All about ideas…

The fate of newspapers

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I just finished reading an article in eCommerce Times regarding the funding of online newspaper content.

The Newspaper Association of America asked for ideas on what newspapers can do to escape the financial quagmire many seemed trapped in. Companies like IBM, Microsoft, Oracle and Google answered with their suggestions, some of which sharpen targeted advertising and some of which rely on readers to pay up for what they’re used to getting for free.

Although many of the Tech giants apparently offered different methods in which newspapers can once again become profitable by charging for online content since print subscription rates have fallen off so dramatically, Google had the most “eye-brow raising” response.

“Google believes that an open Web benefits all users and publishers,” the company writes in its proposal. “However, ‘open’ need not mean free.”

Google proposed offering news organizations a version of its Google Checkout system, which is used for processing online payments. It would give readers a place to sign in to an account and then pay for media from a variety of sources without having to punch in their information over and over. The company says it could offer publishers several pay methods, from basic subscriptions to so-called “micropayments” on a per-article basis.

Personally as someone who – if given the time reads up to six dailies, ranging from major metros to small, locals; approximately half dozen weekly pubs; and potentially four or more monthlies – reads a great deal of online content, the idea of paying for content definitely will squeeze my budget right now. However, I do understand the need for newspapers to raise capital to survive.

Over the last decade as more and more readers turned to the internet to obtain their news (free of charge) rather than from paid print subscriptions to local and major metro papers, most papers have slashed their staff by significant numbers, cutting out most particularly foreign bureaus, reducing staff covering national news while relying more heavily on AP and other national news distributors, and even changing the focus of their content to reflect more local news in the hope that local news will draw readers back. However, that strategy has not worked well as free internet content provides both local and national news.

Newspapers have a sticky mix to accomplish regarding finances. They have to provide what content readers want and for which readers will subscribe to attract advertisers who will pay the rates papers desperately need to supply the desired news content.

Advertisers pay large sums for readers: the aggregate of subscribers. In other words, the more subscribers, the more people will see their ad, which means the paper can charge more for an ad to pay for the reporters (and other publishing expenses) who provide the content that readers want. However, with print subscriptions going down dramatically as a result of free internet content, advertisers can negotiate lower rates based on lower subscription rates.

While advertiser revenues make up the largest proportion of revenues for a newspaper, the volume of subscriptions still comprise an important revenue stream. In addition, that subscription volume enables newspapers to set ad rates. The greater number of subscriptions, the higher the ad rates. And the reverse hold true as well: lower subscription rates means lower ad rates. Currently, newspapers are being hit in both revenue streams as a result of significantly reduced paid subscriptions.

One source (advertising) of revenue cannot exist without the other, and the other, paradoxically, cannot publish content without the former.

While I think Google’s idea may lead to a solution. I’m yet skeptical of its workability, especially for those of us who like to scan and read news from a variety of online news sources.

In addition, as the usage of ad blocker APIs increases, the number of online ads viewed decreases. If pay-per-click (PPC) of online ads decreases, then advertisers have yet another tool to decrease the amount paid to newspapers. And the only way to reduce the effect – or desired need – of ad blocker APIs is to ensure that every internet connection is a high-speed, broadband connection.

So far, Congress has not chosen to allocate the funds to make that outcome possible as was the case during the Eisenhower Admin. when a national interstate highway system was deemed necessary for commerce. Nor have large internet providers, many of whom see no profit margin in expanding their reach to cover smaller communities. On the contrary, several large providers have diligently lobbied to prevent smaller providers from providing access service to any number of communities.

In addition, large providers have kept rates at a premium for high-speed broadband which causes more ad blocker APIs to be used to facilitate faster downloads. The result of large companies dominating the internet provider market – with extraordinarily deep pockets to lobby Congress – has been to keep prices for high-speed broadband high and competition low.

That anti-competitiveness means even more people will choose to use ad blocking APIs to facilitate faster downloads which means even fewer people will see paid advertising on publication websites which means ad rates will decrease even further. It’s a vicious circle that affects every pocketbook…and both advertiser and online news providers at their core.

Nevertheless, while I agree that some sort of online content paid subscription rate will become the norm of the future, I would like to see a more diversity in the way users are asked to pay – especially for those of us who pick and choose from a large variety of news sources. What that diversity is, I am not yet sure. However I think it might be something along the lines of a subscription payment for a set number of pay per click article viewings, regardless of the individual newspaper viewed.

For example, I could chose to pay to read 100 articles a month – not just the headlines but the full articles – at a set price from a variety of papers of my choice. If I go beyond that amount, I’d pay more based on a pay for click amount. Kind of like the way phone companies charge their service.

Will this kind of payment subscription service make papers profitable? Who knows. But if payment systems are not revised so that papers can once again become profitable, sustaining businesses, we may become a nation without a news outlet. To badly paraphrase Thomas Jefferson, the only truly free nation has a truly free newspaper community.


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