Newspapers: Suicide by Greed and Stupidity

A friend at the Times-Dispatch sent me a link to a blog I’ve never seen before, which I hereby point you to. This post refers to the Time article by Walter Isaacson in which he argues that “micropayments,” that is, small payments for reading individual articles on newspaper websites, will not only work with us users, but will save newspapers.

If you listen closely, you can feel the final, futile vibrations of a dinosaur’s tail as it thrashes helplessly upon the unforgiving earth.

I refuted Isaacson’s essay in this post on Feb. 6. The Print CEO blog has an excerpt from the Daily Show, where Isaacson spoke with Jon Stewart; and the blog doesn’t refute Time‘s piece, but suggests instead that

Jon Stewart’s idea to use chemically addictive ink might have some merit too. At least to save the printed newspaper.

This explanatory essay, linked from the Print CEO blog, does a much better job at explaining why micropayments will never work.

The dinosaurs just don’t understand. And they won’t until the ugly truth is shoved down their throats.

Newspapers: Unable to Face Reality

The dinosaurs are trying to roar, but to us it sounds only like whimpering.

Time has posted online an opinion piece, “How to Save Your Newspaper,” which has its heart in the right place, but its brain is in suspended animation around frigid Schenectady. The writer, Walter Isaacson, is incredibly smart, has a wealth of knowledge and experience behind him, and is completely naive in the realities of Internet-savvy America and both what we need and, especially, what we want.

I post the article here in its entirety so that I may criticize it and make objective comments. Please click on the link above for the Time article as it appears online. My comments are yellow in the article, reprinted below.

Thursday, Feb. 05, 2009

How to Save Your Newspaper

This story has been modified from its original version

During the past few months, the crisis in journalism has reached meltdown proportions. Not true. Journalism itself is not having a crisis — news reporting is just as good or better than ever. The financial side of publishing a newspaper is, however, collapsing in upon itself and creating a black hole on Wall Street. It is now possible to contemplate a time when some major cities will no longer have a newspaper Especially the metro papers and when magazines and network-news operations will employ no more than a handful of reporters.

There is, however, a striking and somewhat odd fact about this crisis. Newspapers have more readers than ever. Not true, as this sentence explains: Their content, as well as that of newsmagazines and other producers of traditional journalism, is more popular than ever — even (in fact, especially) among young people. THAT is true. Content is king. People need the news. But they do not want their news in the newspaper format. The old-fashioned page format, the old-fashioned way of “subscribe or buy” distribution, are important factors in the downfall of the newspaper industry that are not being faced by management.

The problem is that fewer of these consumers are paying. Instead, news organizations are merrily giving away their news. Merrily? Not hardly. The companies just don’t know what to do yet. According to a Pew Research Center study, a tipping point occurred last year: more people in the U.S. got their news online for free than paid for it by buying newspapers and magazines. Who can blame them? Even an old print junkie like me has quit subscribing to the New York Times, because if it doesn’t see fit to charge for its content, I’d feel like a fool paying for it. But it isn’t free, and this is another factor that management is failing to consider. Television used to be free, paid for by advertisers. Then cable came along, and America discovered it was willing to pay for more channels, more interesting content, and better reception. Now the Internet has come along, and we are also paying for that. Both cable and Internet are monthly bills for most of us — so we ARE paying for the news. The logical extension of this argument is that perhaps newspapers need to go back in time to when television was free. That’s right. Free newspapers, completely paid for by advertising. Naaaah. Never happen.

This is not a business model that makes sense. No, it’s not. But newspapers are stuck: if they pull out of the Internet, someone else will take their place. Perhaps it appeared to when Web advertising was booming and every half-sentient publisher could pretend to be among the clan who “got it” by chanting the mantra that the ad-supported Web was “the future.” But when Web advertising declined in the fourth quarter of 2008, free felt like the future of journalism only in the sense that a steep cliff is the future for a herd of lemmings. (See who got the world into this financial mess.)

Newspapers and magazines traditionally have had three revenue sources: newsstand sales, subscriptions and advertising. The new business model relies only on the last of these. That makes for a wobbly stool even when the one leg is strong. When it weakens — as countless publishers have seen happen as a result of the recession — the stool can’t possibly stand. And this is what’s happening today. This part, he got right.

Henry Luce, a co-founder of TIME, disdained the notion of giveaway publications that relied solely on ad revenue. He called that formula “morally abhorrent” and also “economically self-defeating.” That was because he believed that good journalism required that a publication’s primary duty be to its readers, not to its advertisers. In an advertising-only revenue model, the incentive is perverse. It is also self-defeating, because eventually you will weaken your bond with your readers if you do not feel directly dependent on them for your revenue. But we CAN’T depend on readers any more . . . because we are losing them, in herds, droves, schools and flocks. This is circular thinking, and indicates if not a complete willingness to run away from the harsh realities of consumers and the newspaper — almost every newspaper is doing this type of childish reasoning — then it indicates an infinite loop of strategic and, ultimately,financial madness. When a man knows he is to be hanged in a fortnight, Dr. Johnson said, it concentrates his mind wonderfully. Journalism’s fortnight is upon us, and I suspect that 2009 will be remembered as the year news organizations realized that further rounds of cost-cutting would not stave off the hangman.

