By paulgillin | June 5, 2009 - 10:38 am - Posted in Advertising, BusinessModel, NewMedia, Newspapers, OnlineMedia, Solutions

Publishers MeetNewspaper executives met in semi-secrecy this week to ponder collaborative solutions to the industry’s troubles.

They heard a big idea from Alan Mutter called ViewPass, a subscription service that would be jointly owned by publishers. ViewPass would aggregate editorial content and collect visitor data that could be used to sell higher-priced ads.

Mutter’s network, which he has been building quietly over the last few months with collaborator Ridgely Evers, would create profiles of paying subscribers based upon information they volunteer as well as their reading habits. It would provide a means to monetize content through subscriptions and micro-payments but, more importantly, would develop rich information about members over time. Mutter estimates that a system like this could more than double the CPMs that publishers charge advertisers. There would also be a penalty for content providers who abused copyright: they would be booted off the system. The Nieman Journalism lab has a two-page PDF description, if you’re interested.

Attendees at the meeting also discussed ideas for regulating the reuse of content along the lines of a model deployed for nearly a century by the music business. Music publishers license songs to bars, radio stations, shopping malls other outlets through organizations that represent the copyright holders. The best known of these is ASCAP (American Society of Composers, Authors and Publishers and Broadcast Music). Outlets can buy blanket licenses to play copyrighted works in public, with composers and performers getting a percentage of the fees.

The big concern with any consortium is legality, but The Wall Street Journal quotes several experts on antitrust law saying that the music industry experience is a valuable precedent for the news industry. If publishers argue that the survival of their industry depends upon regulating fair use of their content, the Justice Department would be hard-pressed to object to a consortium.

A Different View

On the other hand, a lot of people think the paid-content debate is pointless flailing. Xark’s Dan Conover writes a blistering critique of the industry’s search for salvation. Rather than changing the existing model, he writes, publishers are fumbling around for a solution that requires readers to fundamentally change their behavior. People aren’t going to start paying for something they’re accustomed to getting for free, so the debate is simply hastening the demise of the industry by delaying the search for useful solutions. Innovation requires examining all possible alternatives, and newspaper publishers aren’t the kind of people to do that. “They’ll do anything to survive… so long as it doesn’t involve change,” he writes.

Conover makes the point that pay walls involves a trade-off: the more you charge, the fewer people come to the website. Lower traffic means lower advertising revenue and the income from readers won’t make up the difference. Tim Windsor weighs in with a comment noting an earlier column he wrote at the Nieman Journalism Lab documenting that traffic declines after the imposition of pay walls at could be on the order of 95%.

“When the Los Angeles Times walled off its entertainment content in 2003, ‘total visitors to the site — people who read and interacted with content — plunged from a high of 729,000 in July 2003, the month before the wall went up, to about 19,000 total registered visitors. That’s a drop of 97% in actual audience.”

Our Two Cents

The newspaper industry’s paid content debate sounds more and more like the desperate protests of the music industry when file-sharing began to dismantle its business model. The two industries have some characteristics in common. Both are mature, traditionally stable and highly profitable businesses with predictable growth and high barriers to entry. The people who gravitate to such industries excel at managing costs and limiting risk.

These are the last people you want to run operations at a time of crisis. Crisis demands innovative thinking, fast reaction times and tolerance for risk. One reason we’ve seen so little of this in the newspaper industry is that the people at the top have no capacity for making dramatic changes. The innovation that we’ve seen comes almost entirely from startups or skunkworks operations that publishers have had the sensibility to leave alone.

Paid-content models may gain some limited traction in markets that place a high premium on a certain kind of content. Bloomberg continues to charge high fees for information because it innovates so well in the ways it analyzes and presents it. But that’s Wall Street. It’s hard to believe that much of what now appears in newspapers is going so compelling that the average consumer is going to pay for it. Hyper-local and database content may have more commercial appeal but a lot of newspapers will need to change the way they gather and publish content in order to cash in on that opportunity.

The industry is still too dependent on advertising. Ideas to squeeze more blood from that stone have value, but they aren’t going to alter the economics of a fundamentally broken industry.

Consider the analysis from Moody’s Investors Service Senior Analyst John Puchalla, who says high costs are squeezing the life out of the newspaper industry. Only 14% of the industry’s costs are related to content creation, Puchalla says. Unless the number can be brought down significantly, the high fixed costs, combined with crushing debt loads, will make it impossible for publishers to acquire new funding. Debt ratings will continue to sink, making capital even more expensive. Cross industry collaboration and outsourcing could lighten some of the burden, but it will be very difficult for publishers to compete with the vastly superior cost structure of online media.

