Reinventing the Economics of News

I read this article about the rise of free daily newspapers in the US and had a sudden realization about the perceived failure of news organizations to charge for news online. The New York Times has torn down the TimesSelect pay wall — does that mean that reading TimesSelect content online is now FREE?

What I realized is that, actually, it’s NOT free. To read the New York Times or any other newspaper online, I have to be connected to the internet — and that, in most cases, is definitely NOT free.

Broadband internet access at home is still in the $40-50 range. I pay Verizon extra to access the internet on my Blackberry. I pay extra to use my Blackberry as a tethered modem. Traveling to the New York the other day, I paid for WiFi access in TWO different hot spots because my tethered modem kept dropping the connection (not a coincidence I think). Companies pay for high speed lines for their employees. And we of course pay a lot for the computers and handheld devices that we use to access the Internet (e.g., iPhone).

I realized as I kept pulling out my credit card for public WiFi access that it’s the ISPs who now wield much of the monopoly power once enjoyed by newspapers. I read the New York Times everyday — and I still pay for the privilege. It’s just that I’m not paying the New York Times.

This is the fundamental flaw in the thinking about the future of news — the assumption is that newspaper subscribers used to PAY for NEWS, and online they get it for free.

But the reality is that newspaper subscribers didn’t pay for just for news — they paid for DISTRIBUTION. They paid for a highly useful package of information to show up on their doorsteps every morning…which was the ONLY way to get access to that information. That package included news, and many subscribers valued that part of the package, but they also valued:

  • Movie listings
  • Employment listings
  • Real estate listings
  • Cars for sale listings
  • Comics
  • Sports scores
  • Style section
  • Coupons
  • FSIs
  • Ads for sales at retail stories

Everyone is thinking about the shift in the economics of content in terms of paying for content, but what publishers are really facing is a shift in the economics of distribution. We’re still paying for a bundle of information to be delivered to our homes — it’s just that now that bundle is traveling via fiber optic cable rather than newsprint.

It’s not that “content wants to be free” — it’s that Internet access ISN’T free, and now that distribution and content have been unbundled, people are reluctant to pay TWICE — once for distribution (i.e. internet access) and again for content (paid subscriber wall).

So as news organizations seek new models to “pay for news” — to staff the newsrooms that do the reporting that create the news — they need to stop asking why consumers won’t pay for news anymore. Because they ARE paying to access news.

What needs to be reinvented is the economics of content CREATION, which has been cut loose from the economics of distribution. Fewer and fewer people are paying news organizations to distribute news — so they need to find a model that pays strictly for the creation of news.

That is…unless news organizations can once again become hubs of distribution — a destination for consumers to access a rich package of information. Right now, most news organizations are merely offering the same package of information online that they do offline — but the web is much, MUCH bigger than that.

That’s why search engines like Google, along with ISPs, have taken over the information distribution business — search offers people the whole web, while news organizations still offer the same old finite package.

It’s time to get out a clean sheet of paper.

Or perhaps more apt — a new Wiki or Google Doc — figuring this out is going to be a collaborative effort, like Jeff Jarvis’ Networked Journalism Summit.

Jeff is right to focus on the network. The new economics of news won’t be based on monopoly distribution channels — it will be based on networks.

Scott Karp

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