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Newspaper paywall broken down by single digit subscribers

Looks like Newsday can boast about its 35 paying subscribers. After three months, Johnston Press is ending its £5/quarter paywall after less then 10 people signed up. This news comes as Rupert Murdoch just put two of his U.K. papers behind an even more expensive pay wall – £1 per day and £2 for a week.

So newspaper executives can claim people will pay for newspaper content, but the real-world case studies show newspapers are vastly over estimating the number of subscribers they’ll sign while also giving up tons of traffic and publicity to websites willing to give content for free and find better ways to monetize their traffic.

How’s that paywall going Newsday?

Newsday made the bold (and some, like me, might say, silly choice) to lock its online content up behind a $5 per week paywall. Cablevision, who purchased the newspaper for $650 million in 2008, offers its website to Optimum Cable subscribers and Newsday subscribers for free, but charges anyone else $5 per week, and three months in, the numbers are starting to leak out.

First, how many people have signed up for $175 per month Newsday website? 35. Yes, 35 people. So that extra $9,000 a year must really make up for the estimated 50 percent drop in web traffic. At least they don’t have to pay famous columnists who want people to actually be able to read and share their work.

Now I look at these numbers and see evidence that paywalls might not be a great idea to make money. Even assuming the vast majority of Long Island (which Newsday targets) have free access as Optimum Online users, erecting the paywall means more costs like paying for more customer service and accountants, while even print newspapers find going free both saves tons of money and increases circulation (because they don’t have to pay for as many customer service agents or accountants).

Less traffic, tiny amount of money after spending tons (even to buy the paper). Maybe they’ll eventually learn their lesson that paywalls don’t work and end it like the New York Times did. And then forget and bring it back years after.

Shocking news: People scan lots of headlines

On the proverbial eve of the New York Times’ return to paywalldom (has everyone forgotten the Times already dropped its pay wall once because it didn’t work), a research firm posted a study showing 44 percent of Google News visitors scan headlines and don’t click through.

They think this is high. I’m shocked it’s so low.

Analyst Ken Doctor says: “Though Google is driving some traffic to newspapers, it’s also taking a significant share away. A full 44 percent of visitors to Google News scan headlines without accessing newspapers’ individual sites.”

What is Google taking away? If I read all the newspaper and magazine headlines at the newsstand, am I taking something away? No. It’s the newspaper’s job to convince me to “buy” or, in this case, click. Google is providing a huge amount of free advertising for these newspapers and converting 56 percent of that traffic. Any marketer will tell you a 56 percent conversion rate is astronomically high. It is up to those newspapers to turn that traffic into loyal readers.

For Rupert Murdoch and others looking to block Google because it’s taking so much for itself, they are just going to leave that 56 percent for the thousands of other news sources willing share in free advertising. And if they really learn from this study, they’ll figure out how to write better headlines and better stories to convert the other 44 percent.

Murdoch looking into blocking Google from giving him free traffic

Rupert Murdoch, after a short time of seemed like he understood the internet was a new and exciting tool, has since changed his medication and now sees it as the evil of all evils. He has been pushing, vocally, not through action, reinstating paywalls on his various media properties. The Wall Street Journal is one of the last major newspapers to have a paywall around most of its content.

Now Murdoch is claiming he will block Google from indexing the WSJ and his other media properties. Murdoch told Sky News Australia “If they’re just search people… They don’t suddenly become loyal readers.” He explained that traffic from search engines involve no loyalty – just view a few headlines and leave.

Removing a site from Google takes just a few lines of code in a robot.txt file, something Google and other search engines make no attempt to hide. So why is Murdoch waiting?

Maybe because even without loyalty, Murdoch knows traffic will drop significantly without search engines bringing tons of free traffic. Even if 99 percent of those people never return, there are 1 percent that stay and might return. It’s up to Murdoch and his websites to give these users a reason to stay and then find ways to monetize that traffic. Murdoch has previously said no news websites or blogs are making serious money, ignoring the massive enterprises behind Gawker, Huffington Post, PerezHilton, TechCrunch and hundreds of others who have embraced the internet to find more cost-effective ways to engage audiences and produce compelling content.