One option for survival being tried by some publications, such as the Christian Science Monitor and the Detroit Free Press, is to eliminate or drastically cut their print editions and focus on their free websites. Others may try to ride out the long winter, hope that their competitors die and pray that they will grab a large enough share of advertising to make a profitable go of it as free sites. That’s fine. We need a variety of competing strategies. You bet your ass we do.

These approaches, however, still make a publication completely beholden to its advertisers. Start thinking differently, dinosaurs. The old way just isn’t working any more. So I am hoping that this year will see the dawn of a bold, old idea that will provide yet another option that some news organizations might choose: getting paid by users for the services they provide and the journalism they produce. Not a bad idea. So . . . how?

This notion of charging for content is an old idea not simply because newspapers and magazines have been doing it for more than four centuries. It’s also something they used to do at the dawn of the online era, in the early 1990s. Back then there were a passel of online service companies, such as Prodigy, CompuServe, Delphi and AOL. They used to charge users for the minutes people spent online, and it was naturally in their interest to keep the users online for as long as possible. As a result, good content was valued. When I was in charge of TIME’s nascent online-media department back then, every year or so we would play off AOL and CompuServe; one year the bidding for our magazine and bulletin boards reached $1 million.

Then along came tools that made it easier for publications and users to venture onto the open Internet rather than remain in the walled gardens created by the online services. I remember talking to Louis Rossetto, then the editor of Wired, about ways to put our magazines directly online, and we decided that the best strategy was to use the hypertext markup language and transfer protocols that defined the World Wide Web. Wired and TIME made the plunge the same week in 1994, and within a year most other publications had done so as well. We invented things like banner ads that brought in a rising tide of revenue, but the upshot was that we abandoned getting paid for content.

One of history’s ironies is that hypertext — an embedded Web link that refers you to another page or site — had been invented by Ted Nelson in the early 1960s with the goal of enabling micropayments for content. He wanted to make sure that the people who created good stuff got rewarded for it. In his vision, all links on a page would facilitate the accrual of small, automatic payments for whatever content was accessed. Instead, the Web got caught up in the ethos that information wants to be free. The free television model that has prevailed since the 1950s has spoiled America. If it’s on a tv (a monitor), then content is expected to be free. This may be a concept that may prove inviolate with the public. Maybe it’s time content providers faced this and stopped fighting it, hm? Others smarter than we were had avoided that trap. For example, when Bill Gates noticed in 1976 that hobbyists were freely sharing Altair BASIC, a code he and his colleagues had written, he sent an open letter to members of the Homebrew Computer Club telling them to stop. “One thing you do is prevent good software from being written,” he railed. “Who can afford to do professional work for nothing?”

The easy Internet ad dollars of the late 1990s enticed newspapers and magazines to put all of their content, plus a whole lot of blogs and whistles, onto their websites for free. Wrong. Ad dollars on the Internet have NEVER been easy to get. Papers and magazines jumped on the web because they realized if they didn’t, they’d be left behind. But the bulk of the ad dollars has ended up flowing to groups that did not actually create much content but instead piggybacked on it: search engines, portals and some aggregators.

Another group that benefits from free journalism is Internet service providers. They get to charge customers $20 to $30 a month for access to the Web’s trove of free content and services. As a result, it is not in their interest to facilitate easy ways for media creators to charge for their content. Thus we have a world in which phone companies have accustomed kids to paying up to 20 cents when they send a text message but it seems technologically and psychologically impossible to get people to pay 10 cents for a magazine, newspaper or newscast. Kids WANT to text message. It’s cool. Most adults couldn’t care less.

Currently a few newspapers, most notably the Wall Street Journal, charge for their online editions by requiring a monthly subscription. This is a newspaper whose regular readers can all afford an extra monthly charge. But what has happened across the country when local newspapers have tried to charge for their services? When Rupert Murdoch acquired the Journal, he ruminated publicly about dropping the fee. But Murdoch is, above all, a smart businessman. He took a look at the economics and decided it was lunacy to forgo the revenue — and that was even before the online ad market began contracting. Now his move looks really smart. Paid subscriptions for the Journal’s website were up more than 7% in a very gloomy 2008. Plus, he spooked the New York Times into dropping its own halfhearted attempts to get subscription revenue, which were based on the (I think flawed) premise that it should charge for the paper’s punditry rather than for its great reporting. (Author’s note: After publication the New York Times vehemently denied that their thinking was influenced by outside considerations; I accept their explanation.)

But I don’t think that subscriptions will solve everything — nor should they be the only way to charge for content. A person who wants one day’s edition of a newspaper or is enticed by a link to an interesting article is rarely going to go through the cost and hassle of signing up for a subscription under today’s clunky payment systems. The key to attracting online revenue, I think, is to come up with an iTunes-easy method of micropayment. We need something like digital coins or an E-ZPass digital wallet — a one-click system with a really simple interface that will permit impulse purchases of a newspaper, magazine, article, blog or video for a penny, nickel, dime or whatever the creator chooses to charge. Listen: you can hear the laughter ringing out through cyberspace . . .

