Friday, August 7, 2009

It wasn't too late to save newspapers in 2002 (now, it's too late for some)

Originally published in the April, 2002 issue of Presstime magazine (this is slightly expanded to its pre-edited version).

Newspapers are engaged in the single largest act of self-destruction in the storied history of the medium.

Unlike Ted Turner, whose infamous and obviously premature prediction of the death of our industry has become a source of grim satisfaction to newspaper publishers everywhere, I’m confident newspapers will be around for my great grandchildren to read. What’s at risk is the strength and reach of the industry that produces them.

Since the early 1990s, by misreading the impact of the Internet, by accepting as fact myths since debunked, newspapers have been engaged in devaluing their most valuable asset – local news content – with potentially cataclysmic results. The genie is well out of bottle, but it’s not too late to lasso it back home. To do it will take courage and unblinking commitment to a single, simple principle – value.

I’m not talking here about ethical values, human values or even journalistic values. I’m talking about the value of something as determined by the price consumers pay for it, a principle older than Adam Smith.

Many readers are already jumping ahead of me – consumers simply will not pay for content online, thereby placing its direct value (not subsidized by advertising) at zero, you are thinking. You’ll use research studies, actual experience or water cooler conversations to bolster this argument. My response is pretty simple – the experiment is flawed because the laboratory has been contaminated. The main contaminant is a decade-long online free-for-all based on the most damaging myth to emerge in the digital era – that the Internet changes everything. It doesn’t.
"…The ‘new economy’ appears less like a new economy than like an old economy that has access to a new technology,” writes Michael Porter for the Harvard Business Review. “Even the phrases ‘new economy’ and ‘old economy’ are rapidly losing their relevance, if they ever had any. The next stage in the Internet’s revolution will involve a shift in thinking from e-business to business, from e-strategy to strategy. Only by integrating the Internet into overall strategy will this powerful new technology become an equally powerful force for competitive advantage.”
The Massachusetts Institute of Technology once actually predicted that the Internet would essentially dissolve international boundaries and bring about “computer-aided peace.” How na├»ve that sounds post September 11.

Whatever permanent change the Internet brings to our world, it will be evolutionary, not sudden. Here’s why, as argued by W. Brian Arthur in the March 2002 issue of Business 2.0 magazine:
“As technologist John Seely Brown points out, something subtle happens to a technology when it achieves amenity: It disappears. We become absorbed into its world, and its bones don't stick out anymore. Thus, if we are driving a car at night, we are absorbed into car-world – we are aware we are driving, aware of the passing trees and fences, but not aware of the car as a technology. The car disappears.

"By this standard the Internet is somewhere around the get-out-and-get-under days of the Model T Ford. To access my bank account, I have to fire up my computer, and wait. Then dial in by modem, and wait. Then get a browser going, and wait. Then enter account numbers and passwords, and wait. All the time there exists a barely noticeable anxiousness that the process may hang up at any moment. The Web's interface remains comfortable to use: ill-fitted, unreliable, frustrating, slow, and lacking content when we get there. It has not disappeared, nor has it achieved amenity. It will take time for amenity technologies to become available and used. It took automobiles from about 1890 to the 1940s – half a century of development -- to reach amenity. Needed were paved roads, reliable brakes, ignition systems, safe tires, and a thousand other things.

“The information revolution is not radically different from previous revolutions. The Internet has had its boom and crash, and there is no reason to suppose that history will be negated: Full use of the technology will arrive eventually. It always has. But this will require that the technology become workable for the user, and that businesses re-architect themselves to make use of it. This will happen gradually during the next 10 to 20 years as the missing components of the technology's use structure are put in place. In this buildout, the technologies that will matter most, that will determine the pace, are the ones I am calling arrangements-of-use.

"If there is one difference with this revolution, however, it is that it won't end when we have blanketed the country with optical cable or have teraflop processors. Information technology morphs every 10 years or so, so that what we thought defined the information revolution – batch processing, desktop computing, Web-based interconnection – is continually superceded by something new. What lies ahead can never be fully foreseen. This means that we can expect more innovation in this buildout phase than with previous revolutions. But during the next few years, at least, what will drive the buildout is something at once silent and unremarkable: the quiet, inexorable interconnection of business and the slow appearance of Web-based services that digitization provides.”
When newspapers rushed to push their content online for free – out of fear, excitement, greed, whatever – they set an unreasonable expectation that high-quality content can be made available for free in perpetuity, a phenomenon that former New York Times Editor Max Frankel dubbed “Nirvana News.” What we’re either learning now or will learn eventually is that somebody’s got to pay for it.

