Don’t stop the presses

The recent pronouncement by News Corp proprietor Rupert Murdoch that the days of free news on the internet are over and that his own newspaper websites are considering charging for access within a year has refueled the ongoing debate about whether newspapers the world over made a strategic mistake by allowing their content to be viewed for free, at a time when the average person under the age of 30 accesses most of their news online and has not developed a habit of buying daily papers.

Murdoch described the move towards a pay system as a way of correcting a “malfunctioning business model”, and is understood to be encouraged by booming online subscription revenues at the Wall Street Journal.

That title, meanwhile, is planning to further refine its model by introducing a micro-payments system for individual articles in the autumn. This is intended to appeal to occasional users who are not willing to pay out more than $100 for the annual WSJ.com subscription.

The New York Times Company and Washington Post Company, meanwhile, are launching pilots with the newly launched large-screen Kindle DX this summer. “At The New York Times Company, we are always seeking new ways for our millions of readers to have full and continuing access to our high-quality news and information,” said Arthur Sulzberger Jr, chairman of The New York Times Company and publisher of The New York Times. It’s understood that The New York Times, The Boston Globe and The Washington Post will all offer a discount on the new Kindle in return for long-term subscriptions.

Increasing activity in this area reflects the growing urgency to find an effective business model for the newspaper industry, both online and offline. Newspapers may once have seemed unassailable bastions that represented the issues, fears, hopes and aspirations of a town, city or an entire nation, but these days titles around the world are dropping like flies in the face of slumped advertising and declining circulation figures.

Venerable titles such as the Denver-based Rocky Mountain News, which has a 150-year tradition, have closed down, while The Boston Globe is said to be haemorrhaging US$1m a week. In Ireland, in recent weeks, the Leitrim Post folded and, across the board, advertising is down by up to 30pc for most newspaper titles.

But it is in the US where the changes have been most marked, with the Los Angeles Times’ parent company, Tribune, now bankrupt, along with the Minneapolis Star and Chicago Sun-Times. Hearst Corporation, meanwhile, is threatening to close the San Francisco Chronicle.

Amidst this is a growing cacophony of what can be termed noise or, as some commentators put it, the “metaverse” of blogs, news websites, social-networking services such as Facebook, YouTube, Twitter and Second Life and the ability to consume news on PCs and mobile handsets.

Many newspaper groups have opted to go web-only as a solution, a strategy vigorously pursued by the Seattle Post-Intelligencer. But there are question marks over how successful this strategy will be. Researchers from City University in London suggest that many newspaper publishers are likely to lose more than they gain if they cease distributing their printed products in favour of the web. Their study focused on the fate of Finnish financial newspaper Taloussanomat, which axed its printed version and went online-only in December 2007.

The decision was made after the title suffered severe losses – but even going online-only failed to lift it out of the doldrums. After the move was made, the Finnish title’s costs fell by 50pc – but its online readership declined by 22pc and revenues dropped by more than 75pc.

Radio and TV stations are also feeling the cold winds of change, with falling advertising accelerated by vying for a hip, young audience that spends more time in front of a computer in the bedroom than a box in the living room.

Where once we rushed to the news-stand to get the headlines, news aggregators such as Digg, The Drudge Report, the Huffington Post and Techmeme are becoming personalised newspapers with the individual reader now a self-appointed editor, prioritising and awarding points for what is considered news.

The plight of newspapers in the US has been laid squarely at the door of the rising web media, but according to Menno van Doorn, author of Me the Media: Rise of the conversation society, talk of the internet contributing to newspapers’ decline is incorrect.

He says the wider economic issues, such as the collapse of banking and property industries, are what are really taking the toll. “You can say the same for a number of industries. Newspapers are suffering the same fate as a lot of other industries. You shouldn’t confuse the economic depression with the rise of Web 2.0.”

Nevertheless, in April the chairman of the century-old wire agency AP accused news aggregators such as Google of profiting from the abundance of free editorial on the internet and inherently damaging the profitability of traditional media. AP’s chairman, William Dean Singleton, stormed: “We can no longer stand by and watch others walk off with our work under misguided legal theories. We are mad as hell and we are not going to take it any more.”

However, proponents of news aggregators argue that sites such as Google News serve to actually drive online audiences to the sites of news services like Reuters or major newspapers like the Wall Street Journal. But if you study Google’s actions of late its intentions are in fact to mine the internet for the best quality editorial available and present it as premium content.

Addressing a newspaper convention in the States in April, Google CEO Eric Schmidt said that advertising is still the best way to reach a large audience; newspapers and other traditional media have recognisable brands; and online advertising follows quality content. “We think we can build a business with you. That’s the only solution we can see.”

Dr Marc Pinter-Krainer, founder and CEO of international news portal OneNewsPage.com, said recently that the problems besetting newspapers should not be laid at the door of news aggregators such as Google News.

“Newspaper group financial losses stem from an unfortunate double-whammy. They have been bruised by a fall in hard-copy circulation coupled with a dramatic loss of advertising revenue during this recession. But another worry is the deep structural changes in news reading habits. Younger-generation readers – those under 40 – are more than happy to get their news for free off the web, and many of the under 30s haven’t developed the habit of buying a daily paper.”

Pinter-Krainer also argues that most people who read online news today expect it for free and this has been a major mistake publishers have to take into account. “The newspaper industry must take some responsibility for the fall in their sales when they first decided to give away news content for free. Looking back with the benefit of hindsight this was probably a big mistake.

“Apart from a few more honourable exceptions like the Wall Street Journal that adopted an early ‘pay-for-content’ business model, most newspapers suffered from this strategic wrong turn at the start of putting their stories on the web.

