Bad Assumptions Made By American Press Institute Will Stop It From Helping Newspapers

from the go-through-the-list dept

Last month, we wrote about the problems with the American Press Institute's "plan" to help save newspapers, which seemed really misguided. Steve Yelvington has now gone through the report and does a great job explaining why the report is so far off: it's basic assumptions are all wrong. He lists out each assumption and explains why it's wrong:

Consumers perceive that content produced by news organizations is valuable to them. This myth persists primarily in organizations that are dangerously out of touch with their markets. Public opinion of journalism, and of newspapers, has gone into a nosedive. Decades ago, people might trash-talk "the media" but generally would make an exception for their local paper. No more. Newspaper managers should know this, but many of them have fired their research people to save money, preferring to stumble through the fog without eyes and ears.

Consumers will actually make content purchases when they are confronted with many free options. Over the last 15 years, this assumption has been demonstrated to be false in digital paid-content experiments by newspapers all over the world. The numbers of consumers so inclined aren't great enough to sustain a business of significant scale. This idea persists primarily because so many newspaper people are deeply ignorant of what's been going on in their own companies, and because digital people generally lose power struggles with print people. Almost everyone I know who ran a paid-content online media experiment no longer works for the company where they tried it. Those companies are now largely ignorant of their own histories.

Publishers can exert their influence in the marketplace through laws and public policy, both of which could change. Newspapers have been trying without success to get rid of FCC's cross-ownership ban for decades. Newspapers, which are deeply despised by many politicians and sweeping sectors of their own customer bases, aren't going to persuade the government to outlaw Google.

Publishers will invest in emerging technologies that establish new work rules, new systems for organizing content and new designs for packaging editorial and commercial content. These would be the same newspapers that underinvested in the Internet for the last 15 years, while pouring cash into glitzy corporate headquarters, printing presses, and more newspaper acquisitions? The ones who now can't pay back the capital they've already borrowed?

News organizations can make the leap from an advertising-centered to an audience-centered enterprise. News organizations -- OK, let's be specific: newspapers -- are deeply addicted to high-volume revenue streams and huge profit margins that have enabled them to gobble up other newspapers and create huge, dangerously leveraged media chains. Such organizations require growth to survive and will fail in spectacular ways when asked to cope with shrinkage. And make no mistake, the scale of any news business that asks its readers to take primary responsibility for underwriting the costs of journalism will be tiny when compared with the fat times at the end of the last century.

The rest of the post is worth reading, as well. Yelvington notes that many of these myths were already debunked for the API, so it's not clear why they've been brought back up. Instead, Yelvington notes that no business model based on "attempts to reverse 15 years of social and technological change" simply won't go very far.

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If You Want To Charge For News, Can You Answer These Questions?

from the please? dept

Want to know why the old school newspapers are failing one after another? Maybe it's because they're spending all their time rewriting the same column over and over again. The latest is David Carr of the NY Times who has written the same column that has been written about fifty times in the past 6 months by others, saying that newspapers should all collude, stop giving away content for free, force Google to pay to link to them, among some other nonsense that makes no economic sense whatsoever.

Steve Yelvington, however, has put up a good list of eight challenges that any newspaper or reporter who wants to charge for news should need to respond to in full. His list is focused on those who want to charge for "local" news, but I think it mostly applies to all news:

1. The painful lessons of experience. You might want to look into the history of attempts by general news sites to get consumers to pay for access. Did you actually think we hadn't thought of it, and tried it? Your ignorance of the field and of history is one of the things that makes the online guys reject everything you say. Do you need a list? The burden of research here is on you; it's your idea, after all. But I can tell you where to start.

2. The problem of scale (volume). It takes scale to make paid content work, and you don't have the volume you think you have. Quit making up wishful percentages based on your totally bogus monthly unique-user count ("well, if we get just 10 percent of our 85 zillion unique users to pay"). If you're going to engage in wishful thinking, base it on the cohort of individuals who visit your website more than three times a week. You will be shocked, and dismayed. I've been saying this for years: How can you get them to pay if you can't even get them to visit frequently when it's free?

3. The problem of scale (breadth). The idea of premium paid content (to generate reader revenue) plus free commodity content (to support an ad model) is alluring, but be honest with yourself. Local sites don't have the breadth of content to simultaneously support a paid premium content model, while maintaining enough free pages to harvest the advertising benefits of the open model.

4. Relative strength of the geotargeted advertising model. Ultimately the idea of paid content goes to war against the idea of ad-supported content. In local markets, the ad model is stronger than in global markets. There is, and always will be, a gross surplus of ad inventory on the Internet, and that drives CPMs into the sand. But actual deliverable geotargeted advertising -- and please understand that I'm talking about a reality that includes the entire sales support system, not theory -- is an entirely different matter. Local advertising sold by local sales forces is a substantial revenue stream, and if you're not tapping into that, it's your own fault.

5. Competition. There are plenty of competitors and would-be competitors just waiting for you to strangle your own website so they can step in and steal your future. The larger the market, the more this is true. In some relatively small, isolated markets you may be able to get away with it. For awhile.

6. Lack of unique content, coupled with a false sense of being unique. When you've had a virtual monopoly for decades, you grow arrogant and develop blind spots about your own weaknesses. From the viewpoint of the consumer, you're not nearly as unique and special as you think. And you've exacerbated this problem with your poor pay scales historically, and more recently your vicious cutting aimed at higher-salary veterans.

7. Support costs. If somebody drops 50 cents into a newsbox and it won't open, they just go away mad. If somebody is paying for access to your website and it won't work, they're going to call and suck up 12 dollars of staff time. You have no idea what you're getting into. Computers are evil, perverse devices aimed at driving humans crazy.

8. Your own staff. Your online staff hates the idea and they'll do everything they can to undermine it. Yeah, you can fire them. Why don't you get a table saw and cut off the fingers of your right hand while you're doing it? I've seen this happen time after time as newspapers consolidate print and online staffs, and the "formerly known as print" people conspire to expel the "formerly known as online" people. The result is a great leap backward. It's self-destructive.

I'd add another important factor to this list: What value are you providing that makes it worth paying you? That's the question I keep asking. Newspaper folks seem to think that their content is magically so valuable that everyone will start paying if they charge. There's no evidence that's true at all. So what value are they adding beyond all the other content out there that makes it worth actually paying for?

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