Paid versus Free: The Truth about the Business Models of News
Paid or free content. Some heavyweights of the blogosphere and journalism have weighed in on this quite a bit over the last while. In fact Chris Anderson’s Book Free came out while I was in the middle of drafting this post.
Frankly these questions have already been answered by economic reality.
I think the reason people don’t realise that this question has already been answered is because they misunderstand the actual debate that is happening.
This is not a philosophical debate between fuzzy concepts of ‘content should be free’ and ‘good content should come at a price’. This is NOT the battle that is going on at the moment in the online world at all. There are 2 seperate types of content war of which the newspapers are one great example and the recording industry another. They are different because one has always sold attention the other has always dealt in rights sales.
NB: The newspaper industry is NOT journalism or the news industry. The recording industry is NOT the music business.
Newspapers
Let’s take newspapers first as they are the easiest to deal with. The most important thing to realise about newspapers is that the news in newspapers is free. The fee you pay in the shop only covers printing, distribution and merchandising, that’s it. Newspaper content IS free and always has been. People who say otherwise don’t understand the business or are being disengenuous.
Newspapers are monetised through advertising which is based on attention which is essentially market share. Some newspapers realise this, such as the Irish Independent which now gives away hundreds of papers in non traditional places and also has a tabloid sized edition. Why did they do this? 2 Different editions and all that extra distribution and not charging as well? They have increased their costs and are charging less. Why?
The reason is because it hugely increases their readership which increases their attractiveness as an advertising channel. Which as previously stated is how all large publications make money.
If you no longer have market share then people stop advertising or you can’t demand the same rates. Simple but here comes the next question..
-Why would you be losing market share?
That ones pretty easy though. It’s because you don’t give me what I want so I go elsewhere.
-Again simple but where are you going?
The Internet
Over the last century the massive costs of setting up and distributing a printed publication have effectively excluded anyone, who didn’t have deep pockets starting out, from competing. So that meant that newspapers have had it there own way for a VERY long time and they’ve not had to deal with customers who have a choice. You only have 6 or 7 to pick from mostly aimed at different general demographics that’s it.
So the internet has done one thing by removing the costly medium of paper and replacing it with electronic data that can be distributed around the world for next to nothing it has driven down the marginal cost of distribution of content to close to zero. Thus it has removed the largest barrier to entry and competition has exploded. The reason I don’t buy the newspapers like I used to is because I get more relevent, better quality, information in a more timely manner from other sources. Frankly I’m a bit tired of their whinging.
Good newspapers will survive. The ones that service their audience properly will continue to prosper and I for one wont shed a tear for the ones that go out of business and neither should anyone else.
In Summary
- Newspaper industry has never charged for content. End user charges were for printing and distribution
- Newspaper industry makes all it’s money to pay journalists from advertising
- The reason advertising amounts are dropping is because less people are reading the newspapers content either offline.
- Users are not reading the newspapers content because they’re not giving customers what they want and a competitor is.
- This is magnified as there are a LOT more competitors now than there ever were before
- You can’t fix all of this by charging people for something you can’t give away for free
- Newspapers MUST change what they produce, how they produce it, how they distribute it or how they monetise the attention if they are to survive. Possibly all of these.
The Recording Industry – coming soon
The recording industry is slightly different but I have even less sympathy for them.
Once upon a time musicians made money from performing music as there was no way to record it…
To be continued…
Barry J O'Gorman | July 21st, 2009 at 8:47 pm #
Anton
Good posting and a reasonable summary.
I have posted on this subject previously. In particular: http://www.bluereek.com/2009/05/we-do-want-newspapers/
I would also now be an infrequent reader of newspapers – like to read them on my holidays, from time to time. My key point is that they are not the ‘news’. They are now another form of periodical – looking to publish daily.
Would like to see quality ‘news’papers survive. I think they are still part of the socila fabric – spoken as a child of the 60’s.
Susan | July 22nd, 2009 at 6:18 am #
Did it take you like a month or so to write this article? “Free” has been on the market some time.
Other than that: I think that in this time & age I like your distinction between newspapers and journalism. But you should than have focused on the key question: as how we are going to make sure journalists are going to stick around and get paid (and have a platform) for doing their job exposing the mishaps in the world.
Your conclusions on the the state of the industry are not new and also you don’t give any concrete solutions. All has been said before, so I’d say all in all this is a pretty lame piece.
Anton | July 25th, 2009 at 12:04 pm #
@Susan Actually the whole point of the piece was not that Free was anything new at all which it isn’t. The point is to properly frame the debate.
Newspapers are not, and have never been, paid for content and the idea that somehow they are losing out because their content is free is a total straw man. A point lost on most people who think that because they pay a buck for the paper that they pay for news. They don’t.
The key question is not that somehow we have to figure out a platform to support journalists. That’s a question for Journalists. The reason their employers are under pressure is because of innovative competition. That suggests to me that the “job” of journalism is getting done more effectively or efficiently by that competition. Otherwise why would people read their content and not yours?? The idea that journalism is the sole estate of people who work for news organisations and that we need to figure out a way or platform for supporting them is just silly.