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Think Big. Move Fast.

The LA Times and Chicago Tribune are for sale. BarryDiller recently announced that buying Newsweek was a mistake. They are not alone in their distress. Newspapers and print magazine across the country are under increasing pressure as they trade analog dollars for digital pennies. 

Everyone is going online. Readers were willing to pay for content when it is printed on paper but they want it for free online. Advertisers pay less for online ads than they do for ones in print. Unfortunately, it is only getting worse. Mobile ad units are cheaper and more ineffective than online units, putting even more pressure on newspaper revenues. In the US, newspaper revenues in 2012 were half what they were in 2000.

But it doesn’t get any cheaper to run a quality newsroom – estimated at around $50-100M a year for a single, high quality national newspaper covering regional, national and international news.

Newspapers have responded by erecting paywalls in front of their content. Says, the Economist:

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The number of American newspapers with some sort of paywall has at least doubled this year. More than a quarter of newspapers now have one, and most big groups that do not have plans to charge for digital access. This is a global trend: newspapers in Brazil, Germany and elsewhere are fed up with giving away their articles for nothing on the internet.

Charging for content online used to be the privilege of the lucky few, such as the Financial Times and Wall Street Journal, offering market-sensitive information readers would pay for. General newspapers opposed charging because they feared their traffic would drop—and their fragile digital ad revenues would fall rather than rise….

Newspapers have been heartened by evidence that pay systems can work. In the industry’s most closely watched experiment to date the New York Times adopted a paid-access model in March 2011. It chose a pay “meter”, which is more porous than a hard “wall”, and allows readers to view a certain number of articles each month before having to pay. The advantage of this is that search engines and social media can still direct casual readers to a newspaper’s site. Traffic typically drops by only around 20%, according to J.P. Morgan, an investment bank. This means online advertising revenue can be mostly preserved while readers are required to open their wallets. In October the New York Times and International Herald Tribune, its global sister, had nearly 600,000 paid digital subscribers. …

It is also too early to tell exactly how successful paywalls will be. They may not work at national newspapers without any real comparative advantage in news, or at newspapers in competitive districts where other papers are giving away content free. The Washington Post, which has had a tough time, has opposed a paywall so far, presumably because it worries it will not woo enough paying readers.

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Newspapers have been forced to use paywalls to offer a subscription product because the cost of payments has been too high to be able to charge a penny or two to read a single article. But even a penny to read an article can be the equivalent of a $10 CPM, which is pretty rich for the online world. Would more users be willing to pay to read just what they want, versus being turned off by more expensive subscriptions?  Freemium certainly seems to have won out over subscription in the gaming industry.

Newspapers haven’t had the ability to try true micropayments to see if this could also work for them. The structure of payments costs has simply been too high. By making it possible for a newspaper to charge pennies to read a page, instead of several dollars for a monthly subscription, they may see a dramatic lift in the proportion of readers that they can charge. Whether it is a supplement or replacement for subscription paywalls, it can only add to revenue as it improves the ability to price discriminate.

One of the areas that Bitcoin could revolutionize payments is in micropayments. Since it costs roughly 30c plus 2% for a credit card transaction when the card is not present, it has been impossible to set prices at a few cents for anything. Bitcoin has zero transaction costs. It would have no problem in handling a 1c transaction, or even lower. This could be a huge boon for newspapers, and for online content more broadly.

What do you think, could Bitcoin help newspapers roll out “pay by the drink” payments systems?

18 Responses to Can Bitcoin save newspapers?

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