Saturday, April 18, 2009

Trying to take the easy way on the web

The latest mantra among newspaper types is that they have to get paid for their Internet content. They remind me of legislators facing a deficit. The knee-jerk response of lawmakers to that dilemma is to raise taxes. Publishers think they should be able to do the same thing to make up for plummeting print revenue. But in their case, they want to charge for something most of them have been offering for free.

The desire is understandable. But it puts the focus on the wrong thing. The problem with the publishers’ approach is that despite the chest-thumping we hear about how newspapers produce all the news content on the Web, there are plenty of other places to find most of what they offer. While some newspapers may be correct that they produce superior online news reports, readers might believe that what they get from other sources is “good enough” and never bother to follow the publishers into their private corral. Let's face it: Much of the basic fodder of news Web sites is commodity content that can be found many places. And note to publishers: Most people already feel like they are paying for Internet content. They pay their service provider, and in some cases more than one. I pay Verizon and Comcast for access to the Web. And the bill isn't insignificant.

Instead of expanding the revenue pie by creating new businesses and services for their communities and readers, the publishers seem to think they’re still in the driver’s seat. But they’re not. The user is. The publishers can try to put themselves back in control by putting the squeeze on their customers or they can change their businesses and invent new services and relationships that bring with them new revenue opportunities. I think the latter is the better route.

Take Denver, a market I know well from my 17 years at the Rocky Mountain News. Even if the state’s largest newspaper, The Denver Post, chose to put most of its content behind a wall and join a pay plan, readers would have many credible options. At 4:30 on a Saturday afternoon, the paper’s home page has two stories with that day’s time stamps on it. But the area has at least four TV station Web sites, one of which can credibly argue that it’s the market leader online. It also has a news radio station, an NPR station, an alternative newspaper and an entertainment Web site that compete in the traditional news sphere. So if the Post goes behind some kind of wall, will its users follow? I don’t think enough will for what they and other metro newspapers offer today.

But if news organizations created Internet content and services that their readers and advertisers valued, new revenue might appear. It’s worth looking at other businesses for lessons. Costco charges a membership fee before customers can take advantage of the great values it offers. Users pay it willingly once they see the benefits. I think newspapers could take a page from Costco's book. But instead of offering a range of benefits to their users, newspapers are still selling subscriptions to their print products rather than membership in an information company that can help people do everything from save money on groceries to pick the best school for their child to report road conditions in real time. How many newspapers have all the e-mail addresses and cell phone numbers for every household they serve? And how many actually ask the owners of those addresses and numbers what they’d like to receive and when?

Finding ways to charge for what they deliver now reflects a limited vision for newspapers. Charging readers for delivering what they want, where they want it and when they want it as members (ie. participants) of a community stands a much better chance of success.

It’s easy to point the finger at Google and ask righteously what that innovative company (whose software I'm using to write this blog) is going to do to rescue them. But it might be worth it for the publishers to listen to what its CEO told them recently. How many of us have sat in front of our computers waiting for a newspaper Web site to load? Would you pay for that level of speed?

It's time to look for ways to build the business, not to build walls around it.

175 comments:

  1. We have been working on different scenarios ranging from fully paid to mixed paid / free: http://mediacafe.blogspot.com/2009/04/charging-for-online-content-new-updated.html.

    The problem with focusing on paid content: you're looking at only 15% (on average) of your actual revenue. So even if all print subscribers pay for online, how much new readers do you need to break even ?

    As you say, media companies need to be much more creative in order to find new sources of revenue.

    ReplyDelete
  2. Part of the problem is that newspapers forgot that they were information providers, not simply publishers. The LA Times ran out on a deal to buy yahoo for some disgustingly cheap price, because that wasn't part of their business model. Yet, while they weren't looking, the traditional model of newspapers went up and changed - without the newspapers learning the wiser.

    The point is that newspapers need to change the business model and find a new way to capture and disseminate information. Linking up with tech firms and others is probably an important place to start. However, Newspapers cannot hope that a few video spots online is really going to change anything. They need to come up with a new wheel...I hope they start soon.

    ReplyDelete
  3. You're absolutely right that a few video spots online isn't going to change anything. That's why I was pointing to the Costco model. Newspapers have an opportunity to establish a new relationship with readers, advertisers and non-profits. The challenge is fraught with risks. But if they don't do it, well....that too is dangerous.

    ReplyDelete
  4. I am intrigued by Steve Brill's new venture: Get a bunch of publishers to aggregate their content and give readers several different options to pay for it (by the article, day passes, monthly subscription); negotiate with the search engine owners to pay a license for the content they put on their news aggregators. See Newsweek Q&A: http://www.newsweek.com/id/194478

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  5. John, I think you're spot-on that newspapers should see their subscribers more like Costco sees its members, and provide a variety of benefits. But here's a word of caution from someone who worked at a company that was once all about paying members (AOL). The value you offer today is not likely what people will pay you for tomorrow. You have to continually reinvent yourself to play that game.

    In AOL's case, its value for a good 10 years was easy access to the Internet. That deteriorated after the advent of broadband, and AOL realized it had little to offer directly. It had to work through cable and DSL companies to remain relevant in the access game. Eventually enough people realized that they didn't need to go through AOL that the company shifted away from subscriptions and toward advertising. (It also tried to increase revenue through other information services, such as streaming music, but that also could not compete with free).

    Much of this is analagous to newspaper content, which used to be available only if you paid for it, but is now more likely to be available for free via multiple digital devices. Because information is more likely to be free than not, basing your revenue model solely on people continuing to pay for content is foolish in my opinion. You need to offer more than that.

    That said, I think there is still value in print, and for a simple reason. Putting paid subscriptions aside for a moment, free print products excel in the area of serendipity.

    For example, if you go to a bar in Bakersfield (where the newsper I work for is based) and see that a new copy of Bakotopia magazine is right there at the door, you pick it up and read it -- even when you know you can read the same thing online. You do that because it's relevant to your local interests, and it's physically present where you are. Businesses know this and SEE it in their stores. I think this is one reason why local businesses still vote for print by paying more per ad than they do online.

    Perhaps mobile devices will do a better job in the future at reaching out and grabbing you based on location and interest. But they aren't now, and for that reason I think there's a significant amount of opportunity left in free, niche print products. That's also why I started Printcasting.com.

    ReplyDelete
  6. John, I can't tell you how sorry I was to see the Rocky fold. I was a subscriber and daily reader and enjoyed your column very much.

    I agree with your view about finding a new business model for newspapers that is sustainable and profitable. However, I worry that the state of the economy is not conducive to a pay subscription. You said it very well, we already pay provider fees among others and these will only go up with time.

    You could make the argument that if you are willing to pay a subscription to a print newspaper you could do the same for the online version. But most people like to get news from different sources e.g. New York Times, Chicago Tribune, etc. If each newspaper were to charge a subscription fee, then their readership numbers would decrease because it would get to be too expensive for the reader. I would suggest newspapers enlist the public's help in writing and reporting stories to differ the cost of online subscriptions to those who contribute stories.

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