallest denomination of local currency – flow from a buyer to seller. These tiny payments are insignificant on an individual basis, but aggregated add up to real money.
Here’s how it might work for newspapers; consider this snapshot of Thursday’s Star Tribune homepage:
Today is a pretty typical news day here in the Twin Cities and there’s the usual mixture of breaking news – the Oscar nominations, the SUV kamikaze run on Planned Parenthood, new unemployment numbers and the AG’s lawsuit against Allina – and features like the skyway for sale and Sid’s column. In today’s world, all this content is free to users.
In a micropayment world, however, click on the link to any of these stories and a tiny, variable payment would flow from user to provider. The skyway story costs 1/10th of 1 cent. The unemployment story is 3/10th of a cent, Sid’s column is 1/2 a cent (and overpriced at that), reading about the Oscars will set you back a whole penny, the SUV story is 2 cents and the Allina story is 10 cents (more on why later). In the micropayment world, a user hitting all of these stories might send 13.9 cents to the Star Tribune‘s achingly bare coffers. No logins necessary, no extra steps, the transaction creates very little friction to the current point-and-click process (see below for a longer discussion on this point).
Less than fourteen cents probably wouldn’t have paid for Sid’s coffee back when he started in the news business (actually, I think it was the price of a steak dinner back then), but is it really relevant in today’s world? You betcha. Remember those stats way, way back at the beginning of our story: 14,000,000 unique visitors per month at the NYT, fast-growing MSM web sites, etc; even little numbers are meaningful when multiplied by big numbers.
This is not just theory. Micropayment systems are already in use in on-line gaming environments, in the Skype calling plan and on the Internet through companies such as Wallie and ClickandBuy. Micropayments also exist in the real world: those of us who use MNPass or an analogous system to avoid toll booths are already micropayment participants.
So, to paraphrase Charley Partana, “If I’m so fucking smart, why am I so fucking poor?” Why hasn’t anybody in the newspaper business figured this out and done this?
Setting aside for the moment my smart-ass answer that it’s because there isn’t a lot of innovation in the mahogany row offices of most media companies, there is still a little work to be done in this area. OK, maybe a little more than a little. But doable.
As the cartoon suggests, there is a missing piece to this path to economic salvation and that’s the inability of the current financial system to handle such tiny transactions on a cost-effective basis. If you’ve ever wondered why there’s a minimum purchase for a credit card transaction at many retailers, it’s because the credit card network charges fees to vendors for its use. There are lots of fees, in fact, and their collective impact makes it cost-stupid (beyond cost-prohibitive) to use the credit card network for transactions of a couple of dollars or less.
There are, however, a couple of ways around this. For example, you could build from the ground up a new system to handle these micropayment transactions. That would be massively expensive, take years and be a very speculative proposition. Let’s not go there.
More likely and more achievable would be to do what Skype and MNPass and the other current users of “macro micropayment” systems (i.e. ones with transactions above a penny) are using: each user “banks” a certain dollar amount with a micropayment transaction clearinghouse – let’s say $100 – which also keeps track of the transactions to be debited against each user’s account (I haven’t modeled what sort of additional traffic load this would add to the Internet, but my gut tells me we could process a helluva lot of transactions with the same bandwidth required to download one episode of Lost from iTunes). At the end of the month or whenever it makes economic sense (like reaching a certain dollar threshold), the books are settled and aggregate payments of all those little transactions flows to each news provider.
My perception of the obstacles to this solution are less technical than they are political. Which system? What features? Who develops it? Who owns it? Why yours and not mine? Nobody, it seems, wants to reach for this ring alone.
So, do it together. I’m not sure if they need it, but I bet the industry could get permission from the Justice Department for a very narrow anti-trust waiver to discuss the creation of a micropayment standard for such transactions. That would ease everyone’s fears about looking dumb and let the standard be developed in the open. And, theoretically, it could work not just for the newspapers but for lots of “content” like images, audio, video, other types of writing.
In fact, I posit that one of the reasons micropayment schemes haven’t worked yet (as this excellent overview from 2005 notes, there have actually been two or three generations of efforts in the last 10-15 years) is because they’ve needed the buy-in from a U.S.-based industry like the newspapers.
OK, bear with me, we’re in clean-up mode on Thing One and will be moving on to Thing Two in just a minute. What the hell, if you’re still reading after 2700 words, you’re either a masochist or you’re…something weirder.
I mentioned adding “friction” above and it’s worth circling back to as it’s one of the reasons cited for the slow adoption of micropayment schemes. In addition to ease-of-use issues, which I’m confident a well-designed system can handle, the two big challenges are privacy issues and what Wikipedia calls the “mental transaction cost of each micropayment.
