Last week, I pointed out that print still accounts for more than 90 percent of newspaper revenues. This week, the third of a three-part series on the future of newspapers.

Buy Stock in Newspapers, Weep For America

In his book “The Vanishing Newspaper” Philip Meyer predicts that 2043 will mark the death of printed newspapers in the United States, “as the last exhausted reader tosses aside the last crumpled edition.”

Not a chance.

Media companies report that their Internet editions are newspapers’ fastest growing sources of revenue. But the Web isn’t why I’m bullish about the industry.
First, there is no Internet–not one that makes money for newsmongers. “Newspapers are growing the amount of revenue they derive from their Web operations,” reports E-Commerce Times, but “that revenue stream is growing too slowly to replace the losses represented by plunging circulation.”

Merrill Lynch estimates that online ads generate seven percent of newspaper income. The firm’s media analysts say it’ll take at least 30 more years before it accounts for half–and that’s assuming current trends continue. They never do.

Second, print is all there is. The pessimists aren’t crazy: A Pew poll finds that only 23 percent of Americans under 30 read a daily newspaper, compared with 60 percent of old codgers. Circulation is down 2.6 percent since 2006, continuing a trend that began in the 1990s. 1.2 million people canceled their subscriptions last year alone! Those are scary numbers. But, Internet evangelist hype aside, print accounts for 93 percent of newspaper revenue over a decade after newspapers committed to online.

“Print is dead,” Sports Illustrated President John Squires told newspaper and magazine execs in 2004. “Get over it” and embrace the Internet, he counseled. But not everyone is ready to abandon a sure thing (albeit one in crisis) for a pipe dream. “It depends on a particular person’s view as to whether the industry is going through a rather difficult transition from which it will emerge stronger, or whether things are really in a long-term decline,” says Rick Edmonds, a newspaper industry analyst at the Poynter Institute.

Smart newspaper publishers understand that Web 2.0 is faith-based. At most, the Internet is a way to promote their print editions. “It’s…possible to get online readers to buy the printed version by trailing stories selectively between online and offline editions,” says Viviane Reding, the European Commissioner for Information, Society and Media.

Third, some types of papers are prospering and growing. I believe that the business of printing news on dead trees will emerge from the current shakeout more profitable than ever. This will be thanks to three emerging trends:

*Big National Newspapers
*More Small Local Papers
*Freebie Dailies

At present, the biggest 50 dailies (“A” papers, in industry jargon) dominate the landscape. Below them is a swath of dailies in midsize cities (Akron, Austin, Albuquerque). Small town, suburban and rural dailies, weeklies and bi-weeklies, whose focus is highly localized (“New Stop Sign Stirs Controversy”)–the “C”s–bring up the rear.

During the 20th century, most newspaper profits were generated by “B” papers. This is the market segment that has been hit hardest by the Web. Free online classifieds has decimated advertising revenues. Neither beast nor fowl, the midsize dailies’ attempt to balance local, national and international coverage pleases no one in an environment where highly customized news consumption is available to readers online–for free. (Publishers were idiots for giving away their content, but that’s another column.) MyYahoo feeds me the latest headlines from Itar-Tass and Agence France-Press every morning; how could the Dayton Daily News, the paper of my childhood, do as well for this half-Frenchman with a Central Asia obsession?

Amid the falling circulation numbers, there are notable exceptions. The three large national papers (The New York Times, Wall Street Journal and USA Today) frequently post circulation gains. Their strategies differ: The Times and Journal offer a must-read experience to those who depend on information for their careers, whereas USA Today is a convenient digest for conventioneers rushing to snag a free croissant at the conference center.

In 20 years, the U.S. newspaper landscape will look more like Europe and Japan. The market will be dominated by two major segments. At the top we’ll find a small cluster, perhaps 10 or 15, of huge national titles–papers such as The New York Times and USA Today will get even bigger. Existing papers (The Washington Post?) will expand; new ones will launch.

At the bottom will be a growing number of tiny weekly and biweeklies whose low overhead make them viable and local focus makes them essential reading. Middle-market dailies in midsize “B” cities–Hartford, Salt Lake City, Daytona Beach, etc.–will vanish or, in most cases, radically contract.

Freebie dailies are luring readers whom the old-school A and B papers have written off. If papers like AMNewYork are short on depth, they’re convenient. These stripped-down mini-USA Todays are designed to be read in under 30 minutes–the length of a typical commute–and tossed. “Our free papers provide young people with something new and different: speedy news and bite-size information, which means they can keep up to speed with a minimum of fuss,” says Steve Auckland, head of the free newspaper division at the publisher of Metro’s London edition.

