It seems that everyone has a plan to save the US newspaper industry these days. Some argue that newspapers, which have lots of online users that they aren’t making money from, should adopt an iTunes model and charge small amounts for piecemeal news content. Others say subscriptions make more sense. The trouble is that both models are very risky unless most big publications make the switch together. This presents an opening for big Internet companies such as Google Inc. or Yahoo Inc. to harness—but rather than looking at their own online models, they should consider the cable television business.
Consider some of the ideas floating around. Apple Inc.’s iTunes did get people to pay for digital music downloads by breaking up albums into tracks and charging a small, 99 cent (about Rs48) fee. That’s harder to adopt for news articles for two basic reasons. First, music has always had a price attached to it, while online news has been free, with few exceptions. Second, music can be enjoyed over and over again, while the value of most journalism is fleeting.
Cumulative effort: A copy of the final edition of The New York Sun on display at a news-stand on 30 September. The US newspaper industry, which is facing a decline in revenues from print editions, needs to generate revenue from online users. Daniel Acker / Bloomberg
Moreover, the micropayment model is almost always less profitable than subscriptions. Research by mathematician Andrew Odlyzko has shown that the mental cost of small, variable payments causes usage to increase by up to 200% when switching to a flat rate. And it has worked well for some content providers offering unique content, such as The Wall Street Journal’s coverage of finance and business, for which some one million customers pay $119 annually.
But if the content is replicable, even if varying in quality— say the breaking news coverage on the US Senate’s latest stimulus package—it becomes harder to charge. The Washington Post may have the strongest piece on the Bill, but if it charges for access and The New York Times, which has a decent story itself, does not, readers might not see the valuing in paying up.
That argues for the top publications, and perhaps some news wires, to band together and to agree to adopt some sort of subscription model. Obviously, they’d want to come up with their own models—deciding what content is best left behind a pay wall—and determining the price based on what their clients would pay. Otherwise they’d be guilty of price fixing.
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An industry-wide effort to do that would at least begin to put a price on content. But there would have to be a way to deliver the content to the masses. Enter Google or Yahoo. The Internet companies could offer up their hordes of eyeballs in much the way that a cable company provides the window to a bouquet of content channels.
And like the cable industry, a customer could buy a monthly pass that would give access to a handful of publications. A standard package could have three newspapers, including local publications, whereas the premium package might go deeper. Alternatively, an a la carte model could be offered.
Of course, cable companies have the added advantage of controlling their distribution medium. The freedom to surf the Web complicates matters. But free is not a long-term viable business model for quality journalism. And micropayments won’t suffice.
Bold, organized action by the leading publications, along with some help from the Web biggies, would be the way forward.