Daring Fireball: Pay Walls
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At first, the newspaper business model was this: there were many competitors, and each competitor faced a mix of fixed costs (staff, printing facilities) and variable costs (paper, ink, delivery). All was fine, because nobody would give away product that had real cost associated with it.
But then the variable cost disappeared. No more paper, no more ink, no more delivery. Suddenly, the only thing left was fixed costs. And all the competitors realized they could start undercutting the next guy, while still making some infinitesimal incremental profit on each viewer. Of course, that incremental profit does not amount to enough to pay for all those fixed costs (staff) that still exist. And hence the problem we have today.
Airlines face the same problem. Fixed schedules and a low cost per incremental seat. So there are always price wars going on to "buy" seats from competitors. But then they can't make up for their fixed costs, and they go out of business.
Without the introduction of variable costs into web content, the newspaper industry will resemble the airline industry: it will rarely make money, and, on net, probably destroy most shareholder dollars invested in it. People will keep talking about erecting pay walls, or fixing the system, but there will always be the next guy who will be willing to provide the same thing for free to grab all those viewers.
Fact: News existed before newspapers.
Fact: News will exist after newspapers.
This is the reason that Simon's plan is never going to work. If they try it, they'll go out of business just that much sooner.
There are publications that still make money off subscriptions. The Economist is the shining example (I even subscribe, for a pretty substantial fee). The value in their publication is in their analysis of the facts.
Everybody will know the same things pretty quickly. However, not everyone will come to the same conclusions. Those conclusions are what they should be charging for, not the facts.
If there had been no newspapers in 1972, I don't see who would have put in the effort of pulling at the threads until the Watergate scandal unraveled. To take a more modern example, I don't see any bloggers that would have taken the time or had interest in doing the few big investigative stories that the San Jose Mercury has broken in the past few years, the one about people being wrongfully jailed because of bad public defenders and the one about the SJ Police's outrageously high number of downtown disorderly arrests, come to mind.
Those are not stories that would have come out in the absence of an operation willing to commit to long-term footwork. They certainly wouldn't have been written by some bloggers looking for news online, because it's happening in the real, offline, world, and you can't just "link" to it.
Without newspapers, or the equivalent thereof, these stories would not be told and no one would keep the government honest (to the extent that newspapers today haven't already failed at this). And I think this would be a loss to society.
Upon thinking about it more, don't you think that the value of the Washington Post is a little over-emphasized in that story today? As much as the newspaper itself played a huge part in allowing the story to break - from employing and training their staff, through providing an infrastructure for doing the investigation to publishing the actual piece - they almost had as much of a role in killing the story. If the editor at the time had succumbed to the pressure from the politicians, he may have caused the story to disappear.
In the end, it wasn't the "newspaper" who investigated it, it was two guys named Woodward and Bernstein.
One thing I believe in is that the internet empowers the individual to do things that were previously impossible to do by one person. Theoretically, I think this applies in this situation as well.
As for the SJ Mercury News example, would that not be the same thing here? I'm sure there at least a couple of individuals in that group that are driving this kind of journalism. Maybe the newspaper as an organization helps foster and nurture this type of behaviour, but so what? Couldn't an organization that is not in the business of printing on paper do the same thing? What is the difference between a newspaper and a blogging organization anyway? Is it the salary? Is it the medium?
Nobody is decrying journalism, just the old (economically) unsustainable models.
Facts don't float around waiting to be plucked from the air and distributed to readers. It takes serious work to uncover secret CIA prisons. I do not believe there is any other organization today that has the time and resources to needed to uncover something like that.
And you're wrong about the business of newspapers. They've never made money distributing news. They're in the advertising business. The money you pay for a subscription barely covers the cost of getting the paper printed and to your door.
Newspapers made lots of money because -- for a time -- they were absolutely the best advertising medium in the world. Newspapers are in serious trouble right now not because of subscription declines (which have been slow bleed for years) but because of a rapid decline in ad spending, which fell off a cliff about a year ago.
What's killing newspapers isn't the competition from online news startups, it's really AdWords and Craiglist along with the decline of national retail chains and the failure of car dealerships.
Search is just one vehicle (among several) for delivering targeted ads. Heck, they make about as much money selling ads on non-Google sites through AdSense as they do selling ads on their own search results pages.
