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Think Big. Move Fast.

Walter E. Hussman Jr., the Publisher of the Arkansas Democrat-Gazette (the major paper in Little Rock), wrote a fascinating opinion column in today’s Wall Street Journal (subscription required) entitled “How to Sink a Newspaper“. He take a contrarian view to the prevailing trend for newspapers to embrace the web and make their content free to drive more online users. Indeed the Newspaper Association of America recently released a report saying that newspaper websites are growing twice as fast as other websites.

Instead, Hussman defends his paper’s practice of keeping the majority of his content behind a pay wall. Because the article require a subscription, let me excerpt a few key passages:

One has to wonder how many of the newspaper industry’s current problems are self-inflicted. Take free news. News has become ubiquitous, free, and as a result, a commodity. Anytime you are trying to sell something that becomes a commodity, you have lost much of the value in providing that product or service….

All of this would be fine if newspapers generated lots of additional revenues from offering free news. But the fact is newspapers generate most of their online revenues from classified advertising, not from news….

It turns out that a Web site is a very different medium from a newspaper. While consumers often find pop-up ads a distraction and banner ads as more clutter, readers often seek out the advertising in newspapers….

Our newspaper, the Arkansas Democrat-Gazette in Little Rock, does not offer our news for free on the Web site. We offer free headlines. On a few selected stories, we offer a few free paragraphs, designed to get people to read our paper. We also offer free classifieds…

So what are we doing with our Web site? We have hired a videographer to complement our text coverage in the newspaper. We have added photo galleries to increase the number of photographs beyond what we can publish. We offer an electronic edition where you can search the entire edition by keywords, something you can’t do in the print edition. And we offer breaking news email alerts, something else you can’t do in print. In other words, we are offering value on our Web site that complements, rather than cannibalizes, our print edition.

Collectively, the American newspaper industry spends $7 billion on news and editorial operations. This includes everything from copy editor salaries to sports travel expenses. In addition, the Associated Press spent about $600 million world-wide in editing and creating news. By offering this news for free, and selling it to aggregators like Google, Yahoo and MSN for a small fraction of what it costs to create it, newspaper readership and circulation have declined.

…it is not just the newspaper industry that gets hurt. Journalism will be diminished in America with less investigative and enterprise reporting; indeed, less reporting of state houses, city halls, school boards, business and sports. Clearly a lot is at stake.

It is time for newspapers to reconsider the ultimate costs and consequences of free news.

Hussman provides some data to back up his contentions, citing growth in his newspaper’s paid circulation against industry wide declines, and showing relatively better performance than the Columbus Dispatch (a comparable paper) in the 6 months after the Dispatch switched their website from free to pay.

Before reflexively dismissing Hussman as an old media dinosaur that “just doesn’t get it”, its worth while considering another newspaper transaction that is in the public eye, News Corps bid for Dow Jones and the Wall Street Journal. Since Murdoch bought MySpace, a move that earned him first ridicule, then praise, it is hard to accuse him of being an old media dinosaur. And as Hussman points out about the WSJ online, it has almost one million paying subscribers, more than all but three US newspapers (USA Today, WSJ and NY Times). Even the opinion piece that I’m quoting can’t be read unless you’re one of these one million!

Hussman gets to the core of an important point, but I disagree with him on the nuances. I don’t think that news has become a commodity because newspapers make it free. Rather, I think that news is free because its a commodity. In a world of wire news, where you read the story hardly matters. For most breaking news, a rewrite of a wire story by a staff reporter is not enough to differentiate one newspaper from another. One could argue that the wires shouldn’t sell to outlets other than newspapers, but that cat is well and truly out of the bag.

The important thing that allows papers like the WSJ, and like the Arkansas Democrat-Gazette, to continue to charge for subscription is that the content that they have is NOT a commodity. The journal covers business news to a depth and breadth that no other US paper does. It adds insight and analysis. What you read in the journal you often CAN’T read elsewhere. Similarly, I imagine that readers/subscribers of the Democrat-Gazette online are not turning to it for news on Iraq or the election, or topics that are well covered elsewhere, but rather news about local issues in Little Rock and in Arkansas that are NOT covered elsewhere. Its the local paper’s coverage of local news that allows it to hold its audience – not its coverage of commodity news.

What this gets to is one of the core premises of business – find your unfair advantage. For now, the Journal and the Democrat-Gazette have an unfair advantage; for the former in the coverage and analysis of business news, and for the later in coverage and analysis of Arkansas news. One could argue that over time these too could come under threat from bloggers both national and local, but for now their news is worth a premium. (As an interesting aside, the free daily BostonNow is now including some local bloggers in its print edition.)

The advice I would give to Huffman would be to take all the rest of his content, the commodity news (International, National, Business etc) and put that outside the pay wall and see what happens. He might be pleasantly surprised.

  • http://launchpadisrael.com adrian

    My dad is an avid news consumer but he hasn’t bought a newspaper or magazine in years. The money he used to spend on paper he now spends on electrons in the form of an ISP and Cable TV bill. To him, there is no online subscription that is worth its value – his needs don’t justify that cost from any online or offline source. For all his news needs, commodity news information is all that’s required.

    If online newspapers were to form a cartel and fix high prices, blogs would fill the vacuum of free information and reduce the efficacy of any cartel. I recently learned that Topix was owned by old media, so even the act of writing in itself is becoming a commodity whereby expressing oneself, receiving public recognition and attaining new relationships is becoming a form of payment for a job that in times gone by only journalists would and could(having the employer relationship) do, and they would do it for financial gain.