Admittedly, the Internet is littered with failed micropayment companies. If you remember Flooz, Beenz, CyberCash, Bitpass, Peppercoin and DigiCash, it’s probably because you lost money investing in them. Many tracts and blog entries have been written about how the concept can’t work because of bad tech or mental transaction costs.

But things have changed. “With newspapers entering bankruptcy even as their audience grows, the threat is not just to the companies that own them, but also to the news itself,” wrote the savvy New York Times columnist David Carr last month in a column endorsing the idea of paid content. This creates a necessity that ought to be the mother of invention. In addition, our two most creative digital innovators have shown that a pay-per-drink model can work when it’s made easy enough: Steve Jobs got music consumers (of all people) comfortable with the concept of paying 99 cents for a tune instead of Napsterizing an entire industry, and Jeff Bezos with his Kindle showed that consumers would buy electronic versions of books, magazines and newspapers if purchases could be done simply. The author clearly does not understand who the American audience is today. Music sells, because we’ve always had to pay for it (except in the measly bites free radio gave us in its heyday) AND, more importantly, because people want it. TV shows on iPods, not selling as much. There are other and better ways for people to watch their shows. And Jeff Bezos and Amazon’s Kindle are NOT yet a success. I’m a reader and a writer, and other than one writer I know of, who is rich, filthy, stinking rich, God bless him, I know of no one who has even seen a Kindle, much less bought one.

What Internet payment options are there today? PayPal is the most famous, but it has transaction costs too high for impulse buys of less than a dollar. The denizens of Facebook are embracing systems like Spare Change, which allows them to charge their PayPal accounts or credit cards to get digital currency they can spend in small amounts. Similar services include Bee-Tokens and Tipjoy. Twitter users have Twitpay, which is a micropayment service for the micromessaging set. Gamers have their own digital currencies that can be used for impulse buys during online role-playing games. And real-world commuters are used to gizmos like E-ZPass, which deducts automatically from their prepaid account as they glide through a highway tollbooth.

Under a micropayment system, a newspaper might decide to charge a nickel for an article or a dime for that day’s full edition or $2 for a month’s worth of Web access. Some surfers would balk, but I suspect most would merrily click through if it were cheap and easy enough. Again, he uses merrily. And again, he’s completely wrong. Most would not click through if they were being charged. Most people I know don’t even click through Internet ads. Face it, Charlie: nobody wants to pay for the newspaper any more. Get over it and move on. Merrily.

The system could be used for all forms of media: magazines and blogs, games and apps, TV newscasts and amateur videos, porn pictures and policy monographs, the reports of citizen journalists, recipes of great cooks and songs of garage bands. This would not only offer a lifeline to traditional media outlets but also nourish citizen journalists and bloggers. They have vastly enriched our realms of information and ideas, but most can’t make much money at it. As a result, they tend to do it for the ego kick or as a civic contribution. A micropayment system would allow regular folks, the types who have to worry about feeding their families, to supplement their income by doing citizen journalism that is of value to their community. It’s called asking for donations through PayPal. A lot of bloggers do it.

When I used to go fishing in the bayous of Louisiana as a boy, my friend Thomas would sometimes steal ice from those machines outside gas stations. He had the theory that ice should be free. We didn’t reflect much on who would make the ice if it were free, but fortunately we grew out of that phase. That was called stealing, and the author is being disingenuous with us. If you don’t want your content “stolen,” then don’t post it. Or go ahead and put a lock on it: let’s get the Times-Dispatch to charging for access to the articles, the obituaries. Then maybe you’ll see how many subscribers they DON’T have. Likewise, those who believe that all content should be free should reflect on who will open bureaus in Baghdad or be able to fly off as freelancers to report in Rwanda under such a system.

I say this not because I am “evil,” which is the description my daughter slings at those who want to charge for their Web content, music or apps. Instead, I say this because my daughter is very creative, and when she gets older, I want her to get paid for producing really neat stuff rather than come to me for money or decide that it makes more sense to be an investment banker.

I say this, too, because I love journalism. I think it is valuable and should be valued by its consumers. Agreed. Charging for content forces discipline on journalists: they must produce things that people actually value. Then you’re calling for a radical rethinking of what a newspaper is all about, because the public doesn’t care about journalism: it cares about good stories. I suspect we will find that this necessity is actually liberating. The need to be valued by readers — serving them first and foremost rather than relying solely on advertising revenue — will allow the media once again to set their compass true to what journalism should always be about. Good luck with that. Hey, here’s an idea: maybe, create a product that people like and want, and you won’t have a problem selling it. Instead, you’re just beating a dead horse.

Isaacson, a former managing editor of TIME, is president and CEO of the Aspen Institute and author, most recently, of Einstein: His Life and Universe.

Wornom, a freelance writer, was in the newspaper industry for fifteen years. He would like to see newspapers continue, but he finds the paper increasingly irrelevant to the public at large.