Privacy in this context means the ability to make micropayment transactions from the consumer end so that nobody knows when I click on the link to “read” the Britney Spears article at Playboy.com (go ahead, click it…you know you want to). In all of the current generation of micropayment schemes, such anonymity is possible and the operators purport to be able to launder each transaction so that vendors don’t know who’s buying from them (please note, though, that privacy is a relative thing; if the IRS, the CIA or the NSA come knocking that your micropayment vendor’s door, you can pretty much count on the fact that they’ll give you up in a heartbeat).
The other challenge – the mental transaction thing – refers to the notion that each one of these purchases, no matter how small, carries overhead in the form of decisionmaking by the user as in, “Is this content worth the price?” Economists and psychologists tend to believe that the collected weight of these decisions adds up to a big pain in the ass that would impede use of micropayments.
If you’re a MNPass user, you might recognize this dilemma as you’re zipping toward the HOV lane divider and trying to decide to jink left and pay $1.25 for the HOV lane during rush hour or to jink right and save the buck and a quarter but run the risk of hitting traffic. If a couple of us can’t decide fast enough and hit the center barrier at 70 mph, you can look for “mental transaction ban” legislation to be introduced.
I haven’t seen any data on this, but I’m convinced this problem can be solved with the use of individually set, persistent (as in set them once and they stay in effect until you change them) limits and thresholds on the size of micropayments. When you sign up for your micropay account, for example, you decide that you will one-click purchase any content that costs less than 10 cents.
Using our Star Tribune homepage as an example again, that means that of the six stories you’re interested in reading that day, five of them would have simply opened up when you clicked on them and the micropayment purchase would occur invisibly to you. For the sixth story, though, the one about Allina, you might see a pop-up dialog box with a message like:
Feeling rich? Dial your threshold up to a quarter. Tight this month? Set it at a penny. Want to be notified when you spend more than $1 in a 24-hour period, 50 cents on one site or $10 a month? Point and click.
Now, why is the Allina story 10 cents? The answer is at the heart of the wonderful opportunity news content providers have by disassembling their content and selling it piece by piece: variable pricing. New organizations will be able to price segregate almost without limit. Price segregation sounds bad, but it isn’t. Not for consumers or providers.
Who’s going to read a story about an Allina lawsuit? Lots of business types, particularly those with ties to Allina or the healthcare industry. Just like business travelers, business news consumers are relatively price insensitive and an Allina employee in particular is probably not going to think twice about paying 10 cents. They are willing to pay more…and should.
The newspapers will be crappy at this sort of pricing at first because they won’t have an institutional expertise at it, but they’ll catch on pretty quick. And, because the transaction is being conducted over the web, they’ll get lots and lots of data to help them refine their models. And, once they get the basics down, they can start embroidering by adding loyalty discounts, corporate deals, pricing by geography, etc.
Who knows, they may even reach the Holy Grail of variable pricing…individual pricing in which everybody has a different price based on his or her reading history, purchasing patterns, etc. Given all the shit I took from the media during my time at Northwest for our variable pricing efforts, I’d find that amusingly ironic.
OK, that takes care of Thing One, which is by far the harder of the two Things to deal with IMHO. Thing Two, distribution and display, is much simpler because it requires no “insert miracle here” moment. In fact in many ways, as George Allen used to say, “The future is now.”
Thing Two: Distribution and Display
The distribution gap is already mostly closed for the vast majority of Americans and other residents of the most developed countries. Electronic distribution is almost everywhere already, either through the ever-expanding patchwork of wi-fi hotspots or through the use of the cellular networks which are already faster than their wired predecessors were just a decade ago. Other countries are even further along this road than we are. Some holes to fill way out yonder and in tunnels and elsewhere, but getting there.
In other words, it may be easy to walk down to the corner and put 75 cents in the news rack to get a copy of the Wall Street Journal, but it’s even easier to sit on your ass in your nice warm office and surf to wsj.com or download it in 30 seconds to your Kindle (more on this device below) via Amazon’s “WhisperNet” cellular service.
As far as display goes, let’s pause for a moment to pay homage to the reining champ: paper.
Despite the fact that it’s boring (think Dunder-Mifflin for God’s sake), there are definitely some very good things about this “technology” even today. It’s cheap, disposable, recyclable, portable, flexible and – when used for news – has a density of information that no current digital display technology can match. It has a format that allows for both intense and casual reading, it doesn’t require batteries, a cord or access to a network. If you drop it, you pick it up and keep on reading. If you drop it in the puddle, you throw it away in the recycling bin and replace it for 50 cents via a ubiquitous distribution system of newstands, vendors and racks.
