Tuesday, March 3, 2009

Paying for Online News...or not?

In today's tough economic times many businesses are trying to figure out the best way to still make a profit.  Newspapers are not an exception to this, rather they are actually at the center of this very issue.  Readership of print papers is going down as more and more people are getting their news online.  So the question has arisen: Should newspapers charge people to read their paper online?

WHAT TIME IS SAYING
Walter Isaacson of Time recently released an article called How to Save Your Newspaper that was in favor of creating a system in which online news sites would charge readers to view their content.  Isaacson argued that if print newspapers continue their downward trend, and online newspapers continue not charging, eventually no one will be able to put out news.  In the current online business model all revenue comes from ad sales.  But since ad sales are currently on the decline, newspapers are making less money.  
According to Isaacson's argument, news should be treated as something of value.  If people are not making any money from writing news, no one will be inclined to make news of value in the first place.  He ultimately is championing a pay as you go system that would charge readers a small fee (five or ten cents) each time they read something news online.   

WHAT THE NEW YORK TIMES THINKS
In contrast to Isaacson's view Michael Kinsley of The New York Times thinks that paying for online news is something that should not and cannot feasibly be done.  In his article You Can't Sell News by the Slice he surprises support for this argument by referencing a time when Microsoft charged $19 for a years subscription to Slate, their online magazine.  They even offered a free umbrella when readers signed up.  But this idea failed after only about a year and the idea of charging for content was dropped.  
Kinsley makes an even more compelling argument when he points out that readers have never really paid for content in the first place.  They were actually paying for the paper the news was printed on, not the words themselves.  He even says that newspapers were actually giving away about a dollars worth of free paper to readers every week.  So, if they got people to read the content without paper, it should theoretically be a good thing.  
Finally he argues that even if newspapers were able to get around two dollars a month from readers like Isaacson thinks is possible, this would not compare to the revenue that papers get from advertisements now and that really it would not be enough to save newspapers in the first place.  

To Pay or Not to Pay?
As a journalism student I have heard plenty about how newspapers are dying and how online is the way of the future, although I feel this fact is probably obvious to most people, not just those studying the field.  As a news reader, I feel that this is a great thing.  I love the convenience of being able to check the LA Times whenever I feel like it.  I don't have to lug around a newspaper in order to be able to check the day's stories in my spare moments, rather I simply click the icon on my Blackberry and any story I want is at my fingertips.  Online news has made me  a much more avid news reader.
That being said, I don't know that I would feel the same if I knew that every time I clicked a headline, I was being charged five or ten cents.  In my opinion, this would drastically alter the news people look at.  With online news free as it is now, I constantly read stories that I do not know if I have an interest in or not.  I have learned a lot of interesting things this way.  However, I feel that I would be far less likely to click on a story that I didn't think I would necessarily be interested in, because I wouldn't want to get charged if I decided I no longer wanted to read past the first page.  
Beyond the fact that people may not read as much news if they had to pay for it, I think it would be extremely hard to get people to want to start paying for things that they had been getting for free for a long time.  Do people actually want the content enough to pay for it?  This is a question that Susan Mernit also asks on her blog for the Huffington Post.
She points out that people aren't as concerned about getting their information from a "brand" source.  Many people are actually getting their news from individual sources and blogs and it is unlikely that all these sources would also start charging.  Basically, it is unlikely that people would pay just to get news from a brand name source when they could get the information elsewhere for free.
While I understand newspaper's dilemma, I personally feel that starting to charge now is not the way to go.  While it may seem like a solution to the decline in paper newspaper sales, I think this is short-sided thinking.  Ultimately, I think that instead of trying to replace the money lost from paper subscriptions with money from online subscriptions, newspaper companies should instead look for a new way to make a profit.