Stefano Hatfield is the former editor of the New York edition of Metro, a slim free daily given away free to subway riders. “This is a generation who grew up with the World Wide Web,” he says of the papers’ target audience, aged 18 to 35. “It is difficult to persuade young people that news should be something you pay for.” There are Metro editions in Boston and Philadelphia. The Examiner chain has Washington, Baltimore and San Francisco. Chicago has Red Eye. Freebie dailies will spread to cities without integrated mass transit systems as they learn to distribute to shopping centers, corporate parks, college campuses and motorists stuck in traffic.

None of this will improve the quality of journalism. “Ultimately [free dailies] will breed in people the idea that news shouldn’t cost anything, even that news is cheap,” points out media commentator Roy Greenslade. “But in fact, news, done well and properly, requires investment and money. They will no doubt tell us what happened–but news should also tell us how and why things happen. I fear that approach will be lost.”

It will. It’s a trend that began decades ago, when newspapers closed overseas news bureaus and eliminated long-term investigative journalism to cut costs, and started embracing elites rather than exposing them. And it’s terrible for our society, culture and politics. Government and business will face even less accountability than they do today. Democracy will lie in ruins. The print newspaper business, however, will be going gangbusters.

COPYRIGHT 2007 TED RALL

This is the second of a three-part series about the media.

Blind Newsman Gums Internet Dog

Last week, I discussed the blind faith that is leading media executives to invest heavily in online ventures at the expense of print. This week: will the Internet ever be profitable?

Americans are optimistic to a fault. Overthrow Saddam, we thought–yeah, that “we” includes a lot of liberals–and whatever came next would be better. I was skeptical. You couldn’t ask for a worse government than the Taliban, yet what followed them in Afghanistan–anarchy, chaos, rape, genocide–was even worse. Which is what happened in Iraq.

Optimism is for suckers. Entropy rules the universe. In the absence of a powerful positive force to counterbalance it, things usually get worse.

Media executives are like the neocons, in their blind faith that a brighter future will inevitably emerge from the rubble of the crumbling edifice of print media. Sometimes the old order just goes away. Sometimes there is no new one.

U.S. newspapers report that quarterly revenues are up 21 percent for online, and down 9 percent for print. At first glance, it looks like new media is picking up the slack from dying old media. But total print revenue was $10.1 billion. Online totaled $0.8 billion. As a percent of overall newspaper industry revenues, online is up a smidgen over 1 percent. There’s more Internet money coming in, but not nearly enough.

At The New York Times, which analysts point to as one of the most Web-savvy old media outfits, 13 million people read NYTimes.com every day. Only 1 million read the dead trees version. But print readers–7 percent of their customers–continue to generate 92 percent of the company’s revenue.

The old order is in trouble. And the Thrilling! Shiny! New! Internet can’t take its place. Online evangelists are tearing down the ancien régime without planning for the occupation phase. And they’re inflating another Dot-Com Bubble.
If the future of media looks like the Web does now, things are about to degenerate from grim to grisly. Media outlets are firing professional journalists, replacing them with random bloggers. Musicians with sizeable audiences are collecting insulting pittances for downloads of their albums. Some creators are soldiering on, working for free or for pennies. But they won’t do it forever.

Venture capitalists are investing in “consolidators,” websites like the Drudge Report and Huffington Post that link to columns and articles written by unpaid bloggers and professionals who’ve managed to hold on to their jobs. Creative people who actually make the product they sell, meanwhile, are receiving squat.

It’s inevitable that, sooner rather than later, these intellectual property vampires will suck creators dry. Professionals with mortgages and car payments will flee for greener pastures, replaced by hacks and rank amateurs happy to work for “exposure.” We’re already seeing the effect as journalism increasingly suffers deprofessionalization; 16-year-old bloggers with mad HTML skillz are demanding, and often receiving, equal access to readers.

Last week, I wrote about the content-is-dead mantra. The principle that intellectual property has value, and that those who create it ought to be paid, is in mortal danger. But people are willing to pay for content on the Internet. It just has to be easy.

Would you pay for Mapquest? I’d pay a quarter or a dollar for reliable directions from the airport to my hotel in a new city. Sometimes, while researching this column, I encounter a link to an archived newspaper article that I could use, but it charges a $2 or $3 download fee. The cost isn’t the problem–it’s a miniscule, and in my case tax deductible, expense to make my work better. But I don’t bother. I don’t pay for Mapquest, either.

I don’t care about the money. I just can’t stand filling out all those fields.