Techdirt points out that for all Murdoch’s grandstanding, his own websites have aggregators that link to other people’s content the same way he claims others are stealing his content. When others aggregate content it’s stealing. When Murdoch does it, its convenient? Maybe this will stop his crusade to overturn fair use in the courts since he’d be culpable too.

Newspapers doomed, but it’s everyone else’s fault

I keep looking for other things to write about, but the newspaper industry just keeps giving me great posts to write.  Let’s first look at this Washington Post article that pretty much argues for ending all the useful innovations of the internet to save newspapers.  It’s written by two former newspaper lawyers, but the Washington Post wouldn’t be swayed by that kind of conflict of interest.

Michael Masnick does an already perfect job of dismantling the outrageous arguments in the article. To summarize, the authors, Bruce W. Sanford and Bruce D. Brown, seem to be calling for an end to search engines and fair use while expanding copyright law to cover “hot news” and allowing newspapers to violate antitrust laws (while still offering them tax breaks).

But all this talk of saving newspapers still ignores why newspapers are more important than news. Newspapers are not the only source of journalism and any legislative attempts to save them only support an obsolete business model. Masnick cites from Dale Harrison’s comments on the Post article.

A lesson worth remembering is at the turn of the 20th century people had a transportation problem…and the solution turned out not to be a “faster horse”…but a Ford.

And one should note that the Ford didn’t arise out of the “Horse Industry Revitalization Act”.

I think the future of the media business will look as different as Ford and Toyota’s operations look from horse traders and blacksmiths.

Imagine what the passage of such ill-conceived legislation would have done to the car industry a century ago.

Harrison goes on to show that newspapers, for decades, had a monopoly on distribution. This lead to inflated advertising prices and likewise inflated budgets (much of the reason newspapers are in trouble now is the massive amount of debt they acquired during the bubble 90s). This monopoly distribution is dismantled with the internet, forcing advertising prices down to real market values and giving customers almost infinite choices for their content consumption.  Because of this basic economic fact, newspapers cannot sustain the business model they’ve been using for the past century.  It’s time to evolve.

But we’re scared if we lose newspapers, we lose journalism because none of these bloggers or aggregators create content.  If that so, then why is Maureen Dowd getting accused of plagiarizing a blogger? I’ve already criticized Dowd’s incredible misunderstanding of the internet and newspaper economics as well as her accusations of copyright infringement at Google (even though Google only links to content).  I actually have no problem with Dowd copying the blogger (she can copy me anytime) – plagiarism can actually be a good thing sometimes – but Dowd’s hypocrisy shows that 1) newspaper journalists are not perfect and 2) some bloggers can apparently write really well.

Also, let’s note that bloggers exposed Dowd’s plagiarism and pressured her to update her column online (and a correction in the Times).

Thankfully, not every newspaper wants to remain in the 1980s. John Naughton writes for the Guardian saying capitalism will eventually kill off newspapers that can’t evolve, leaving the market winners to better understand how to run a news business (not just paper) in the 21st century.

The problem at the moment is that the web is awash with free content, and in a competitive market the price always converges on the marginal cost – which is currently zero. But as providers disappear (or, like Murdoch, decide to charge), the supply of free news will diminish and something more like a normal market will emerge. Only then will we find out what people are willing to pay for news.

That takes care of the economics. But what will journalism be like in the perfectly competitive online world? One clue is provided by the novelist William Gibson’s celebrated maxim that “the future is already here; it’s just not evenly distributed”. In a recent lecture, the writer Steven Johnson took Gibson’s insight to heart and argued that if we want to know what the networked journalism of the future might be like, we should look now at how the reporting of technology has evolved over the past few decades.

The future is now. See if you can catch up.

Maureen Dowd, you’ve let me down

Shockingly, I read newspaper…content. Like most Wednesdays and Sundays, I enjoy Maureen Dowd’s dry wit and political commentary. She’s brilliant and kept me sane during much of the election (except for when she wrote her column in French and Latin). But today, Dowd’s column took aim against a true evil, Google, for destroying newspapers.

