A new Pew study on the economics of news does not give comfort to news sites planning pay schemes. It also does not give me comfort that we’re wasting precious time futzing over walls when we should be paying attention to the big problems we have — one of which this Pew study points out: dreadful engagement and loyalty — and should be looking at other ways to give and gain value in our relationships with the public. The Pew data:
Over all, the evidence suggests the outlook is difficult both for paywalls and for online display advertising. While most people have not been asked to pay for content, even among the most avid news consumers online, only about one in five at this point say they would be willing to pay, and this does not include less voracious news consumers. At the same time, the vast majority of those online, 8 out of 10, say they basically ignore online ads.
In short, a good deal must change, the data suggests, before the digital age will begin to sustain itself.
About 71% of internet users, or 53% of all American adults, get news online today, a number that has held relatively steady in recent years.
Most of these online news consumers graze across multiple sites without having a primary one that they rely on. Only 35% of online news consumers have a favorite site.
To put it another way, 65% of online news consumers do not have a site that is so important to them that it stands out in their minds above all other sites they visit.
The users who do have a favorite site are pretty faithful. Some 65% of them check in with that favorite site at least once a day.
Yet even among these most loyal news consumers, only a minority (19%) said they would be willing to pay for news online, including those who already do so and those who would be willing to if asked.
Instead, a large majority – 82% – of those with a favorite site said they would find somewhere else to get the news.
Because so few online news consumers even have a favorite site this translates to only 7% of all people who get news online having a favorite online news source that they say they would pay for.
This is a sign of just how much initial difficulty the movement toward pay walls could have.
In sum, there appears to be only a very small cohort of voracious news consumers who have to have their news from a particular site, even if they have to pay for it. The vast majority of online news consumers, though, seem willing to browse for news from many sites, do not have a favorite online news source, and even if they do, are not willing to pay for that site’s content.
This is not to say that resistance might breakdown over time. . . .
All these findings speak to the natural disadvantage of news content: Most news is covered by more than one organization and people do not place enough value on the difference between the various reports. In other words, if a user had to pay for a New York Times article on Haiti, evidence suggests that he or she would just look for another source that could provide the basic information. The nuances of depth or breadth in the pay story may not be valued enough to induce payment over a free alternative.
Thus, if the news industry is going to make headway with pay-walls, they are going to have to break through what for now appears to be continuing reluctance, even among its most avid consumers.
Paid Content is holding a conference on paid content. I’m there. Sigh. No surprise that I think this is too much focus on one model and meme.
At the start, James McQuivey of Forrester says: “People don’t pay for content and they never have… They have always paid for access to content. In the past, access happened to be gated by analog constraints.” We correlated the form – the gate – with the content. He argues that we are paying more for access but didn’t pay for content. “Media have always been a subsidized business.” He argues that subsidy is shifting from advertising to “a device and access service subsidy.” He says that he who controls access commands the highest share of revenue. He emphasizes that content rights holders win only if they hold a monopoly on that content; if competitors can do likewise (read: news) it doesn’t work. He says that device makers are a new player in getting access revenue. He also says that overall, revenue will go down because advertisers’ money will be split among many media (read: the end of scarcity). He says that competition among content creators will be fierce.
Next up is a panel on big-media joint venture. In Twitter, someone asked what a JV is. I said it’s a bunch of cats tied by the tail. As this is in the NYTimes building, I’m reminded of the newspapers’ disastrous JV, the New Century Network. I’m less interested in big-media JVs than in small-media JVs (aka networks, a la Glam).
The European, a German online news service, asked me to write a commentary for a debate on paid content. Here it is in German. And here’s the English text:
I have nothing against charging for content, if you can. After all, I’m selling a book. But I believe building pay walls around online news is a bad business decision.
The discussion about charging for content rises from a sense of entitlement—“we deserve to be paid,” which is an emotional argument—rather than from rational economics.
Charging is an attempt to replicate an old business model in a profoundly changed media economy that is no longer built on scarcity—on publishers’ control—now that everyone can publish. The new link economy rewards openness and collaboration.
Charging is also a distraction from the real goal: profitability and sustainability. We must rethink the entire ledger of the business of news, starting with costs, which must and can be reduced through collaboration, working in networks, and through the efficiency that comes with the specialization the internet demands.
More important, charging brings many costs:
• It creates the expense of marketing (when, online, your audience will market you for free, if you deserve it).
• It reduces audience.
• It reduces advertising revenue.
• It reduces links and clicks, which reduces Googlejuice, which reduces discovery, which limits growth.
