Newspaper Companies Push Paid Content, Grapple With Economic Literacy
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Media industry analyst and author Ken Doctor at USC's Annenberg School.
Doctor addressed a crowd as the University of Southern California’s Annenberg School Tuesday afternoon, describing the way Google took now-defunct Knight Ridder by surprise in the 1990's.
“Google traffic went from a good idea and nice-to-have traffic to essentially addiction,” Doctor said, priming the audience for a run through key points in his new book, Newsonomics. Between 50 and 70 percent of newspapers’ Web traffic now comes from search engines.
The new strategy, epitomized by The New York Times’ soon-to-be-announced paywall, represents a major shift toward paid content for newspapers operating in a critical time. More frequent readers will be asked to pay a subscription fee for “all access” to its Web site and/or iPad application.
“Will readers accept this proposal?” Doctor asked. “We don’t know. There might be a psychological thing going on here, how you transition everybody from this era of ‘news is free’ to ‘news has value online.’”
USC Professor Gabriel Kahn, who invited Doctor to Annenberg as part of a Media, Economics and Entrepreneurship initiative, explained: “The New York Times has 40 million readers. Some of those readers are worth a lot of money to The Times if they can find a way to charge them. If you can find a way to extract value from your most valuable customers, then you’ve made a giant leap forward.”
In 2011, newspapers have a lot to contend with. Print ad revenue and circulation continue to dive while online ad revenue lags. Tech companies are winning a large majority of that online revenue. Meanwhile, Doctor reported, newspapers are still getting 85 percent of their revenue from the declining print medium.
The rise of tablets, most noticeably the iPad, appears to have provided some publishers with the kick they needed to start building new revenue streams.
“The tablet is so interesting. It’s certifying this new, ‘news anywhere’ era,” Doctor said. “Really, news companies have thought of this era since the early 90's as: ‘We do two things now, print and online. We don’t really like to do online, but we do online because we have to, but we’ll figure it out.’”
This may be the year that online begins to drive more media companies. Tablets and smartphones are just beginning to gain widespread adoption, and consumers have demonstrated an affinity for reading news on them.
“'All access’ has arrived,” Doctor declared, saying more than dozen publishers will be following the Times’ lead in the next year or so. “This is the new business model and everybody is aiming for that five to 15 percent [of really loyal audience members].”
There is plenty of competition for newspapers, however. The last decade pushed an array of new non-profit sources, aggregators, urban media startups, content farms and cross-media giants like Comcast and HBO into the fray.
At the same time, an array of marketing companies has popped up, fighting to be the middlemen between advertisers and audiences. Most radically, advertisers have realized they can succeed by communicate directly with customers on the Web.
“It’s not because they don’t like us,” Doctor said. “They just don’t need us.”
Kahn said the transforming industry’s painful truths must be examined by more editors and journalists if news publishing is to remain a sustainable profession.
“People who produce content don’t often understand the business models that allow them to do that. The more they do that, the more successful they’ll be at producing content on a sustainable economic basis,” he said.
“I think the risk is if you let the economics of the news business deteriorate to the point where anything can masquerade as news.”