Dowd, in skillful style, made no question about Google’s culpability. She just compared Google to Big Brother and said while Google’s C.E.O. Eric Schmidt isn’t Dick Cheney, he isn’t far off.  He hates your privacy, but he hates newspapers more.

Dowd is a columnist, and I love her for her opinions.  But this column ignored the basic economics and facts of newspapers’ relationship with Google.  She makes it sound like Google it’s just taking content, posting it, and then laughing as newspapers suffer. She writes “Google is in a battle royal over whether it has the right to profit so profligately from newspaper content at a time when journalism is in such jeopardy…[Schmidt] declines to pony up money, noting that newspapers could opt out of giving their content to Google free and adding, ‘We actually like making our own money for obviously good capitalist reasons.’”

But Google does not take newspaper content or post it (with the exception of Associated Press content which it explicitly pays for), Google just links to the content.  Google, in fact, only added ads to its News search the beginning of this year. Before that, Google made no money directly from news search. But either way, Google just links to news articles.  It helps people find the news articles they want.  Google sends thousands if not millions of people to newspapers through these links.

But Dowd, instead of realizing how much Google increases the value of her content, tries to paint them as just a step behind Dick Cheney in taking over the world.

Newspapers as a whole need to stop looking for people to blame (Techdirt has the excellent point that Craigslist deserves just as much if not more blame for “stealing” all those classified ads it doesn’t charge for).  Dowd is just another newspaper veteran looking to protect newspapers without asking if there’s a better way.  Just because you’ve always done it one way, doesn’t mean business can’t evolve.  Look at how newspapers used to do business – they lost money. Weird.

There’s more to business than profit

This, I did not expect. I’ve been following the crisis of the newspaper industry closely and have many suggestions, which I’ve discussed here.  A new suggestion has come to my attention from a 1918 Atlantic Monthly article claiming the death of newspapers. As history shows, this was a little premature.

Oswald Villard found daily newspapers had rising costs and rarely, if ever, any profit.  He writes:

It is a fact, too, that there are few other fields of enterprise in which so many unprofitable enterprises are maintained. There is one penny daily in New York which has not paid a cent to its owners in twenty years; during that time its income has met its expenses only once. Another of our New York dailies loses between four and five hundred thousand dollars a year, if well-founded report is correct, but the deficit is cheerfully met each year. It may be safely stated that scarcely half of our New York morning and evening newspapers return an adequate profit.

That $500,000 loss compared to $7 million in today’s dollars (according to Slate), which pales in comparison to the $85 million the Boston Globe expects to lose this year alone. But Villard highlights the unique business model many newspapers used to support.  He claims owners were willing to accept losses in their newspapers because of the prestige of owning one.  Slate puts it: “A newspaper owner gets a place at every table, access to all the top politicians’ ears, and the power to impose his worldview on his readers—or, at least, the illusion of such influence.”

Few businessmen are willing to make such expensive vanity purchases (Slate makes some notable exceptions, like Rupert Murdoch’s New York Post or Mortimer Zuckerman’s New York Daily News).  Of course, stock markets, quarterly reporters, and multi-billion dollar sales turned the newspaper business into a profit boon for the 80s and 90s with few expecting the bubble to burst.

For naysayers predicting the demise of democracy should newspapers all disappear (unlikely), the vanity business model represents only one of many, many options to develop news and other businesses. I doubt this trend will take the business world by storm, but the history lesson is worth noting – business isn’t always about money. There’s power and influence too. I’ve been a proponent of the value of self-promotion (like this blog), but maybe even multi-billion dollar corporations have a place in a vanity portfolio.

Read all about it: Newspapers declare war

After years of watching blogs and online news sites grow and prosper, you’d hope the news industry would see the potential and not the end.  Unfortunately, all the posturing of the past few years is exploding as the Associated Press and some news leaders are basically declaring war on the internet.

I haven’t been a fan of the Associated Press, who for a news organization, has surprising distain for fair use (except when it suits AP). This week, the non-profit organization announced it will police the web for anyone pirating news content. This is not limited to copying full articles, but anyone partial copies or even sentences and headlines, targeting aggregators like Google News, Digg, and many others.  As part of a coordinated assault, News Corp. owner Rupert Murdoch put it succinctly: “Should we be allowing Google to steal all our copyrights? Thanks, but no thanks.”