Whereas NYT is obligated to invest in journalism to generate distribution, Google invests in useful tools. It appears that investing in useful tools is a more efficient way of generating distribution than quality journalism, at least for the time being.
The problem with subscriptions is the way they're implemented now, not that people find them fundamentally unappealing. It's just that, when I run up against a pay wall for a specific story as I try to click through to it, I don't see the value proposition in subscribing to the entire website. I just want my damn story, and I'm not getting it. That is just frustrating.
Back in the day that AOL was a walled garden with custom content, the value proposition for signing up was simple. They did all the work of making sure content was available just to you, and you handed over your subscription fee to one entity. Done and done. If AOL had been implemented as a hodge podge of pay-as-you-go islands of content, it wouldn't nearly have been as successful.
Outside that, all I'm missing is access to specific articles on other papers I don't subscribe to. Couldn't that be done with per-article fees covered by newspapers I subscribe to?
For example, say I subscribe to the NYT. With that subscription, I also got 100 article credits/year to read from the economist, wsj, etc. And visa-versa.
Regardless, I don't think the random copies are that big of a deal. The only time something material is lost is when a copy gets posted to reddit or digg instead of the original. Few people are going to come across random copies of articles in obscure corners of the internet without direction.
Technically Google only index's top sites in near real time. CNN might be walked many times a day, but if you think that every blog or torrent site gets walked even close to a fraction as often then your mistaken.
This has been the Business Plan of the Future for at least the last fifteen years. This Clay Shirky essay is getting on towards nine years old:
http://openp2p.com/pub/a/p2p/2000/12/19/micropayments.html
... and yet the counterexamples are still pretty thin on the ground. Where is the newspaper that thrives on micropayments? It's not like nobody has had the time to try it yet.
If the transaction is anything easier than a credit card transaction to process, it's not gonna be secure. There might be some attempt at some "no bother" microtransactions systems, until people start getting microbills from Kiev for 3,780,000 nickles for micro-porn. Ooops. I figure these microtrasaction system got about 6 months before Ukrainian hackers have figured out how to buy BMWs with nickles
Frankly, I think this approach is far worse than a flat subscription. And $0.25 is way to high. I would probably switch to a (lesser) news site that was free rather than pay a fee for 95% of the stuff out there.
A custom-picked lineup for $20-$30 a month over Boxee or a Slingbox or a Roku/Netflix box, etc. would compare well to $50-$60 plus endless taxes for channels you never watch and a clunky set-top box. Maybe you could start with sports or foreign channels to avoid vertical collusion problems from channel providers.
Okay, but maybe we should wait until Verizon rolls out fiber optic to more of the USA before cutting them off at the knees like that. They are depending on everyone to buy overpriced TV service to pay for all that fiber, after all.
[1] "SyFy", I guess now, which just seems strange.
http://en.wikipedia.org/wiki/Zattoo
They've been trying to expand into the U.S. for at least a year now, but it hasn't happened so far.
If they want to subscribe, the newspapers need to figure out how to sell something that they haven't already given away for free. Wish I could tell you what that is, because they already give everything away. The only other option would be to figure out a new way to make money off their content.
Information, particularly mass information is now cheap, and those high margins are completely and irreversibly gone. Money is still there to be made, as the many full-time bloggers can tell you. But it won't be enough to staff the newsroom floor. That work will be distributed.
Why? People pay $$ for the content that just happens to be in newspaper form. They also pay for content that just happens to be on the TV. Why wouldn't they pay on the Web? OH THAT'S RIGHT! Because everyone expects everything for free! We're all a bunch of freeloaders that don't even want to pay for valuable content.
It comes down to scarcity. A physical paper is a good. You're not buying the news, you're buying a paper. People buy cable subscriptions because there aren't any good free alternatives.
But news on the Internet? There are _thousands_ of places to get that. And most of them are free. The Times and the Post don't have enough added value to justify the cost.
That doesn't indicate that the readership are "freeloaders" (which implies they're somehow taking advantage of the newspapers generosity) — that's people deciding they'd rather not give away their money.
It's a value proposition - the newspapers who do not make money on the web do not offer something unique to their readership and hence their advertisers.
Really? Mac OSX is just ones and zeros. Does Gruber think that, along with all other forms of commercial software or anything else that can be digitized, be free?