But more than any of this, pay walls curtail a news organization’s relationship with its public, with its customers. On the internet, it’s in those relationships where value lies.
The New York Times plans to charge its best customers—its most frequent readers—while enabling what Rupert Murdoch calls the worst customers—those who stop by once from a search engine or an aggregator—to get what they want for free. That might make sense if you are selling a scarce resource: those who drink the most wine pay the most. But online, content and news are not scarce. They are the magnets that draw readers to you so you can build a valuable relationship.
Online also brings new opportunities to find value there. Hubert Burda said at DLD that Focus Online is profitable not because of advertising but because of ecommerce. The Telegraph in London brought in a quarter of its profit a year ago from direct sales of everything from clothes hangers to wine. So media companies are becoming in part, retailers. Does it make sense to put a toll booth at the door to your store to keep people out?
Once you have a lasting relationship, there are more ways to serve customers and make money. Some newspapers are holding events. Some are charging for education. Some are even selling real estate. But to do this, you need to invite, not drive away more readers.
There is one more cost to building a wall, a cost to journalism. Alan Rusbridger, the innovative editor of the Guardian in London, just delivered a monumental speech arguing that charging “removes you from the way people the world over now connect with each other. You cannot control distribution or create scarcity without becoming isolated from this new networked world.”
Rusbridger also warns that there are competitors lying in wait to step in when news organizations build walls. “Let’s not leave the field.” Rusbridger said, “so that the digital un-bundlers can come in, dismantle and loot what we have built up, including our audiences and readers.”
Just as The New York Times announces its pay wall, Guardian Editor Alan Rusbridger gives an important speech on the topic — indeed, on the very nature of journalism — arguing against pay walls.
Charging, Rusbridger says, “removes you from the way people the world over now connect with each other. You cannot control distribution or create scarcity without becoming isolated from this new networked world.”
In an industry in which we get used to every trend line pointing to the floor, the growth of newspapers’ digital audience should be a beacon of hope. During the last three months of 2009 the Guardian was being read by 40 per cent more people than during the same period in 2008. That’s right, a mainstream media company – you know, the ones that should admit the game’s up because they are so irrelevant and don’t know what they are doing in this new media landscape – has grown its audience by 40 per cent in a year. More Americans are now reading the Guardian than read the Los Angeles Times. This readership has found us, rather than the other way round. Our total marketing spend in America in the past 10 years has been $34,000. . . .
This is the opposite of newspaper decline-ism, the doctrine which compels us to keep telling the world the editorial proposition and tradition we represent are in desperate trouble. When I think of the Guardian’s journey and its path of growth and reach and influence my instincts at the moment – at this stage of the revolution – are to celebrate this trend and seek to accelerate it rather than cut it off. The more we can spread the Guardian, embed it in the way the world talks to each other, the better.
Rusbridger warns The NY Times that if it shrinks behind its wall, The Guardian could become the biggest newspaper brand online. He imagines start-ups that “begin each day with a prayer session for all national newspapers to follow Rupert Murdoch behind a pay wall. That’s their business model.” His warning continues: “Let’s not leave the field so that the digital un-bundlers can come in, dismantle and loot what we have built up, including our audiences and readers.
Rusbridger argues, as do I, that this is about more than a revenue line:
There is an irreversible trend in society today which rather wonderfully continues what we as an industry started – here, in newspapers, in the UK . It’s not a “digital trend” – that’s just shorthand. It’s a trend about how people are expressing themselves, about how societies will choose to organise themselves, about a new democracy of ideas and information, about changing notions of authority, about the releasing of individual creativity, about an ability to hear previously unheard voices; about respecting, including and harnessing the views of others. About resisting the people who want to close down free speech.
As {legendary Gaurdian editor C.P.] Scott said 90 years ago : “What a chance for the newspaper!” If we turn our back on all this and at the same time conclude that there is nothing to learn from it because what ‘they’ do is different – ‘we are journalists, they aren’t: we do journalism; they don’t’ – then, never mind business models, we will be sleep walking into oblivion.
The irony of the report that The New York Times is going to start metering readers and charging those who come back more often is this: They would would end up charging — and, they should fear, sending away — the readers who are worth the most while serving free those who are worth least.
That’s according to the math of News Corp., which argues that readers who come via links from search and aggregators and bloggers and such are worthless because they’re not local and they don’t stay; they’re one-click-wonders. The readers who come back again and again, the ones you know more about and can rely on and target better and build relationships with, goes this logic, are worth more. And News Corp. is also threatening to charge them.
