The future of newspapers online

There was an intriguing article in the San Francisco Chronicle about the future of newspapers now that the world is moving to online news.

The author, David Lazarus, is right in a number of respects, including that newspapers are giving away the store for free.  Well, nearly for free.  They do get some ad revenue from their websites.  But what made me want to comment on the article was not the free-store but that he’s missed the underlying issue.

The underlying issue is that in the digital age, the supply and demand curve is all out of whack.  Lazarus’s point is that the first newspaper to charge for their content, is going to be the first to go out of business because every other newspaper will still be free to online readers.  While, that’s one way to put it, I think it is the wrong way to print it.  The better way to put it is that the supply for news articles is so high that it’s driven the price to an unchargably low figure.

See, before the days of the Internet, everyone had no more than 3 or 4 newspapers to choose from.  I had three choices: The SF Chronicle, the SF Examiner and the Oakland Tribune.  If I wanted news, that was where I was going to get it from.  Frankly, sometimes I didn’t like my newspaper, but I was willing to put up with it and pay a reasonable subscription.  Now I can choose between thousands of newspapers.  I can go to the New York Times, the Chicago Tribune, the Washinton Times (or Post), or any number of smaller papers from the Sacramento Bee to the Punxsatawney Spirit.  Each paper has something a little different and I want a little bit of each.  It’s not reasonable to expect me to be locked into one.

So, it’s not that I’m not willing to pay a subscription, but I’m not going to pay a subscription that is priced with the expectation that I’m getting all of my news from that paper.  There’s just too much supply out there to expect that of anyone.  I’m not going to pay $15 a month for one paper because frankly one paper no longer has $15 of value with the supply available.  But here is what I am willing to do, I am willing to pay $15 a month for a subscription that would give me access to the majority of the major papers out there.  Or I’d be willing to spend 25 cents to get access to one-day’s worth of articles, but just like my print newspaper, I’d better have access to those articles for more than one day (a week would be a BARE MINIMUM, a month would be more appropriate).  And it better be easy for me do to.  I’m not going to whip out my credit-card every time I want to buy a $0.25 paper.

So Mr. Lazarus, I’ve now given you two suggestions as to how your paper can charge for its content in the Internet age.  The Hearst Corporation (or whatever it’s called these days) needs to start working on how to implement ideas like that.  If the newpaper companies choose not to adapt to new business models, it’s not the consumers fault they’re going out of business.

Along those lines I’ll close with two example from recent business history.  The first is the VHS movie market.  When that came along, Hollywood was really scared that it would undermine their business.  Why would people go to the theater if they could watch movies from the comfort of their home?  As a result they initially priced movies at ridiculous rates like $50.  Just as they feared, home movie collections taped off of HBO and others flourished.  But then the movie industry got wise.  They got into mutually beneficial financial arrangements with rental companies and dropped the price of VHS tapes to a consumer acceptable $15-$20.  The end result is that the VHS revolution in the end was a huge profit center for Hollywood.

The second example is the one Mr. Lazarus brings up himself: Napster and iTunes.  What is missing from his analysis is that Napster’s legal demise did not cause iTunes to succeed, it was effectively the other way around.  Other companies were in the process of working around the issues that Napster failed to address in court while providing music for free (example: bitTorrent) but all of those efforts lost their head of steam once iTunes came on the scene.  Why?

Because people want to do the right thing.

People don’t want to steal.  They’d prefer to buy stuff at a reasonable price.  They want to pay people for their work.  But when they’re not given what they believe is a fair price, then the general populance is going to find another way to get what they want and it may include minor theft.  Additionally, they’ll complain when any government entity cracks down on that minor theft.  But when given a reasonable and appropriate way to pay for what they value, people would far prefer to do it that way.  People want to do the right thing.

So that’s your answer Mr. Lazarus.  Your newspaper and the fellow newspapers out there needs to find a reasonable way to provide people a way to pay for what they want.  They’ll pay for it as long as it’s easy and fair and recognizes the vast choices that exist in news providers because of the Internet.

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