And, paper provides the intangible that I value very highly: the serendipity factor of finding something you didn’t know you were looking for.
These advantages keep print newspapers in the game – try reading a newspaper on your laptop while standing up on subway sometime to see them in action – but their advantages are narrowing daily.
But, lest we forget, like Mark Antony come to eulogize Julius Caesar, “I come to bury paper, not to praise it.” Its time on stage – at least as far as the newspaper business is concerned – is rushing to an end. We still have a little work to do before the electronic world outshines the real. Even so, there’s a clear, well-defined path that will – I believe – pull us even and then ahead of paper. Let’s take our bearings and see where we are.
The Kindle is version 1.0.
For those who have missed the introduction of this device, the Kindle is the brainchild of Jeff Bezos and the wacky gang at Amazon. It is essentially an electronic reader into which you can pour hundreds of books along with newspapers, magazines and other written contact. It plays MP3s and connects to the world via a cellular network. No will be shocked to learn that I’ve been playing with one for the last year or so.
As you can tell, the Kindle is butt-ugly and not much of an analog for paper. It’s too small, doesn’t match the resolution of paper, can display only black-and-white (grayscale actually), etc. It is best suited for its main purpose, reading books (for which it is well-suited).
But it does work for newspaper reading.
You can download the daily New York Times and the Wall Street Journal in less than 30 seconds from anywhere you get a cell signal. The text is readable, the layout and organization is navigable. The cost is comparable to the print edition.
But, it ain’t paper.
What I really want is something with all the great qualities of paper enumerated above and the advantages of digital – dynamic content, interactivity, storage capacity, etc.
Here comes Version 2.0.
A company by the name of Plastic Logic has been creating quite a buzz for itself over the last six months with pictures and demos of it scheduled-for-this-year product: the Plastic Logic Reader (there’s a name developed by engineers).
As you can see, the Reader is a big step up from the Kindle as we now have a form factor on par with a magazine or a tablet of paper. Tiny enough, in fact, that some reviewers have worried about losing it in the recycling.
The bezel around the edge houses power, wi-fi, storage and other administrative functions and serves to add stiffness to the display (it really does bend). Screen resolution is supposed to be about 150-175 dots per inch (pixels per inch really), still a far cry from what printing presses can do (your typical magazine prints at 2500 dpi) but substantially better than most computer displays (it uses the same “ink” technology as the Kindle).
The Reader is supposed to start dribbling out in the second half of 2009 with consumer sales beginning in 2010. Us gadget lusters are very excited to get our hands on it.
But it still ain’t paper.
What we’re waiting for is Version 3.0, an evolution that is more than a few years away (but less than 10) and it looks something like the USA Today imagined in Minority Report or – just as interestingly – like the Daily Prophet in the Harry Potter series.
Sir Arthur C. Clarke, one of my childhood heroes for writing really interesting science fiction (try Childhood’s End (1953!), 2001 (1968!) or Rendezvous with Rama (1972!) for some ideas that will cook your kid’s 12-year-old noodle), famously said, “Any sufficiently advanced technology is indistinguishable from magic.” Of course, Sir Clarke was a little ahead of his time; he anticipated it all in 1961.
Now, skeptics will point out – correctly – that electronic paper will not ever replace its low-tech predecessor when the price disparity between the alternatives is so large. A Kindle – if you could buy one as they’ve been sold out since before the holidays – would set you back $359 (you can buy them on eBay or Amazon’s Marketplace if you’re really interested but be prepared to pay a premium). No word on pricing for the Reader but “not cheap” is probably a good guess. You can buy lots of newspapers for the same amount.
Correct, but ultimately fixable as electronic paper will follow the same price curve that all technologies follow in the current age: through the floor at an accelerating rate. Between 1980 and 1990, for example, the price of 1 megabyte of hard drive storage dropped from approximately $700 to about $10 (today, that same amount of storage will set you back $0.00002).
Once the technology is developed, the manufacturing process is optimized and the demand is established, the price of digital paper will fall just as quickly if not faster.
OK…shockingly…that’s it. Let me wrap up by reviewing the preceding 4,543 words: 1) journalism is not dead, dying or irrelevant; 2) micropayments are the answer to the economic discontinuity afflicting newspapers, and; 3) advances in distribution and display technologies will make digital paper a reality and a viable alternative to paper.
Got it? Now, please somebody go do it so all the journalists can quit worrying about their future and so that something important doesn’t slip by unnoticed while the industry is navel-gazing.
Me, I’ve got to get on to some of the other entries on my to-do list like #17 (program Roombas), #8 (empty receipts from wallet) and #4 (tease cat).
“#23: Fix newspaper business.“