Monday, May 14, 2007

The Free News Debate

A piece by the publisher of the Arkansas Democrat Gazette's been floating around the Internet for a bit and recently popped up at the Wall Street Journal. In it, Walter E. Hussman Jr. continues the rather tired argument that successful online news sites will find a way to put up a wall around content as his does (thereby suffering only a circulation decline of 0.4 percent daily and 1 percent Sunday).

His comparison is the Columbus Dispatch, which opened its site.

I've grown kind of tired of this debate, and of the rather untidy comparisons made by people like Hussman, but Howard Owens has an excellent, reasoned post once again explaining why Hussman has some of it right, but a lot of it wrong.

Joe Wilkert also weighs in (his emphasis):
Yes, we all know that the subscriber model was a lot more lucrative to the newspapers than the freeloading website visitor model. I'm pretty sure that if someone could have prevented the combustion engine and automobile industries from launching, the horse transportation industry would have remained lucrative as well. That didn't happen though, and like the blacksmiths of many years ago, the newspaper industry needs to acknowledge reality and move on.
Wilkert makes a point I have -- had newspapers not generally gone free, alternatives would have sprung up and eventually knitted themselves into viable alternative newsgathering (and potentially profit-making) organizations.

Mark Hamilton also has some thoughts (and promises more in subsequent posts):
The basic idea I have is that the logic that says newspapers made a mistake when they first jumped on to the web and gave their stuff away is flawed and ignores the reality of the net. Regardless of what they had done, I suspect, free would have emerged as the underlying reality of web-based journalism. And if that logic is flawed, the idea that the genie can be put back in the bottle and widespread subscriptions services can emerge is flawed, too.
Hamilton also notes a bit of irony that newspaper publishers who argue that they need protection have been perfectly happy to piggyback and take their value from the subsidized Internet and what it has spawned (think all the free blogging and video sharing sites along with open-source software).

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At 5/15/07, 5:05 PM, Anonymous Peter Fisk said...

Let's hold off on the conclusion that there is not adequate demand to sustain a model where consumers pay for high-quality, credible, reliable, online journalism. More likely, the newspaper industry is simply trapped for now in a suboptimal Nash equilibrium with regard to charging for online content. If so, that will change – but how and when are uncertain. Another part of the problem is that newspapers continue to undermine the quality of their own products, thus making them more and more vulnerable to competition from free online infocrap.

Frankly, I’m pretty tired of these “wall” and “genie” arguments. When cable TV was developed to “put a wall around content,” consumers eagerly began paying for the differentiated content behind the “wall,” even though “the genie was already out of the bottle” and they had been watching free-airwave television for decades. That “wall” is a basic microeconomic principle called excludability. It’s not a deviation from the norm. It’s a central characteristic of typical price-system market operation.

If worst comes to worst and there is indeed inadequate market support in the digital age for the type of high-quality journalism that newspapers have long provided on a profitable basis, we may have to look toward the public broadcasting model for inspiration on how to keep excellent newspaper-style journalism – and thus our cherished freedom and democracy – alive and well. If that’s what it takes, fine by me.

At 5/15/07, 5:39 PM, Blogger Doug Fisher said...


No one is saying there isn't the model for credible, quality journalism. The Wall Street Journal shows that there is. And as soon as I see it in papers like the A-D, I'll be the first to say charge for it. (In fact, I said that just the other day at a paper where I am consulting on the same issues. More on that in some future posts.) The problem is that so much of what is there has always been a commodity -- the "value," such as it was, came from controlling the method of distribution -- the "wall" -- that too many misguided people think can be rebuilt. It can't be rebuilt on the underpinnings of the trad model that too many pine for.

Cable is an interesting but imperfect example. If consumers were allowed to choose only the channels they wanted, I think you would see much the same thing as newspapers -- much of what is out there is unsustainable because it is largely a commodity. The problem now is that there are inherent cross-subsidies that cloud the true economic model. Those same cross-subsidies have existed, to an extent, in the newspaper as profitable sections/operations propped up unprofitable ones. What is now happening is that the true economics of the situation are coming out -- and a lot of people don't like it. (In fact, the true economics of TV news came out a long time ago when the companies decided it no longer would be a loss leader, and a lot of people really don't like the results of that.)

(A separate debate is whether such cross-subsidies are healthy for democracy, and an argument can be made that they are. It's an argument I find a lot to agree with. But as I said, that's a separate debate that gets into information policy -- and a lot of beer.)

At 5/15/07, 6:30 PM, Anonymous Peter Fisk said...

Yes, exactly. The Wall Street Journal example proves the point that consumers will pay for online newspaper content if it is (a) high-quality and (b) well differentiated. This bodes especially well for small to midsize papers that specialize in local news, but only so long as they commit to maintaining high standards of journalistic quality.

To elaborate on the cable TV analogy, I suspect that we will end up before long with several intermediary businesses that broker access to online content in much the same way as your local cable company brokers your access to various TV channels. You’ll pay a monthly fee for access to a certain bundle of online news sites including that of your local newspaper(s). And you’ll have tiered options: Pay more for the premium package, and your password gives you access to all the major papers: New York Times, Washington Post, L.A. Times, etc. I’m no engineer, but it seems to me the technology is available already. Sure, there’ll be challenges in guarding against unauthorized distribution of content, but that’s already the case with other industries including TV, music, movies, and software, and they continue to thrive.

At 5/16/07, 10:17 PM, Blogger Doug Fisher said...

Yes, and as a bit of a corollary to that, I've maintained for a bit that you will see such aggregators come along to serve bloggers and "independent" Web publishers as well. If you think of reporters as a kind of independent contractor (the reporter-source relationship is still one of the last cottage industries), newspapers have provided services such as insurance, legal protection, editing, marketing, aggregation, etc.

I hope that's not too much of a stretch, but I can see the development of some kind of similar service for independents on the Web. After all, how many people want to really click, click, click? Actually, there's no reason -- other than their libel insurer -- that existing papers couldn't do it. I suspect we'll have to straighten out some of the legal niceties that still remain unsettled (despite -- or maybe in spite of -- Section 230) before this is viable, but I see a day ...


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