But Google and aggregators are not stealing your copyrights. It’s called free publicity. Just because someone else benefits by publicizing you isn’t bad or stealing.  It’s the way the internet works.

The other ironic part of AP’s strategy is to make sure search engines post “the original source or the most authoritative source” first in it’s results. Of course, AP wants to do this by pressuring Google rather than building good SEO websites and encouraging linking to their articles (since Google ranks authority, partly, by how many incoming links you have). So aggregators and linking is bad, but special treatment from search engines, like a special section prioritizing news outlets is okay. And sounds a lot like Google News. Techmeme editor-in-chief Robert Thomson points out the Wall Street Journal and New York Times make use of aggregators themselves, linking to other outlet’s content.  The New York Times was even sued over its linking practices.

Google Chairman and CEO Eric Schmidt spoke to newspaper publishers, urging them to think about the consumers, saying “if you piss off enough of them you will not have any more.” His point is newspapers need to address the needs of consumers, not fight against the way the market is evolving. Aggregators and link sharing is how the internet works – and both make content easier to find and more valuable to the person finding it.  Newspapers spent years hiding behind pay walls and found that didn’t work (though it seems it won’t stop them from trying again).

Also part of the news industry’s problem is an attachment to the medium paper.  As Michael Masnick writes: “It’s like saying ‘how to reinvent the horse-drawn carriage’ rather than ‘how do we improve transportation’”.  Charlotte Hall, an editor from the Orlando Sentinel, says:

It stops the clock once a day and takes an assessment, offering the kind of in-depth and analytical work that the 24/7 breaking news world on the Web cannot provide. Print is good at the things the Web is not good at–watchdog, explanatory, enterprise, narrative storytelling.

But Masnick notes that nothing Hall says print is good at can’t be done on the web. Newspapers are trying to convince people that if newspapers all go out of business, there will no news. All those television networks seem to be absent in this dialogue. But this is not the case.  Newspapers can be replaced by news websites.  Websites do some things better; paper does some things better, but neither matters when consumers are more and more choosing to get their news on websites.  The customer is always right, unless, it seems, it destroys your century old business model.

I don’t think paper will completely disappear. Some people still like the tangible product, so there is a market to sell to.  But overall the market is demanding evolution, and if the current players do not want to fill the market demand, someone else will.

Newspapers the only ones in love with micropayments

The newspaper industry has been buzzing about building their own iTunes, offering a pay-per-article model with everyone’s favorite buzz word, micropayments.  After a cover article in Time Magazine promoting the model, the idea has joined a larger debate of people who just don’t understand the new economics of news.

Walter Isaacson’s article for Time builds on this misconception that newspapers made the mistake of posting their content online for free, making customers get used to the idea and now unwilling to pay. Alan Mutter even calls this the Original Sin.  So all newspapers have to do to save their ailing industry is agree to charge for every article.

The crux of the micropayment argument is people should pay for news simply because that’s the way it’s been. But economics change. The internet makes sharing news articles incredibly cheap.  With hundreds of thousands of online news sites and blogs spreading news for free, no amount of conglomeration will convince the market to pay for news again.

Let’s look at what happened already. The New York Times tried to charge online subscriptions to its archives. Instead of paying for subscriptions (or per article), customers went to the Huffington Post and blogs to get the same information for free.  Isaacson says newspapers need to prevent others from sharing the content they read, but how does he think this will happen? Mind wipe after reading? Information and news can’t be copyrighted. Once you read a news article, you can tell anyone and everyone what you read.  The value is in being the source material, but if people can’t read the source material, they’re happy to find a secondary source.  Marshall W. Van Alstyne, associate professor at Boston University, likened iTunes for news as putting toll booths in the ocean.  Any barrier to user entry online is easily avoided.