“The truth is that journalism is expensive and the better its quality, the more costly it becomes. This is because the gathering of news, especially news that requires more than rehashing a press release or adding a few quotes to a newswire article, is time consuming, people intensive and therefore expensive.

“The rise of free news portals such as Google News may seem like the final nail in the coffin for the newsprint industry. While large changes are definitely afoot, it’s worth bearing in mind that the newsprint industry has been read its last rites many times. And yet it is still here – alive and kicking – with some 30 million Britons still

buying a paper every day.”

Van Doorn agrees. “Journalism won’t be extinct. But it will have to coexist and try to differentiate itself. Journalists will have to climb down out of their ivory towers. In the past, the journalist was the one person who would get the information, present it and inform the public on what’s happening. This has become impossible because of new media such as Twitter.”

Looking ahead

Van Doorn says the traditional media business could learn something from the IT industry, which has learned to combine open source and closed source systems. “Study what IBM, SAP and Microsoft are doing with communities outside their corporation. Look at products such as SAP on Linux – SAP depended on the work of the amateur to sell new products. IBM is doing the same. Microsoft has a really successful community of people working for it that isn’t on the payroll. Microsoft is a clever company and it is using Linux.

“The IT business has transformed its business model into hybrids, that’s the future of newspapers. If you look at online news today, it’s not totally the work of amateur bloggers. Journalists and news organisations are still making money because they are writing authoritative stories.”

Van Doorn points out that the history of advertising is studded by shifts. “Once, most of it was on the streets on posters because that’s where the people were, then it was newsprint, then TV and radio, and logically, because it shifts, there’s a decrease in one or other media. Where people will be spending more and more of their lives will be the digital space. There is no real business case to make for a newspaper that is not in the digital space.”

Local newspapers, van Doorn suggests, could have a vibrant future by harnessing local content and using it alongside Android-based smart phones that use telemetry to gauge exactly where the user is standing. “I could be pointing my phone in the direction of a castle and it could interact with a local newspaper that could tell me its history, as well as push nearby restaurant ads and offers in my direction.”

In the growing cacophony of noise on the internet, whether through Twitter feeds, Facebook status updates or through video broadcasts via Qik from people on the street armed with the latest mobile handsets, the director of AdSense display content for Google and YouTube EMEA, Damian Lawlor, fervently believes there’s a future for quality content.

Lawlor argues aggregators help drive traffic to newspaper websites. “It’s the publisher’s role to create and attract content, the advertiser is all about finding the audience through targeting. The way we’re funding the monetisation of the web, we’re allowing for a creative way of producing great content, allowing publishers to reinvest in that content, grow the user base and build a great business out of it.

“The next step for us is to fine-tune the targeting for advertisers, enable them to have a great relationship with publishers and do a push around interest-based advertising.”

Lawlor believes that despite the breakneck speed of the internet and the increasing noise from bloggers to Twitter, traditional media houses with recognisable brands have a vital future ahead of them, despite the havoc wreaked by economic conditions.

“If you look at the amount of content out there, and the fact that audiences are spending a lot of time online, traditional media has a bigger role to play online than has been appreciated so far. Due to the fact that the spend can be more measurable, it is going to be a greater growth area than they envisaged.

“What you’re seeing is a lot of traditional media like newspapers embracing the online world. Content-based advertising allows the media to offset the shift that is occurring. Audiences are moving online and the monetisation of online is not dramatically different to the print model. If you produce great content, and with ad revenue based on traffic, you will see results.

“Yes, people are excited by all the content out there in its various forms, but you will see a major consolidation occur with quality content on the web winning out. People will want to read good quality – quality content will attract readers, and the quantity of readers will attract advertising,” Lawlor says.

Tried and tested

The Irish Times is one newspaper business that has already given the paid-content route a go. It introduced a subscription model for content on its Ireland.com website in 2002, but since relaunching online in 2008 as irishtimes.com most of its news and features have been available free of charge.

The decision to provide free access was taken for three key reasons, according to Paul Farrell (FMII), group commercial director at The Irish Times Group. “It was about freeing up the brand and having a presence online. Secondly, we want to see ourselves as the No 1 news source in Ireland and RTÉ had taken that position,” he says. “The only way that we could compete to that breadth of audience would be by being free. The third reason was around the greater commercial opportunity of online in the longer term, which was about growing the audience, trying to leverage that audience off a range of revenue opportunities and preparing into the future in the digital space.”

He’s not convinced that it’s possible to return to the paid-for content model. “In theory it makes sense, but what Google has done with the web has almost lowered people’s expectations to a level that everything should be free,” he explains. “I think unless you get a concerted effort across all publishers that that’s what they would do, it’s very difficult to say, ‘Well, now we’re going to add subscription to our content’.

“There is an opportunity in the pay-for-content model, but it does require some sophistication on the technology side in terms of how you structure your content, manage your content and distribute your content, which would require an investment from our perspective.”

Alternatives, he believes, include having a transactional element to certain parts of the offering, like photo sales or the crossword in the case of The Irish Times, and developing affinity-based models with commercial partners. “There are other opportunities in mobile and digital,” he adds. “For example, people are currently paying to get the [Irish Times] crossword on the web – would they pay a bit extra to get it on their phone?

“We will consider different options, but I would be sceptical of the Murdoch view, which is ‘This is something we have to do, we’re going to do it, and it’s going to work’. I just think that misrepresents the whole ethos of where the web has gone and I think you have to be a bit more creative with how you might be able to sell and package content. It’s more about creating new products out of what you have or changing the product that you currently have for free.”

This article first appeared in Marketing Age magazine.