Monday, March 2, 2009

Isaacson's Pay to Play Model Sorely Off Course

I have compared two conflicting articles addressing the issue of implementing micropayments for access to online news sites. The articles address the question, “Would the implementation of micropayments for access to online news be an effective way to revive the economic sustainability of the online journalism industry?” In “How to save your newspaper,” Walter Isaacson argues that micropayments are a great way for newspapers to become profitable – or at least sustainable – in the immediate future. Conversely, Michael Kinsley’s “You can’t sell news by the slice” argues that implementing micropayments would be imprudent and impractical. Although my heart sympathizes with Isaacson’s theory, my gut tells me that Kinsley’s argument is more realistic.

Pro-Micropayments
Isaacson argues that the current business model for online news is weak because its sole revenue stream comes from advertising. He favors the implementation of micropayments as a way to strengthen the relationship between news makers and news consumers and supplement losses in print sales and advertising revenue. Isaacson sees this strategy as a way for creators of online news content to be compensated, and not just the search engines and aggregators whose high-volume traffic draws significant revenue from advertising. Thus his solution: “an iTunes-easy method of micropayment,” much like the models set by Steve Jobs in the music industry and Jeff Bezos in the online book industry. It is here I take significant issue with his argument, which I will explain in my Analysis and Conclusion section.

Con-Micropayments
Kinsley asserts that the issue most adversely affecting the journalism industry is increased competition from the Internet. He says that this competition has undercut the information monopoly previously held by newspapers across the country – and consequently undercut the need for readers to pay for access to quality content. Kinsley further argues that paying a few bucks a month for online content would provide pennies on the dollar for newspapers, which make far more money from paper and digital advertising than they would from micropayments.

Analysis
Newspapers are not like iTunes songs. People don’t reuse the day’s news as they do a hit song by Radiohead; music is played over and over again, whereas the news is most often read, and then readily discarded. As such I think it would be difficult for consumers to justify shelling out $2, let alone one penny, for something that they are able to get of similar quality for free from other Websites. Further evidence of failed micropayment for news includes the death of the TimesSelect from The New York Times. While this does not necessarily prove the model to be a complete failure, there is at least one major inhibitting obstacle that comes to my mind: Given the lack of cooperation among media conglomerates, it would be extremely difficult – if not impossible – to universally implement a micropayment model agreed upon by all major legacy media institutions. In my opinion, such competition would inevitably lead to a race back to the bottom.

I find Kinsley’s argument about industry competition to be quite apt. There are enough competing news organizations that if one were to implement micropayments, many users would simply switch papers with little (if any) drop in quality reporting. Ten out of 10 friends I polled rejected the idea of paying for news content and said they would go elsewhere for information rather than pay, even a little bit, for the news. This suggests a lack of brand loyalty among consumers that perhaps could be related to the dramatic increase in access to various sources of information. Perhaps this loyalty may change as more and more legacy media operations continue to shutter their doors, as Kinsley suggests. Though this may be a painful transition, it could prove to be beneficial to news reporting in the long run to return to an era of titans like The New York Times and Washington Post. I shudder to think of how many great papers will die along the way, including my hometown paper the San Francisco Chronicle.

Conclusions
I would like to see a greater investment in the Kindle II. Already, users can subscribe to The New York Times for $13.99 per month. However, I would like to see additional features and content available for these subscribers. This could include not only news updates, but also greater interaction among users. This could be a great social networking tool for the news. An example would be a “Top Articles Read by My Friends.” There could be a section where you can see what articles your friends and associates are reading. You could highlight passages from articles and discuss them with your friends. Additionally, users could register with a certain industry and read the top articles other users in the same profession are reading.

I would also like to see some kind of national endowment for investigative reporting and foreign reporting. This could come from a federal, state, or local level and reporters could be selected by the people, based on their resumes in a somewhat similar format to the Spot Journalism model, but with voters required to identify themselves. This may be wishful thinking, but in a perfect world this is what I would do.

I think more papers should try to customize the news-reading experience for each online consumer based on their interests. Perhaps there could be a section of “Must Reads” for keeping you updated on current world and national affairs and a “Local News” section, but the “Sports” section could emphasize local teams and conferences/divisions. Other more personal sections could include: “What to read to sound sophisticated at a dinner party” or “Best viral stories of the week” or “Dining and partying in Los Angeles,” whatever. Basically there should be more filters and a better way to allow readers to customize their experience. This should be an option for all users, but not mandatory. This should be open to linking to content from other providers to appease the multi-source demands of most online news consumers.

