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Monday, May 14, 2012

Newspapers in the news

GigaOM has an interesting article on how paywalls are a terrible idea for newspapers. The debate has been raging for years of course, and I have written in the past how solutions like DoubleRecall could help avoid paywalls. Mathew too says newspapers should look beyond the oh-so-obvious paywalls to create revenues:

To me, it makes more sense to try and figure out how to take advantage of the Web in order to provide something that the current market is likely to value, instead of focusing on how to squeeze as much as possible out of a declining market. 
However, how many newspapers have ever managed to 'creatively' monetize a website in a sustainable, ongoing fashion, without resorting to paywalls? In a sense, paywalls are the newspaper guys' answer to the book publisher guys' $10 ebooks. Sure there is no variable cost of selling each additional ebook, but you still have to charge folks per ebook to keep business running. Of course the fundamentally low cost of ebooks will probably shake up the publisher industry's high overhead costs in the long run, and reshape publishers if not destroy them completely in the long run.

However the newspaper industry has a far worse problem. While book publishers undertake the real job of hand-holding authors, helping them publish, and promoting their books (basically they do some value addition), most newspapers are just news aggregators (thanks GigaOM for the thought). And I think thats a key funda, one which may point to the long term future of newspapers, beyond just the current paywall debate.

So your newspaper basically picks up articles from agencies like AFP and Reuters, adds a few local (city/state/country) articles from a few journos on their payroll, prints them on a sheet of paper, adds a ton of advertisements, and delivers them to you in the morning. For this task their costs include

a) Payments to the agencies like Reuters
b) Printing costs
c) Salaries to journos / editors directly on their payroll (and hence not part of item 'a')
d) Overheads, overheads, and more overheads (advertising sales teams, subscription sales teams, printing staff, middle managers, regional managers, HR, Finance, etc. etc.)

Now these paper guys are having to compete with Google News, Yahoo News, Huffington Post, and a ton of other online aggregators, whose costs are only 'a', and in some cases, 'c'. Paywalls or not, how the hell are they going to compete with leaner online news aggregators whose only handicap is lack of journos / editors covering local news? If I may do some crystal gazing...

In some time agencies like Reuters and AFP will also add journos / editors covering local news onto their own payrolls. Or maybe new agencies will get created specifically for local news. But once that last bastion of newspapers is breached, there will be a big shakeout in the industry. Most smaller newspapers (who have little original content) will get wiped out. Larger ones like NYT may survive for a while. Meantime, the online guys get better and better at understanding your news needs (they are already much better at it than your print guys, who force feed random stuff down your throats all the time!). And as the final nail, some online aggregator will probably start offering a reverse newspaper down the line for the remaining paper format addicts. Imagine a Google News offering low-overhead printout and delivery (locality-level) of a Google newspaper in your exact preferred layout, but in paper format. Don't you think that might mean curtains down for conventional newspapers?


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