So why charge your best customers? Why single them out? Why risk driving them away?
The logic eludes me. So do the economics.
I know, the argument is that these readers use the content more so they should be charged more. But that is based on the assumption that content is a consumable, a scarcity that drains the more it is read. Of course, it isn’t. Content is, instead, a magnet that can create relationships of value; whether that happens is up to the creator of the content and the quality of service and relevance is gives. That, dare I repeat it, is the basis of the link economy.
But note the verb that started off the paragraph above: should. Readers who read more should pay more. This is the product of journalism’s sense of entitlement.
So why would The Times charge? There are a few possible reasons:
* It has failed at advertising, as I said of News Corp. recently.
* Its costs are too high — and rather than cutting them into a rational business, it desperately seeks some other revenue.
* It is falling prey to PR, to the pressure of outsiders who keep nattering on about charging.
* It has forgotten its own lessons with TimesSelect sees amnesia as a strategy.
I think the risks are great and grave. The Times could have fought to become the preeminent news brand on earth, fighting it out with the BBC for that title. Instead, I fear, it will duck into its shell as the Washington Post has.
I already pay for The Times at home. I hope they would not charge me again. If they do, I will cancel the paper. If they charge me for using the paper more, I will use it less.** I will find other very good substitutes for much of what I get from it — indeed, this will push me to discover and curate new sources. I will read what matters most to me from The Times and discover just how much that is — a calculation the paper should not want to force me to make, not when there is so much new and good competition out there.
Clay Shirky has ridiculed micropayments, saying that we don’t like being nickel-and-dimed. I’ll ridicule metering, reminding those who contemplate it to remember what we think of meter maids. We curse them.
There is only one thing that can happen should The TImes put a meter on us. It will shrink.
** I should expand on this point. I would not use The Times less because I like it less, because I want to punish it. I love The Times. I read it every day. What I’m saying is that by metering, The Times will have me make a new economic decision every time I want to read a story: Is this unique content I will get only here (there is a good deal of that) or is this commodity information I can get elsewhere (BBC, Reuters, Washington Post, Politico, TechCrunch…). The Times then restricts our relationship and it is in that relationship that it has to find value.
That’s the essence of Murdoch: balls. It’s the essence of the culture of News Corp., which I learned from working there (at TV Guide): Australian macho seat-of-the-pants instant decision making.
That is the secret to Murdoch’s success. It is also the secret to his failure: Sometimes his balls land on red, sometimes on black. Murdoch plays the odds but he does it by making big bets. He can do that because he’s a mogul; they’re his balls. Companies that are ruled by task forces don’t act like him; they overthink to convince themselves they’re making smart decisions (like merging with AOL). News Corp. underthinks.
So I don’t buy the worship of those who think that Murdoch must know something we don’t know, that he’s inscrutable and brilliant and so one mustn’t question his actions – as in the case of pay walls and Google – for fear of missing some Yoda moment. No, sometimes Murdoch wins his bets, sometimes he loses.
He almost lost the company once with bad bets with debt. He bet big on U.S. satellite (and then said, oh, nevermind). He bet huge on China but now admits it’s tough. He wasted a fortune and a decade and any hope of an internet strategy on Delphi (where I worked) and Iguide. MySpace – need I say more?
But he bet big on sports and keeps winning as a result. He started a fourth network against all odds. He launched successful satellites elsewhere in the world and won. He won and lost but so far has still won more than he lost and that’s why he’s a winner.
What’s sad about the Murdoch family’s pathetic mewling about Google as if it were a big, bad bully kicking sand in their face and their desperate, cliff-grabbing speculation about pay walls is that neither is a big bet. Neither shows any vision. Neither shows balls. That’s why I have no faith in the argument that Yoda – or Jabba the Murdoch, if you prefer – has one more up his sleeve. No, son James Murdoch just said News Corp isn’t a news corp anymore but a TV company. They’ve given up. They’re just hoping to squeeze one more pint of milk out of old Bessie before they turn her into fajitas.
You want to look to an executive who has a strategy and fearlessly executes it, look to Jobs. Bezos, too. You want big-picture vision, see the Google boys. Charisma? Obama. Experience? Well, that was Jack Welch, until the value of experience expired.
Tweet: Worthless readers. And what to do about Murdoch et al’s whining about them.
One response publishers make to my argument that Google drives value to them and their content in the link economy is that the readers Google sends are worthless.
