Six Pixels of Separation - The Blog
September 29, 200910:19 PM

People Will Pay For News Online... Just Not A Lot Of People

The days of scoring record profits - year on year - for traditional publishers may be coming to an end. It doesn't mean that they will not make any money. It just means that they will make a lot less money than what they anticipated.

There's nothing new in saying that. Countless Blog posts, magazine articles and newspaper pieces have been written about the death of the newspaper (with the magazine industry playing a close second). Smart and engaging media pundits like Jeff Jarvis and Jay Rosen have built their professional careers on deconstructing the new state of affaires when it comes to the publishing industry (I've given my own perspective on it in this space on numerous occasions). There are many mitigating factors as to why this shift is happening and the Internet is not the lone culprit. Everything from innovation to indignation on the part of the publishers have played key roles in the current dismantling of how the masses consume news. The truth is that you can blame the overall decline in people reading print as much as you can blame the Internet for the shifting landscape.

The bottom line is that the traditional media publishers have given the majority of their content away for free online for so long that their ability to turn it into a pay model is a tragically long shot. 

That reality was driven home on September 25th, 2009 when Silicon Valley Insider - Business Insider published the news item, People Won't Pay For News Online. As part of their "Chart of Day," here's what they stated:

"Asked what they would do if their favorite news site suddenly began charging, 74% of respondents said they would 'find another free site,' according to a Harris Interactive study commissioned by PaidContent UK. Only 5% said they'd pay to continue reading... We wonder if studies like this will put any kind of damper on Rupert Murdoch's plans to charge for access to much more of News Corp's online news and entertainment content - from celebrity pics to the Wall Street Journal."

What's left to figure out is how big of a market that 5% is.

It seems to be the one major part of the equation that no one wants to really look at or acknowledge. That 5% (which could be more) may well be a significant amount of money for new publishers... and that's the point. No traditional publisher is going to stand up in front of their shareholders and say, "well, we made 52 million dollars last year, but because there are simply fewer people willing to pay for the news, we're only going to make 15 million next year," with smiles on their faces. That being said, for many new media publishers that 15 million might be more than enough to keep a newsroom gainfully employed with profits to spare.

Are traditional media publishers ready to make a lot of money, even if it is a lot less money than they are used to?

By Mitch Joel


Comments Comments Feed
  • Posted by Bobby Hewitt
    Mitch Joel

    If small is the new big, then the 15 million next year vs the 52 million last year is the direction it's heading, which also means a much smaller staff and possibly a shift to an organized citizen journalist model. The problem I see is that when news is disseminated that much credibility becomes a huge issue. But then again the credibility of the the big news networks has been eroding for years and will continue to erode as the speed of communication increases. Great food for thought Mitch, thanks for the post.

    Reply
  • Posted by Michael Boyle
    Mitch Joel

    Mitch, this is a good piece and a good summary of the current discussion, but I can't help but notice that to some extent the discussion on these terms is a trap.

    User pay (in the form of newsstand buys or subscriptions) has NEVER been the most important revenue stream for any mass market print media. Is print media really in trouble because there are fewer buyers? Yes - but NOT because of the lower revenue from sales, rather it's because the ad market collapses with fewer readers.

    So our beloved print media industry seems like it's trying to recoup one failing revenue stream - ad sales - with a revenue stream that has always been much smaller - user pay. It's no wonder the math doesn't work - there's no way it could work. And my bet is that even if circulation had remained high, we'd be more or less in the same place as we are now as print advertising customers asked for as high a level of detail about conversion rates and such as they get from their online buys.

    Online ad spending is at an all time high - but the newspapers aren't getting much of the cut, and certainly not enough to replace print ads. Newspapers are an ad platform, and publishers made money by owning the platform. I can't see any way out of their current conundrum that doesn't involve owning the new platform. But... good luck taking on Google. They would have had to have started a decade ago. And the only alternative precedent - Craigslist vs classifieds - isn't very promising either.