Sunday, March 1, 2009

Two cents to save the biz

As the news content industry stutters and stumbles, all the journalism veterans seem eager to contribute their two cents toward a financial solution. If only those cents could be deposited into the San Francisco Chronicle’s bank account, the Bay Area might not be facing the reality of a massive hole where their news coverage used to be. Unfortunately, the currency of opinion doesn’t pay the bills—not lately at least.

Walter Isaacson, a former editor at Time Magazine, seems to think the newspaper industry would be better off if they could find a way to charge for their content, if only in small amounts. These small charges, called micropayments, would be deducted from readers’ bank accounts through services like PayPal at a rate of something like five or ten cents per article. With time and volume, Isaacson argues, the payments would add up to an amount that could potentially save newspapers from their demise.

Isaacson’s philosophy stems from the idea that making news content free on the web was a mistake in the first place. By relieving the reader of any cost, the onus of keeping news businesses afloat falls completely on the advertiser. Along with making newspapers less profitable, this model makes America’s largest content producers indebted to Fortune 500 companies rather than readers, that is, if they even continue to buy ads.

The solution, then, according to Isaacson, is to break the financial dependence on advertisers and start charging readers small amounts for the content they read. Surely such a shift in the model would shake things up enough to give the newspaper a fighting chance. Or would it? Michael Kinsley, the founder and editor of Slate Magazine disagrees. In response to Isaacson’s call for micropayments by readers, Kinsley claims that asking readers to pay for their web content is absurd. Citing past attempt to coax readers into shelling out, Kinsley makes the argument that the internet, as is currently function, does not lend itself to Isaacson’s model, and that any future attempt to cash in on readers is futile. He makes this rather compelling argument by explaining that, contrary to popular understanding, readers have never really paid for their content.

Even before the rise of the internet, readers really only paid for the newsprint and the ink used to produce the paper, never the reporting or the writing. Given that, Kinsley says, creating new model contingent upon readers opening their coffers is nothing more than a fool’s errand.

So where does that leave us? One wise editor suggests a solution to the catastrophic financial problem, and another equally wise editor shoots it down. It seems to me that, for all the years of journalistic experience invested in this argument, the only thing these veterans have accomplished is canceling each other out. Isaacson makes a valid point. The ideas and concepts that constantly improve our content viewing experience are too great not to be paid for. As a reader, I should be paying money for the work reporters have done to make their content available. That all seems to make sense within the age-old American capitalist mold.

The problem is that the web was never designed to accommodate for this type of business. Call it a lack of foresight, but instituting systems of payment for every available news article would drastically retard a medium whose primary appeal is its convenience. Issacson’s method seems plausible in theory, but as Kinsley points out, people would never go for it. They have already become accustomed to viewing news content in a certain way, and with a certain freedom. T

hey have been spoiled at the expense of the journalism industry. But that doesn’t mean that Kinsley has the answer either. In fact, Kinsley doesn’t have any answer. Not to bring politics into this debate, but it makes sense that Mr. Kinsley works for Slate (a conservative-leaning publication) as he publishes columns discrediting the ideas of others, offering no new ideas of his own. Kinsley seems to think that if we just leave the industry alone, and let hundreds of imperiled local papers die, the industry will become competitive again, if only for a handful of survivors. This cannot stand as the default course of action.

The economic theories of Ayn Rand and Newt Gingrich have been discredited repeatedly, and they need not factor into the downfall of yet another sector of American industry. Micropayments may not be the answer. In fact, they probably aren’t. The media industry has always found new ways to make advertising profitable enough to sustain its business. Soon, as the country moves out of recession, internet advertisements will become more valuable. Companies will begin to realize that online readers are worth as much as print readers. Until then, the benevolent wealthy should be employed. If keeping newspapers afloat requires endowment, fine. Donation? Great. The short term goal should be pumping money into these organizations in any way possible.