Worthless readers. WIliam Randolph Hearst, Joseph Pulitzer, Joseph Medill, Katherine Graham, and C.P. Scott are rolling (with pained laughter) in their graves. Since when did readers become worthless? Since when did a newspaper have enough readers?
“We can’t monetize those readers,” the hapless publishers whine. What’s the problem with these readers? “They read just one article and then leave,” is one complaint. “We can’t sell enough ads,” is another. And how is that Google’s fault?
No, this is the publishers’ failure and fault, not Google’s. Only the publishers can fix it. That they would rather complain than try is only evidence that they have given up on growth, on optimism, on the future. Rupert Murdoch and his son, James, have said they would rather shrink to more valuable (read: paying) customers, but then James has also said that News Corp. is no longer a news company but a TV company. It’s one matter to get rid of readers who cost too much because your trucks drive too far to deliver newspapers to them or you bribe them too often with bingo/wingo or sneakerphones to get them to subscribe. But online, more readers costs you nothing but bandwidth, which keeps on costing less. So Murdoch pere et fils have surrendered.
I choose not to. I say there is plenty they could do:
1. Relevance. Publishers should provide more relevant links and content to satisfy and serve these readers. I learned at About.com, where I consulted, that the most effective means of driving more traffic into the site, rather than away, was relevant links. Readers may come via search but may not find what they are looking for, so offer them more. If someone came to your restaurant for the crab cakes, wouldn’t you also offer slaw?
2. Context. I want to suggest abandoning the article for the constantly updated topic page (a la Wave). The problem with an article online is that it has a short half life and gathers few links and little ongoing attention and thus Googlejuice. It’s for this reason that Google’s Marissa Mayer has been advising publishers to move past the article to the topic. Abandoning the article for some living, breathing news beast yet to be defined may be a bit too radical for today’s publishers. So instead, I suggest, at least place the article into a space with broader context – archives, quotes, photos, links, discussion, wikified knowledge about the topic, feeds of updates; make the article a gateway to anything more you’d want on its subjects. Daylife (where I’m a partner) is working on something like that.
3. Sell. When someone comes in from search without a cookie attached, you know this person is not a regular reader. Yet you give her the same page you give to your constant readers. What you should do, instead, is sell the wonders of your site. Show off your best and most popular stuff. I’ve heard and used the phrase “every page a home page” for years, but I’ve never seen a publisher mean it, except for Stockholm’s Aftonbladet. Go to the site, click on most any store, and scroll down and you will find the entire home page replicated. Insane? Like a Swede.
4. Sell ads. OK, so this search-driven reader may not be local and so you can’t serve an ad for the hospital up the street. What sites do instead is place remnant network ads there at terribly low CPMs; that is why they complain about the value of readers who come from Google, Drudge, et al. But Dave Morgan’s Tacoda solved – at least until it was swallowed up by AOL [pardon me, Aol.] – by using data points across sites to maximize the value of ads served (e.g., someone who visits a travel site is served a high-CPM travel ad even after leaving and going to a harder-to-target local site). I’ve been arguing for reverse syndication as a means of maximizing ad value and even suggested that papers should link together to sell their national inventory (oh, that’s right, they tried to in the New Century Network but couldn’t get their act together … surprise!).
5. Kill commodity news and cost. Focus. Part of the problem is that papers carry commodity content that draws audience – via search – that is hard to target with local advertising. That commodity content also costs money to produce. A key imperative of the link economy is that one must specialize – to draw the “right” audience and to find the efficiency that comes from doing what you do best and linking to the rest. The better job a paper does focusing, the more it can create appropriate content to attract appropriate audience and advertising and the more economically it can operate.
6. Stop whining. It’s unbecoming. It makes you look weak and wimpy as if you have no strategy and no control over your vision and have just given up on adapting to new realities and growing by finding new audience and building a future but only plan to milk the last drops out of your dying business. Or maybe that’s all true.
: See Danny Sulllivan, who beat me to writing this post.
This is round two against Google. In round one, some publishers said Google steals our content. Google’s response was that it sends them millions of visitors for free. So in round two, it’s time to make out like those visitors aren’t worth much. That’s especially important if you’re an executive who, after floating the idea of dropping Google, comes under attack as stupidly cutting your own throat.
Me, I see visitors as opportunities. This is the internet, where you can tell far more about a visitor to your web site than you can in print. . . .
Do something. Anything. Please. Survive. But there’s one thing you shouldn’t do. Blame others for sending you visitors and not figuring out how to make money off of them.
See also Umair Haque: “Blocking Google is about as smart as eating a pound of plutonium.”
