Nevermind the 21st Century. Traditional Media Needs to Understand the 18th Century

May 22, 2009 at 5:48 AM (Uncategorized)

News publishers, especially newspaper publishers, are in a panic right now. The combination of the free distribution of information over the internet and a crappy economy has them eyeing their bank accounts with a certain amount of anxiety.

They just can’t make any money, it seems. Several publishers, including Rupert Murdoch, want to begin charging for online access to their news content. The reason most of them have not already done so, it would seem, is their fear of Google. Google makes it so easy to find news content that, if any news publisher walls off their web site, people will simply find the same news somewhere else.

Well, certainly that’s a good point. A shiny, new post from Techdirt’s Mike Masnick shows that this is exactly what will happen.

Masnick points to a Slashdot post discussing Craigslist’s lawsuit against the Attorney-General of South Carolina. The original Slashdot post provided a link to an article at the Wall Street Journal. That article sits behind a pay wall. The posting later was updated with a link to a similar story on the San Jose Business Journal web site that is not behind a pay wall.

What’s the lesson here?

The Wall Street Journal gained nothing with that pay wall. I doubt a single person from Slashdot signed up. Advertisers of the Wall Street Journal lost out on a Slashdotting of their ad banners. The San Jose Business Journal and their advertisers, on the other hand, had a good day at the expense of their competitors. If I were paying for advertising at The Wall Street Journal, I’d be a little upset right now.

Paid online subscriptions are not the answer to the news industry’s troubles. Guess what – subscriptions didn’t pay for the print edition in preinternet days either. This is nothing new to the newspaper industry.

More years ago than I want to talk about, I worked in the circulation department of a medium-sized local newspaper. Certainly, we always ran that department so as to make as much money as possible but, in the end, it didn’t really matter. The circulation department did not make money for the publisher. That was the ad department’s job.

The primary responsibility of the circulation department was to make sure those newspapers got in front of as many eyeballs as possible. Profits were secondary to this goal. The more people that we, on the first floor, could say read our paper each day, the more money the ad sales people, on the third floor, could charge local businesses for their full-page ads in Section A.

For a few years, the circulation director went on a crusade to make his department profitable. Rates on subscriptions and for box sales were raised. Rates charged to the paper carriers were raised. Expenditures throughout the department, which also included customer service, were cut.

Newspaper publishers don’t pay newspaper carriers to deliver newspapers; they sell the newspapers to the carriers and the carriers resell to the subscribers. Our carriers started leaving in droves, because delivering a paper route was hardly profitable under the new rates. This meant that new carriers had to be brought in.

You may think that delivering a paper route must be the easiest job in the world, but really, it isn’t. If you accidentally skip a subscriber’s house, it really pisses off that subscriber. Do it two or three times and they will cancel their subscription. It took a while for a new carrier to memorize where each of three hundred or so newspapers needed to be thrown each morning.

As long-time carriers quit and the quality of customer service declined, subscriber rates fell off. With the higher prices, sales from the newspaper boxes dropped. After two years of this, circulation of the paper as a whole declined and that hurt ad revenue, because now we had to sell those ads at lower rates.

In trying to make money by circulating the paper, we lost money overall. That circulation director simply could not see the forest because of all the trees blocking his view.

This is the mistake that news content providers are making right now. They all have forgotten that the circulation department is not the source of the publisher’s profit. By throwing up barriers and ensuring that less people read their content, they are destroying the value of that content, at least in terms of how much they can charge for advertising.

These news publishers need to be whacked across the nose with a rolled up newspaper. They have spent so much time trying to figure out how to make money on the web that they have forgotten how they used to make money in print. They have overlooked the simple fact that the more people there are reading their content, the more money they can make from advertising.

It really is that simple. Stop shooting yourselves in the foot, stop trying to block people who want to read your news, stop criticizing and threatening other sites that send you more traffic. Try to understand that Google News and Google Reader are GOOD for you, not BAD.

In short, stop looking at all the trees and realize that you are standing in a forest.

Sarah Lacy said roughly the same thing, a full month before I did it. Then again, she gets paid for that sort of thing. I don’t.



  1. Andrew said,

    that made me laugh! obviously the issue being that publishers are not seeing the returns they want from online advertising. which probably means a) their cost structure needs to reduce significantly, and b) more effective advertising models need to be found.

    I came across this post whilst writing about the lessons that the music industry can give to newspapers – you can read it here –

    • Rooker said,

      Honestly, I think they ought to be building their own versions of Google adsense. Something that targets ads specifically for each article on their sites. Maybe combined with what information they can gather about registered users, the way the New York Times site does it. I don’t know if they’d need to dance around any issues with Google’s patents or not.

      Whatever they do, they need to step off the tracks before the innovation train runs them over. The recording industry let themselves get run over like that and I don’t know want to know how much they’ve lost to piracy and the ineffectual fighting of piracy. If they’d built something like the iTunes store before Apple got to it, they would all have a lot more money and goodwill right now.

  2. Rooker said,

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