    Overall, though, user pay are a distraction - this whole discussion is and always has been about ad revenues.

    Reply
    • What is even more disturbing (and a stat I have Blogged about here before) is that according to a report provided by Nielsen Online for the Newspaper Association of America, newspaper website visitors generated 3.5 billion page views during the month of June 2009, spending 2.7 billion minutes browsing the sites. This means that over 1/3 of all Internet users visit a newspaper website: http://bit.ly/GZWK2.

      Reply
  • Posted by mbamieh
    Mitch Joel

    Like the commentator before me, i find this to be a bit of a greedy misdirection. News print industry is built on ad revenue and they need to come up with a new business model the augment for the loss in ad revenue that will never be recovered.
    It is sad, but it seems to me that newspapers and publishers, like the music industry, refuse to evolve and they feel like dragging the rest of us down with them.
    They need to bring in about some more innovation and they have a great asset INFORMATION, look at what open calais is doing ... thats one direction that might help them evolve

    Reply
  • Posted by Mike D. Merrill
    Mitch Joel

    Just to add here, CNN just launched their iPhone app with a price of $1.99 yet USA today, New York Times and CNN Money is free. Now, everyone could argue CNN is one of the most respected news sources out there, but why would I pay for the app when the content is free online?

    @mikedmerrill

    Reply
  • Posted by Kevin Lenard
    Mitch Joel

    Mitch, I'm not going to pretend to have any radical solutions to the problems of an entire industry, but there are players out there who have figured out how to make the shift from off to online pay, if not profit (CNN, politico.com). The net has not killed industries like music, it has forced business model innovation upon them. Some are too moribund to adapt.

    Key to note about CNN's $1.99 download charge is that it is one time only, the price was likely researched out the ying-yang, it's too low to be an obstacle to most people paying it and it offers the KEY criteria required for success in apps, value for money. People are used to paying for apps now (BIG insight). This app has advantages over the competition that people who value news, interactivity, instant video feeds, etc. CNN is sidestepping the issue of 'paying for news' and is charging for a feature-packed app -- a brilliant strategic move.

    What 99% of the newspaper strategists are missing is that, as Jonah Bloom, AdAge's Editor has pointed out, is that there's way too much content and too few advertisers. Thus the ad-supported model is unlikely to ever return to profitability -- yet there are TONS of people out there willing to pay for content quality (i.e. expert opinions, not simply blogger opinions), aggregation, filtering and convenience. OK, maybe it's only 5%, but to your point, 5% of the worlds surfers is a lot (especially with universal translation about to dawn online). I'm suggesting that the old subscription vs. ad revenue model might well get turned around 180 degrees online. A radical thought.

    The problem is, with the plethora of content out there (a billion part-time journalists, PLUS the traditional new suppliers) no one is ever again going to pay a single supplier for their content, like the WSJ. I would pay a monthly fee to every news archive out there, however, even up to $99 a month if the service was addressable-advertising-based, serving me stuff it knew I was interested in. Hm. Ten million news readers willing to pay $99/month....

    Here's my take on it: http://advertisingbusinessmodelredefined.blogspot.com/2009/02/salvation-for-newspapers-online-biz.html

    My recent posts on what the successful ad agency of the near future is going to have to do to evolve, based on a lot of sources, are also getting a lot of attention, should you be interested.

    Reply
  • Posted by Dee Gardner
    Mitch Joel

    This is they way I think it should work. You pay a resonable fee every month for access. Like Rapsody, Netflix, WSJ or some new intenet new source. But the way the money gets divided is based on number of views the content gets. The providers with the best experience and most content will be able to charge the top price, and the top artists will get the most money.

    I currently subscribe to Rhapsody. I spend about 145 dollars a year to get the experience I want. I have never purchased one song from iTunes. For the most part I get 99.9 of the songs I want when I want them. I could never afford all the content I have access to through iTunes. I also subscribe to the WSJ online because their content is much better than the free stuff on CNN.

    Reply
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