: On Twitter, Steven Johnson asks: “unless they’re “worth less” than the cost of serving the page, what’s the harm since Google delivers them for free?”
Tweet: A tweet paraphrased my link-economy line and showed me I’ve been saying more than I thought I have. **
In Twitter today, one @rpaskin paraphrased something I’ve been saying – and said again in my talk at Web 2.0 Expo Tuesday (generously covered in that link by Aneta Hall). My line has been that in the link economy, value comes from the creator of the content and from the creator of a public (formerly known as an audience). That is, Rupert’s wrong with he says that Google takes content; it gives attention.
Anyway, @rpaskin tweeted this: “In a link economy, there are values from creating content and linking to content. There’s no value in just reproducing content (Jeff Jarvis).”
I didn’t say that exactly but I think it better expressed what I have been trying to say. Or at least it added a perspective and raised a fundamental and important question, namely:
Is there value anymore in reproducing content? Is the six-century-long reign of Guttenberg and the industries he created really over?
Wow. Maybe so. In my discussions of the link economy, I had been concentrating on explaining and defending the side of the value equation brought by Google, aggregators, blogger, Twitter, et al rather than on the loss of value brought to those who reproduced – rather than created – content. But in looking at the entire equation, what @rpaskin says stands to reason: There is no value left over for the copiers. Indeed, online, if one copies, one is considered a thief because it’s only the thieves who copy.
The problem is, of course, that it was through the making and selling of copies that monetary value was extracted and that is why it is so upsetting to those who did so that they can’t do it anymore. It’s upsetting that they don’t see other ways to recognize value. It’s what makes folks including Murdoch say silly things that betray ignorance about the workings of our new world.
I’m sure Rupert knows exactly how the scribes Guttenberg put out of business felt.
ALSO: Speaking of speaking of Murdoch, you can hear me doing so – along with Michael Wolf and Steven Brill – on Murdoch’s tilting against Google’s energy-efficient windmills.
** Once again, I’m experimenting with using tweets about posts as subheds summarizing those posts.
Yesterday I tweeted about Google’s offer to bring its checkout to enable micropayments for newspapers: “A cynical act, I’d say: a tool no one uses used to coopt foes on a useless quest.” In response, Charlie Williams tweeted, “How about savvy & low risk?” And I said that savvy and cynicism are by no means mutually exclusive.
In today’s Daily News, David Hinckley and Talkers’ Michael Harrison speculate that when Howard Stern’s Sirius XM contract is up, he could use the internet to start his own broadcasting company.
Indeed, he could. Technology makes it possible: We could listen to him – and watch him – on the internet, on our iPods, and even now on our web-enabled phones. There’s no longer a need for a distribution network.
The numbers could be impressive. Stern brought an estimated 6-8 million listeners to Sirius. I’ve talked with a measurement company that did a study on his impact on satellite and concluded that a majority of users were there and paying $12.95 a month because of him. So say that half those people – 3.5 million – would pay half that much – $6 – to get Stern anywhere and on-demand. That’s $252 million. Absurd? OK, so charge $1 a month; that’s $42 million (though at a lower price, the volume would surely increase). Add in a little ad revenue but not much, judging on the crap accounts Sirius has been getting. Marketing? Stern doesn’t need it because his audience is his agency. And Stern doesn’t need to share any of that with Sirius XM. His only cost is his staff and bandwidth. Ah, but you say, he made a reported $500 million for his five-year Sirius contract. But I believe some of that came in equity and as a shareholder, I can tell you that isn’t doing so well. The point is, who’s going to sniff at tens of millions of dollars a year? If it doesn’t work, the risk is minimal. So why not?
Hinckley’s point is that the internet enables Stern to have complete freedom, control, and ownership, which is ideal for a control freak like Stern.
Would I pay for Stern? I already do; he’s why I subscribed to Sirius. I’m just unhappy that I can’t get him on-demand on my iPod and iPhone.
Irony that I’m endorsing paying for content when I scoff at news organizations charging? No. I’ve long said that we do and will pay for unique performances – and Stern is unique. News is information, a commodity once known; that’s what makes it hard to charge for. Mere opinion is abundant. Performance has value, in music, in comedy, or even in news.
Who else would I pay? Jon Stewart could charge (though we’d get less time and he probably has higher cost). My list pretty much ends there. How about you?
The Guardian asked me for quick comment on news that Rupert Murdoch, Mr. MySpace, plans to charge for content. I pulled off the road on my way home and wrote this.
One line trimmed out for space: The debate has been about emotions and entitlement, not economics.