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This entry was posted on Friday, June 5th, 2009 at 10:38 am and is filed under Advertising, BusinessModel, NewMedia, Newspapers, OnlineMedia, Solutions. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

9 Comments

  1. June 7, 2009 @ 10:59 am



    ViewPass strikes me as the kind of solution that tries to slow a boat that’s sinking by aggregating the holes in bottom, or tries to save a stabbing victim by aggregating all of the wounds together into a honking great big bullet hole.

    Apart from the fact that we have laws in place specifically to prevent that kind of price fixing collusion, they would have a tough time selling the idea, never mind the papers.

    The bald fact is that the paper industry is in its death throws and will soon return into an artisanal/trade-craft form of employment. The numbers of impressions produced per day will become the number of impressions produced per decade.

    The need for paper for wrapping probably won’t decrease, but newspapers for the conveyance of information are just dead, its just that there are still some left that don’t know it yet.

    And the forests heaved a sigh of relief…

    Posted by msbpodcast
  2. June 7, 2009 @ 11:45 am



    When you have 14 percent of newspapers’ cash operating costs, on average, devoted to content creation, while about 70 percent of costs are devoted to printing, distribution and corporate functions. And the remaining 16 percent of costs are related to advertising sales, you will have the death of the Newspaper Industry as we now know it today. You can not operate any business under these conditions. This also does not include their debt structure my friends.

    So, what this tells me is that Internet news organizations can operate at 70% less the cost of Newspaper companies today. This is why Internet news organization will have more and more of a competitive edge. However, most of all the ADVERTISERS know this. They are now less and less willing to pay for ad campaigns in print with very little targeted reporting and analytics. They can achieve the same or in most cases greater results on the Internet with ad campaigns that have a better cost effective pricing model.

    Desperate people do desperate things…..

    Posted by Michael
  3. June 7, 2009 @ 4:03 pm



    That’s not going to help. The readership/audiences might be there but the money’s going on-line.

    And just to make things clearer that the internet is perceived as offering a much better ROI for the advertising dollar than any mass media, even the free newspapers are failing. They cant even GIVE IT AWAY because nobody’s ponying up advertising dollars.

    http://www.nytimes.com/2009/06/08/business/media/08iht-free.html?ref=media

    The ad supported model is dying as companies head to the web.

    Its not a perfect advertising model but it offers a better ROI because its on-line and they can have a web site that advertises with messages as detailed as the customer wants them, takes orders, tracks shipments and resolves customer disputes one-on-one.

    When you’re being chased by a fiscal bear, you don’t have to be faster that the bear, you just have to be faster that the next guy. His butt will be bear poop and yours ‘ll still be able to run.

    Tell me again why mass people who depend on ad dollars are having problems and I will point to the web and tell you mass media for profit is unsustainable.

    The mass media are going to become propaganda engines once again, like they were everywhere when they were founded even here in America and were in Europe until the fifties and still are to some extent with all of the state owned media out there. (And that includes PBS in the states, The ABC in Australia, the BBC in England, the CBC in Canada, “France Télévisions” in France, “ERT” (Ellinikí Radiofonía Tileórasi) in Greece, etcetera.)

    Why will all media become state owned?

    Because nobody else can afford it.

    Posted by msbpodcast
  4. June 7, 2009 @ 5:03 pm



    And here’s another example of the death of advertising as a source of revenue for the mass media.

    Even Hulu.com is screwed because they can’t pull in ads.

    http://www.theregister.co.uk/2009/06/05/hulu_may_adopt_subscription_service/

    Posted by msbpodcast
  5. June 7, 2009 @ 6:42 pm



    […] 7, 2009 · No Comments From Newspaper Death Watch, in its commentary on a meeting of newspaper executives seeking to implement a paid content plan […]

  6. June 16, 2009 @ 2:29 am



    TV news is headed the same way, they just don’t realize it yet. This is a good thing, though, and will ultimately be good for the field of journalism. The innovators can build something better on top of the ashes.

  7. June 18, 2009 @ 10:41 am



    Community newspapers have a savior on http://www.communitywebsites.com. License your city site with various revenue models to serve the community and local businesses and run it as a parallel site to your newspaper site. For more info contact Jeffrey Blake at 650 240 5051

    Posted by Tom Vellaringattu
  8. June 20, 2009 @ 9:52 am



    Desperation drives “colaboration”? Too bad it didn’t drive a spell-check.

    Posted by Gypsy Boots
  9. June 20, 2009 @ 10:14 am



    Good catch! Fixed and thanks.

    Posted by paulgillin