Friday, August 07, 2009

Paying for online content

The "death of newspapers" has become a hot topic of late, including on line debates. I could argue that their impending death has been much forecast but in little evidence.

That said there has been dramatic concentration in mastheads in many markets. News Ltd way back in the 90s made representations to the print media enquiry that metropolitan markets would in the near future only sustain one title each. That is almost true in Australia - and perhaps explains the relative resilience of our market compared to others.

Rupert Murdoch has for some time been focussing on the "on-line" world as the enemy, talking about Google getting a free ride and now saying that he will make consumers pay for online content.

It is perhaps time for some reflection. Let's talk first about the historic newspaper model. In the really old days when printing presses first became accessible two things happened. Firstly there was a great industry in pamphleteering - mostly from a philosophical stance and sometimes it became a "regular" pamphlet. The second model was of the "Gazette" style publication that recorded the "facts" rather than "the news". So it included things like the details of ship movements etc. As the "newspaper" evolved the first part became "news and comment" while the second became the "rivers of gold" classified advertising. With the advent of wider circulation and a more consumerist sciety the model saw an increase in the quantity of display advertising.

The eco-system requires a number of things to work simultaneously. The first is that there is enough content of interest to get people to read the paper, and that interest can then generate enough readers to attract advertisers. Mind you enough of the right advertising also attracts circulation. It can be seen that this is a very classical dynamic system - not quite the "predator-prey" model but close. It is also important to note that the "cover price" of a newspaper has played a variable role in covering the production costs - it is often less than the paper cost alone. Interestingly the "free" newspaper in weekly suburbans and MX seems to still thrive.

The threat of "on line" to the newspapers has been threefold. The first is that online classifieds simply outperform print classifieds on functionality - in particular the ability to filter and sort ads. Finding cars for example is much easier on line thn in print - I can select by both price range and model, and rank by proximity to me.

The second is that readers continue to be less dependent on newspapers for news and analysis. This has been a long slow process starting with the impact of radio, but from the mid 80s TV got serious in this market. Online has taken it to another level with many "breaking story" outlets (which are mostly churnalism), the ability to subscribe to the the media releases of interest (e.g. Government agencies, Ministers etc) but also specialist online publishers and even the occassional moderately well informed blogger.

Both of these have the potential to reduce readership, and at the same time advertisers are faced with a plethora of alternatives including on-line. As Alan Kohler notes the advertisers get on-line cheaper and (because of models like payment on click through) get it cheaper.

Kohler is right to think that it isn't about finding ways to get the readrs to pay for content - that never funded the newspapers. In fact, the wrong online payment model runs the risk of just driving the users away faster (I now no longer buy the paper AFR since it is not available online - what's the use of stories I can't link to? - that is not just a blogger talking think about the number of links that ge e-mailed to you or posted on social networking forums).

However, paying for content may yet help. It will at least be a revenue stream, and it also allows us as readers to signal to potential publishers what we like to read. But as Stephen Bartholomeusz points out some publishers have figured out this needs to be a micro-payment model. Most readers buy A paper, not a subscription. On line I might like to buy a story. Think of the model where the entire newspaper headlines and first para are available on line but to read over the virtual fold you pay say 10c.

But ever since the failure of "beans" the micro-payment model has failed to materialise. The only common online model PayPal is more oriented to the larger purchase. Maybe, just maybe, micro-payments will get a new lease of life through the content industry - to do so they need to build a co-operative model (I always think of the non-take-up of EFT-POS when they were non-interconnected networks).

If there is to be a micro-payment model it should be built in such a way that I can contribute funds to it from within my banking application (a BPAY app) rather than I use a credit card on line. Ideally it is designed to get as wide a use as possible including internationally.

But ultimately for the newspapers they are never going to be able to cross-subsidise from the online world to a print world, especially when the print world is a declining circulation. Forcing customers to pay online won't arrest the decline.

The saviour of the "newspaper" model will be electronic publication to e-readers - e-readers will have a life because they are convenient (bigger than a mobile, lighter than a netbook, screens designed for long reading, battery power for a whol day).

So there's my future for newspapers - oh, and newspapers need to learn that it is now time to cannibalise their own business model especially advertising (see note 2 below).

Note 1. I always like the newspaper story because in an earlier life I was the Account Director for the media portfolio in Telstra. Frank McMahon then IT head at Fairfax asked us in 1994 for advice on doing something "on line". e were putting together the first On Australia JV with Microsoft at the time (a short lived proprietry on-line service) and Frank wanted our advice. My technical people told him that while On Australia was good they should look at this new online thing called Mosaic in America - that was of course the first web browser. As it transpired Fairfax moved more into the professional online service market buying some library orientated system.

Note 2. In hindsight it is obvious that the newspapers should have given away a free searchable on-line listing with every paper classified ad and thus strangled at birth the stand alone sites. But that was the classic revenue annibalisation model - but is it better to eat your ow young or sacrifice them?

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