Each website requires you to enter personal data–your name, address, credit card number, expiration date, that stupid security code next to the signature on your card, and the billing address (as opposed to the shipping address). Frequently, website interfaces are buggy; make a mistake and you have to start all over again. I’ll suffer through the ordeal if it’s a site, like Amazon or Expedia, that I’ll use repeatedly. But an archived article? Ain’t worth my time to figure out how to get them my two bucks.

There is a solution to the online payment problem, says Simson Garfinkel, a fellow at the Harvard University Center for Research on Computation and Society and the author of “Database Nation: The Death of Privacy in the 21st Century.” (Disclosure: We’re friends.)

“If content is appropriately priced, of an appropriately high quality, and easy to access, people will pay for it,” asserts Garfinkel. “What is required is a system that is easy to use and licensing terms that are not onerous.”

A universal single-click payment system won’t work, he says, because it would be vulnerable to hackers. We could overlay a national ID card or credit card system over the existing Internet. One of several competing micropayment systems may become dominant, creating a market-based solution. You’d register your debit or credit card info at one place. Then, when you wanted to download a song or read an electronic book or order shoes, you’d go to the vendor’s website and click one button: “Buy.”

Amazon sort of does this. After you’ve registered, you can buy a book by clicking one button. Just like that, it’s on its way. We need something similar for vendors we’ve never dealt with before.

The solution will almost certainly have to be technology-based. And it will require us to give up the illusion of privacy. The government doesn’t–and can’t–know every time you access the Internet. But they do know enough, enough of the time, to separate the Usenet Bible study group members from the kiddie porn fans (OK, so those are sometimes the same folks, but you get the point).

Newspaper editors and publishers could reverse their decline by agreeing, en masse, to charge a substantial fee for their online editions–at least as much as for print. But I wouldn’t hold my breath. Avoidance of long-term thinking is what’s gotten the news biz where it is today.

In the long run, despite their suicidal tendencies, I suspect newspapers will survive, and even thrive, after the current shakeout. When radio was introduced in the 1930s, many analysts predicted the death of the record industry. Instead, radio promotion increased record sales. When television became popular in the 1950s, people said radio was doomed. The radio business is bigger than ever. The Internet was supposed to kill TV.

The newspaper business will change. Three major trends ensure that. They will also make it bigger than ever.

Next Week: The bright (sic!) future of newspapers.

COPYRIGHT 2007 TED RALL

When Media Content is Free, It’s Worth Every Cent

This is the first of a three-part series.

August J. Pollak was thrilled when the Huffington Post asked him to blog for them. Joining the widely-read liberal website was a great break, thought the astute political cartoonist/blogger whose work appears at the perfectly-named “Some Guy with a Website.” Then they told him about his salary: Zero.

“I love the Huffington Post, and I love the exposure I get from them,” Pollak told me. “But it’s never going to pay my rent.”

He’s right. The Huffington Post, capitalized to the tune of $10 million, employs 43 full-time employees, all of whom presumably receive actual cash money, and health benefits, and maybe even a 401(k), for their efforts. But, USA Today reports, “it has no plans to begin paying bloggers. Ever.” Ken Lerer, company co-founder, former Time Warner executive, and probably himself in it for the money, says: “That’s not our financial model. We offer them visibility, promotion and distribution with a great company.” Sorry, August. Vampire capitalism offers its sincere regrets to you, and your 1600 unpaid colleagues.

(Disclosure: I interviewed Pollak for my alternative cartoon anthology “Attitude 3: The New Subversive Online Cartoonists.” We are friends.)
Content is king, dot-com gurus of the 1990s told us. People who made cool pictures, songs and strings of word cashed in. Then Andrew Odlyzko of AT&T Labs wrote an influential essay titled “Content Is Not King.”

“Content certainly has all the glamour,” wrote Odlyzko. “What content does not have is money…The annual movie theater ticket sales in the U.S. are well under $10 billion. The telephone industry collects that much money every two weeks! Those ‘commodity pipelines’ attract much more spending than the glamorous ‘content.'” Moving and packaging information pays. Producing it does not.

Leaders of America’s corporate mass media have embraced a financial model that relies upon a fatal internal conflict. The future of media, they believe, belongs to “consolidators” like the Drudge Report and Huffington, who pull together creative content–in these examples, news stories and opinion columns–they don’t pay for. But who will write the stuff they steal–er, consolidate?

In the short run, they’re getting luminaries such as late JFK biographer Arthur Schlesinger, Jr. They buy the pitch, sold by scruffy cool 29-year-old guys who look like the Mac guy in the “Mac vs. PC” commercials, that the intangible benefits of exposure online will lead to tangible paychecks. (When, they don’t say. From whom, they know not.) In the long run, hacks and amateurs like the right-wing bloggers who destroyed Dan Rather’s career at CBS by “debunking” his scoop about George W. Bush’s Air National Guard records. (Rather, it turned out, was right all along. Sorry, Dan.) And who will produce boring old content in the really long run? No one. No one worth paying attention to, anyway.