Frankel put it this way: “The oft-heard promise of ‘free news’ is an oxymoron. Americans will get the journalism they pay for.”

There was a time, before the bursting of the dot-com balloon and at a time when venture capitalists were throwing money at digital startups with little concern for an odd little thing called “profit,” when the Internet was going to revolutionize every phase of our lives. At the same time, the newspaper industry became convinced – or it just plain panicked – that the Internet would certainly forever change our industry, and sooner, not later. While I agree that the Internet will, indeed, forever change newspapering, my argument is that it’ll be an evolutionary process over which we will have far more control than we once imagined.

Newspapers began a search for business models supported by ad revenue created by “eyeballs” attracted to their web sites. How to attract those eyeballs? With the content that people had been gladly paying for on our now shamefully old-fashioned printed newspapers, of course.

And so began the disastrous devaluation of the content of local newspapers. We’ve tried other models, from “push” technology to local guides to archive searches. These all may eventually become viable components in an Internet business model. But any model whose foundation is giving away our valuable content is fatally flawed.

During this time, newspapers have spent hundreds of millions – perhaps $1 billion or more – in various experiments. This isn’t all bad for an industry notoriously reluctant to invest in R & D. But it seems that we’re not learning much from this massive infusion of cash.

We must start by destroying the first two myths of digital newspapering:

Myth #1: Only large newspapers with large reporting staffs and a national reputation can create content unique enough to sell online.

I argue that the very opposite is true. The more local your newspaper, the more unique your content for your intended audience and the more likely it is to have a quantifiable value (in dollars and cents) to that audience. My newspaper, the Post Register in Idaho Falls, Idaho, has the world’s most unique content, if you’re looking for news about eastern Idaho. From police logs to obituaries to investigative journalism to sports scores to who’s playing in what pub to how to tie a fly to snap up cutthroat trout to opinions on local issues, no other news organization in the world can compete with us when it comes to serving our intended audience. Our newsroom is larger than the local TV newsrooms combined. We have the second largest news staff in the state of Idaho. While that means nothing to someone in New York or Florida or California, it means everything to someone wanting news about eastern Idaho. If you don’t want news about eastern Idaho, well, I don’t really care about you as a potential reader, do I?

(Parenthetically, why is it that we can support such a large news staff? Because we enjoy the dual revenue streams of advertising and subscriptions. This is what sets us apart from broadcast news and printed shoppers, and it’s vital that we not lose that distinction in the digital environment.)

My newspaper is hardly unique. Nearly every daily newspaper in North America outside of a metro market can make the same claim. So why are you giving that unique local content away on the Internet when you expect people to pay for it after you print it on dead trees with ink that rubs off on the reader’s hands?

Metros are another story – their competitive environment is dramatically different from those of small and mid-sized dailies, and they face different challenges. For many metros, a paid model probably won’t work, at least today.

Myth #2: The Internet environment is unique. Internet users simply won’t pay for content.

Of course they won’t if they don’t have to. Our industry’s research data on paying for online content will remain flawed until we get serious about ending this devaluation plague by stopping the give-away. We’ve trained Internet users to believe that the Internet is supposed to be free. Imagine that.

Some newspapers have dipped their toes in the water and immediately retreated when visits to their sites plummeted after requiring a fee for access, or even upon insisting on registration. They fear losing ad revenue based on “hits.” It’s the wrong model – abandon it now. Do we have the patience to blend the Internet into our industry over the long term, or must we demand some kind of quantifiable result now? If it’s the latter, the war may be lost.

The effect of scarcity on value is another misunderstood issue in developing an Internet strategy. Scarcity increases the value of anything. Disney understands this – every so often it pulls off the shelves one its classics (Cinderella, most recently). Do they want to stop making money on Cinderella? No, Disney recognizes that it’s sometimes important to forego short-term profits to protect long-term profits by managing the value of its “content”, if you will. The value of scarcity applies to numbered art prints, even Pez containers, for crying out loud.

You argue that newspaper content can’t be compared to such things. Why not? Do you or do you not produce content that can be found nowhere else? If you don’t, I agree – you’re in real trouble. If you do, or if you don’t but you can, you need to establish a value and stick with it, regardless of how you eventually get your content to the consumer. When you put it on your web site for all the world to see for free, you’ve eliminated scarcity as a value driver.

The local newspaper industry stands alone as the mass medium that daily purveys local news and information of such a quality that it commands a price. We are on the verge of giving away the business value of that news. Unless we stop soon, the genie will be so far gone from the bottle that there will be no getting it back.

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