Why newspapers are not screwed

"Internet outsider" Henry Blodgett's analysis of the newspapers' long-term prospects Why Newspapers Are Screwed is (as you may have already intuited from his title) pretty superficial.

Using revenue and cost numbers from just the New York Times (why?) combined with some debatable assumptions, the analysis tries to show that in a digital-only future for the group online revenues would not be sufficient to cover the reduced, but still substantial, costs of content creation. By extension, apparently, all newspapers are screwed.

So, some basic counterpoints. First, the fundamental assumption - of the permanently low value of news content (and therefore news sites) - is that news content is almost valueless online. It has become a commodity because there is so much of it being produced by everyone from the NYT itself to local TV stations to Korean citizen journalists shovelling their profitable offline content online. Without scarcity there is no pricing power. So far so economically obvious, but work through his theory and of course we quite quickly come to a future in which this array of news content creators do not, in fact, create this vast glut of commodified, generic news because (says Henry) they have gone bankrupt. What prospects then for the handful of high-quality producers of journalism who survive to ring in this future? Far greater pricing power. More money. Perhaps online profitability for their far scarcer news content. Rupert Murdoch once famously predicted a future for the British press which contained only the Times, Sun and Mail (others have added the Guardian to the forecast roster). If most news publishers are to fall by the wayside, the market in which those remaining operate will be very different.

Second, a digital future without print costs does not necessarily mean one without print revenues. See early experiments in this field such as G24, TelegraphPM and others. Again, the value of such experiments (content, advertising space) only increase in the imaginary future where most or all print newspapers have ceased publishing. While it would not (with current publishing technologies) be viable to centrally print and distribute a mass medium such as a newspaper for only a handful of readers, the widespread availability of cheap home printers means that print readerships can go on being served by online news publishers for as long as there happens to be any demand at all.

Third, a point I will return to again and again, newspapers' core value is not their content but their validation. Sure it's expensive to create content. In the long run this probably doesn't really matter. There's plenty of content. The value that newspapers add to the picture is verifying which of it is true.

And finally, a challenge to one more of the assumptions. The whole piece takes as read that the future contains no newspaper print readers. This is an odd conclusion. Globally, newspaper readership is up. Regionally, newspaper readership is up everywhere except North America even without accounting for free metropolitan commuter papers. Add free metropolitan commuter papers to the mix and readership is up almost 5% year-on-year and almost 15% over five years. Sure, we all know that the WAN numbers have their own problems - but it is too facile to simply present as accepted fact the imminent demise of a medium that by one measure grew strongly over both the last one or five years and which in fact continues to find new ways to profitably reach new audiences.

Update: Steve Yelvington picks up some more flaws in the "newspapers are screwed" analysis, concluding "I am not arguing that newspapers aren't in trouble. But the problems are much more driven by a weakening ability to deliver an audience in any medium than by any inherent weakness of an online advertising model. At the end of the day it comes down to a simple question: Are your content and services relevant to consumers in your market?"

Comments

[alan p]

Was this *that* Henry Blodget ;)

[Mark]

Your defense of newspapers are highly unconvincing.

Even if you go with the not so unbiased WAN numbers, global newspaper growth in terms of sales and readership still fall well behind the global rate of inflation, leaving them with a net negative growth.

As go America's papers, so will go the world. Those in the old media need to wake up and re-tool their organisations for something useful in this century, or they will die.

[Rick]

Seamus,

I understand your points, but it is still not very clear what a sustainable model would look like. For sure the value of validated information is high, but the two problems facing it are:

a. the costs for producing validated information are **very high**
b. at this point there are no barriers to prevent the diffusion of the validated information to low-cost means of diffusion

once again, your points are valid, but it is not clear what a viable business model would look like to keep this industry with its current size. if you are instead talking about a substantial reduction of its market focusing on specific niches, then this would make perfect sense.

[Tom Grey]

It's amazing that current newspapers still pay anybody for their opinions -- there are plenty of free opinions available, and it shouldn't be too tough to get good opinions for the cost of mere advertising the website of the opinion writer.

The validating power of paper is maybe the larger part of the value, but also the distribution of a printed, inflexible but very accessable and portable product is a significant value.

Rick above answers his own objection -- FEWER papers, not the current size. But Rick seems correct that the future successful business model is not now known, or at least not clearly accepted as such.

Perhaps somebody like Craig "knows" the Craigslist model, believes it, is working it and is correct -- but his being correct, in the future, is not now obvious/ certain.

[Rick Waghorn]

Not taken from the baove, but from the same stable... "the core value of a newspaper is in being trusted". Not wholly correct, because value can also come from the journalist being trusted. Does the 'trust' in a Jeremy Clarkson motoring review come from Clarkson or the Sunday Times? AA Gill? Trust in niche areas comes in the person, not the product; the brand strength is the individual, not the institution. Does Clarkson need a print press and paper boy to find an audience? No, he's mymotoringwriter(.com).

[Steve Boriss]

Newspapers' value in the past may have been based on "validation," but this is fading fast for two reasons. First, alternative news sources on the Internet have been destroying the public's perception that newspapers are actually providing verified truth by discovering and publicizing lapses. Second, the Internet is providing a different, and ultimately preferred method of validation -- news presented as a series of rumors, confirmations, and corrections in a more exciting and more effective pursuit of the truth (Steve Boriss, The Future of News)

[BD]

I wrote something about this earlier.

http://piquancy.blogspot.com/2007/03/with-grain-of-piquant-salt-its-media.html

[Scott]

In this digital age, every publisher should use the digitization services as the e-edition users are increasing rapidly. This is the only way to increase their circulations. And also there is another way to publish through RSS syndication, pod casting which I found in www.pressmart.net. This website is providing the services of digital versions of print publications, RSS, etc.

[Press Digital]

Newspapers' value in the past may have been based on "validation," but this is fading fast for two reasons. First, alternative news sources on the Internet have been destroying the public's perception that newspapers are actually providing verified truth by discovering and publicizing lapses. Second, the Internet is providing a different, and ultimately preferred method of validation -- news presented as a series of rumors, confirmations, and corrections in a more exciting and more effective pursuit of the truth.

I m totally agree with this.