Hardly a day passes without finding a pitch from some wannabe freeloader in my e-mail. “Our magazine doesn’t have a budget for content, but we’d love to use your cartoon about…” “We can’t offer a salary per se, but you would get amazing exposure to thousands of discrete users if…” Content is still king. Online leeches just don’t want to pay the kingmakers.

“Internet idealists like me have long had an easy answer for creative types…who feel threatened by the unremunerative nature of our new Eden,” computer scientist Jaron Lanier wrote recently in the New York Times: “Stop whining and join the party!” Like other old media types, I’m working overtime to try to smash these economic lemons into sweet, lucrative lemonade.

In the meantime, I called the bank that holds my mortgage. “I don’t have a budget to pay you per se,” I cooed. “But think of the awesome prestige your corporation receives just by being associated with a cartoonist and columnist whose work is literally read by millions of–” Click. Citibank (Bangalore), Ltd., signing out. Back to work!

So I’m cranky. I’ve already been through this give-it-away-for-the-exposure crap before. It wasn’t any more fun in the 1980s than it is now.

In my 20s, when I was starting on my quest to become a full-time dispenser of drawings mocking the president, I let shoestring operations like “Poetry Halifax North,” a tiny review in Nova Scotia, and “Against The Current,” a socialist magazine out of Detroit, print my cartoons for free. They didn’t offer much exposure, but I needed the tearsheets. Not getting paid sucked, but giving away my “content” was understandable–my “clients” were broke.

Over the years, I got better known. Big newspapers and magazines published–and paid for–my cartoons. Working for free had paid off. I became a full-time cartoonist.

But then the big newspapers and magazines started giving away their content. Violating the first rule of capitalism (charge as much as the market will bear, stupid!) publishers became obsessed with securing “market share” online. It costs tens of millions of dollars a year to produce, but you can now read all of today’s New York Times–plus special Web-only articles that don’t appear in the print edition–for free.

The Times projects that online will account for 8 percent of its revenues this year. But that’s not so impressive when you consider that NYTimes.com has 1300 percent more readers than the Old Gray Lady. Why don’t newspaper executives understand that a 50 percent market share, times online advertising rates that basically round off to zero, equals zero? Internet ad rates have been, remain, and will likely remain for the foreseeable future, a joke.

Online media is growing too slowly to make up for the decline of print. “Despite the popular belief that young people are flocking to the Internet, [a Harvard University study] found that teenagers and young adults were twice as likely to get daily news from television than from the Web,” reports The New York Times. Yet newspapers are eviscerating print operations to invest in an online presence without a discernible fiscal future.

Print is dead, Internet evangelists have convinced media executives. But, financially, there is no Web.

True, newspapers are boring, stodgy, and losing circulation. But abandoning them in favor of their possible-maybe-cross-your-fingers online successors is like getting rid of Saddam without planning for his successor.

Print media is dragging content providers into the abyss. First comes downsizing. Writers, cartoonists, and photographers are losing their jobs to peers willing to do the work for less or, in the case of readers invited to submit their comments and images for the thrill of appearing in the local rag, nothing. Then they squeeze those who remain for pay cuts. A cartoon that runs today in Time, Newsweek, USA Today, The New York Times or The Washington Post–the most prestigious and widely disseminated forums in the United States–brings its creator less than The Village Voice would have paid for it in the 1980s. Some print venues offer no payment at all.

Contrary to the conventional wisdom that Internet users won’t pay, technology blogger Dan Bricklin asserted in a 2000 column: “People will pay money for things that give them emotional satisfaction, especially those things that involve interacting with others, or have a high emotion content, like music.” (I found the essay online, for free. Sorry, Dan.)

I think people are willing to pay for more than iTunes and text messages. So does Jaron Lanier, who now renounces his days as an information-wants-to-be-free cheerleader. “Information is free on the Internet,” he writes, “because we [computer scientists] designed it that way. We could design information systems so that people can pay for information–so that anyone has the chance of becoming a widely read author and yet can also be paid.”

Unless something changes soon, deprofessionalization will further erode journalistic quality. The resulting dumbing down of our politics and culture will accelerate. We can’t get the toothpaste back into the tube. The Internet is here to stay. Unfortunately, the best way to make it more profitable–to stimulate all e-commerce, not just journalism–will require us to give up something dear to our rugged individualist American hearts: the illusion of Internet privacy.

NEXT WEEK: The solution.

COPYRIGHT 2007 TED RALL