The further problem with iTunes for news is news is not music.  Alstyne elaborates:

News is not like an iTunes song; it’s perishable. Today’s front page is tomorrow’s fish wrap, and we don’t need to replay it. If anything, a reader benefits more from a second source than repetition from the first. Facts are delivered; songs and movies are created. Facts also can’t be owned, so when the Internet places geographically dispersed media in direct competition, the price of facts falls to marginal cost. In digital markets, that’s zero.

With micropayments, suddenly users have to question is each article worth reading.  This is the problem with micropayments in any industry.  Customer willingness to jump from free to $0.01 is much larger than $0.01 to $1. For every article, I have to decide, is it worth $0.01 to me; is it worth taking out my credit card; is it worth typing it in.  And how will article pricing be decided? Will the more important articles be more expensive?  Customers do not want to guess which articles are worth paying for.

News is free now. It has been free for a while – how much do you pay for TV news? Most arguing for pay models for news articles just want things as they were, pretending the economics haven’t changed.   Saving the newspaper industry relies on giving customers more value, not charging more for less (the most popular trend in newspapers has been reducing size but raising prices – less for more).  The key is to recognize the business’ main value – providing news – rather than the method – paper.

50 percent of most newspapers’ budget goes to printing and distribution costs.  With the internet, those expenses disappear. To be profitable, an online newspaper can make half the money it made offline because distribution is so cheap. MediaView posted a list of 14 models being tested for journalism, many with quantifiable success.  Each successful model (not micropayments, included on the list) looks to raise the value for customers.  Micropayments offer nothing valuable for the customer.

For all newspapers’ grandstanding, there are several viable models already working.  Several big cities have free, tabloid dailies handed out to people on their morning commute.  These quick reads offer the greatest hits of the day’s news, focusing on the need to know and leaving you to fill in the blanks online when you get to work. Online news providers are already offering original reporting, from Slate to Salon supported by advertising.

News reporting won’t disappear because there’s always a market demand for good journalism.  But the old guard isn’t offering the market what it wants – the market wants free, up-to-date news. Many want a community to discuss the respond to the news, asking questions or sharing opinions.  The old guard doesn’t understand how this changes their old mentality.  Newspapers are no longer the only purveyors of news, controlling what we see and when.  They need to be part of the communication process. That requires giving customers what they want, not making things like they once were.

The bailout and bad news business

The bailout’s for the banking industry are a failure.  I say this because we don’t have a set of goals to accomplish.  The government just hands over billions of dollars to the same people to messed up the financial industry and says, have fun, don’t fuck up.  As investors in these banks, the public has no oversight, transparency, or accountability all of which the government promises.  This is, of course, nothing new with our government, and is why I partially blame the news media.

I was optimistic when David Cay Johnston wrote about how journalists need to change their approach to the financial crisis, saying “let’s not make the same mistakes as were made with the run-up to the Iraq War, and the PATRIOT ACT that so eroded our credibility, in terms of how we cover this financial crisis.”  But nothing changed.  The news media was incapable of covering such a complex and nuanced story.  Same for our politicians.  For eight years, politicians and news media have been teaching the public to accept one liner answers and he said/she said narratives.  No filter, no analysis, no answers.  Should we go to war, not go to war. Should we protect ourselves from terrorists or not protect ourselves from terrorists.  The financial crisis couldn’t be broken down to simple platitudes making it impossible for 24-hour news channels (and many newspapers) to fully inform the public.

Without a news media, there is no accountability in democracy.  Sure people can vote every couple of years in the polls, but that doesn’t change the system.  Public shaming is a powerful tool. That’s why accountability in the bailout matters.  AIG has already spent billions on vacations and retreats for the same executives who wasted billions before.

I’m late to the bailout bashing, but felt there are still lessons to learn and things to do, especially since there’s more bailing out to be done (credit card companies, the second round of mortgage failures). First, let’s understand the goals of any bailout.  If it’s simply to save jobs, then save jobs (most of the banks and car companies are already having massive layoffs even after bailout payments).  But let’s have some publicly stated goals so we, the public and news media, can judge progress.  And have the news media follow up on politicians passing these bills.  Create websites to follow who’s getting money (banks and politicians) so the public can see the full story.

I’m not expecting change as the same people who screwed up before are still in power, at the banks, in government, and at news organizations.  But I still have hope for change.