  • http://www.billerickson.net Bill Erickson

    I read the NYT (among other newspapers) every day in my newsreader, and I would be willing to pay for it. But if I did pay for it, the extra content I paid for is still behind a walled garden. I don’t get a “Premium” RSS feed to throw into bloglines to get this content. So in effect, by paying I’m making the consumption of news harder than it already is.

    It’s the same thing with downloadable movies. The industry keeps throwing more and more copy protections on DVD’s thinking that will stop online piracy, when it is actually doing just the opposite. I download movies because its too difficult doing it the legal way. I bought Casino Royale (never by DVDs by Sony, big mistake) and it wouldn’t work on any of my home theatre pc’s, and I couldn’t watch it anywhere in my house. I had to download it illegally to be able to watch a movie I purchased legally.

    It’s not about protecting your content from all the criminals out there – if you see your customers as criminals you’ve already lost them. It’s about making your content more accessible. Your customers will see the value in it, just as I’d see the value in paying for Times Select if they made it work with Bloglines.

    I’m not against charging for content, just putting up barriers to make it harder to access paid content than that which is free.

  • http://planyp.us Yan

    Seems newspapers are stuck on the idea that it’s their content that is valuable. As means of production has shifted into the hands of people and we have discovered that citizen journalists can be as or more effective than traditional media, newspapers need to think about where else they can provide value, other than content.

    One position for newspapers to take is to act as very good local gathering spots. For this they need to morph from static content sites into dynamic destination sites. Old media looking to take a jump into this arena should contact me at yan AT planypus dot com, we have some ideas for you. Thanks!

  • james

    If most of what they report were TRUE, maybe we would read it.

  • Chris Finlayson

    Journalism comes in many flavors. There are headlines, sports scores, editorials, investigations, local news ect… Some of these have become more than a commodity. Sports scores and headlines are actually less valuable in a newspaper because they are so late.

    Editorials and investigative journalism on the other hand seem able to command a premium. It is also the stuff, I would think, journalists would most like to write. Papers should spend less time complaining about how people are not reading their paper because of the internet. If they produced more unique content, it wouldn’t matter that. Cut the size, focus on content that adds value.

  • Greg Spira

    Actually, the ironic thing is that this editorial is published on a free web site, opinion journal (as is all of the Wall Street Journal’s editorial page).

    Hussman complains that newspapers should never have let the AP – which is owned by the newspaper industry – make their content available on portals such as yahoo and aol. While Hussman is correct that this was a move that has hurt the newspaper industry, especially papers that rely heavily on wire services, the reality is that if APhadn’t done that, other wire services already providing material to portals would have been able to hurt the AP. By selling its material to portals, AP stopped Reuters from dominating the web newswire business, which it surely would have if AP had stayed off the web, and that would have weakened AP in the long term.

  • http://www.rosecantine.com Esme Vos

    What do you think about free newspapers? I just posted an article on my blog about the launch of the 4th free newspaper in the Netherlands (http://www.rosecantine.com/archives/334/). The new free paper is called Dag and is a joint venture between the local telco incumbent and a large newspaper publishing company. There are already 3 free papers here: Metro and Spits (distributed in metro and train stations) and De Pers (more serious, focused on quality).

    Dag has an online site that is heavily video oriented. The paper itself is filled with large color photos of scantily clad young people, celebrities and football matches. Target audience is clearly 16-24 so they are on the Internet and on mobile phones as well. Dag competes head on with Telegraaf, the traditional subscription-based paper that also has large color photos, celebrities and sports articles.

    The Netherlands has only 16 million people but there’s a very lively newspaper market. Four free papers, five subscription based national papers, dozens of regional papers….

  • http://lsvp.wordpress.com jeremyliew

    Esme,

    I think free newspapers are a great example of how commodity news is commodity in any media – its not just true on the internet. Then your differentiation isn’t about content, but rather about packaging and marketing!

  • http://launchpadisrael.com adrian

    This seems relevant to the discussion (and a plug for my site) but I have found that I can be an editor of an online news portal, and select the best content around a theme, at low time and financial cost to me (I developed the site so that cut SW costs):

    Further info:
    http://goisrael.blogspot.com/2007/05/lpi-israeli-techmeme.html

    “Every hour new posts are being added to thousands of blogs and news sites, but finding a tailored source that combines all the most relevant content for any particular topic area exclusively is a real challenge, especially for niche areas such as ‘Israeli technology’.

    Search engines, meme trackers and news community sites are only as good as the algorithms and people they harness, which can range from very effective to poor depending on the individual needs of users.

    In response to the lack of detailed sites concerning technology in Israel and its vast innovation, Launchpad Israel was conceived that ‘mashes-up’ the most relevant sites and data from around the web according to the areas of jobs, startup news, business listings, business news, tech blogs and web company blogs. The result is a humanly crafted destination for gaining a clear, efficient and exhilarating glance of the technology society in Israel. …”
    fp: http://goisrael.blogspot.com/2007/05/lpi-israeli-techmeme.html

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  • http://www.industrygirlblog.com Patricia

    What a great post and perspective. I hadn’t thought about it this way, but I agree. What drives me to the New York Times and WSJ is the content that I know I can’t find anywhere else. I wouldn’t normally post a comment, but I very much agree with this mindset.

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  • http://www.users.to No Name

    Editorials and investigative journalism on the other hand seem able to command a premium. It is also the stuff, I would think, journalists would most like to write. Papers should spend less time complaining about how people are not reading their paper because of the internet. If they produced more unique content, it wouldn’t matter that. Cut the size, focus on content that adds value.

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  • Ernie Bland

    The disadvantage of paid online newspapers is that people will always look for or be attracted to free alternatives. Free online newspapers still make money through ads on their site.

    Ernie Bland
    Free Classifieds