November 17, 2009

"About half in U.S. would pay for online news" -- NYT

Read the full article here. This may be the first time that the headline was better written than the first paragraph. The writer emphasizes how less willing Americans are to pay relative to people from other countries, when of course the real news is that people are willing to pay for online news. Nevermind the endless hogwash you hear from Silicon Valley about how no one is willing to pay for anything anymore in this brand new economy of ours.

The consulting group who did the study suggests that charging for online news will make American newspapers more profitable. We already knew that from the Wall Street Journal, Financial Times, and even the smaller-scale Arkansas Democrat-Gazette. But now that "studies show," maybe everyone will listen.

It's not surprising that Americans are more price-sensitive than people in France, Italy, or Spain -- that's true across the board, not just for online news. Spaniards are willing to pay a little more to get a little better quality for just about anything, which is why junk food, Wal-Mart-wear, and skyscrapers have enjoyed much less success over there compared to here. The flipside, which we don't see when we romanticize their lives, is that their choices make them more strapped for cash.

Having lived in Barcelona for about a year, I still prefer the American lifestyle because there are more options here. You can certainly live the human-scale, cosmopolitan life here if you want, but you're also able to wear jean shorts and eat Doritos for your dinner. Given how weak our social bonds are here, and given how cheap the transportation costs are, people will sort themselves into areas where they don't have to be bothered by people who have tastes that offend them. Of course, that sorting is far from complete, so people from across the spectrum are forced to live in the same areas.

While I'm digressing, I think that's another superior aspect of American life -- being forced to interact with people who are different from you, especially those who you'd rather not be around. You always hear people whining about how homogeneous our communities are becoming and that we need to struggle to make them more diverse. But if they think our communities are that way, they should visit any of the European cities that they romanticize. In the same way that whites who live in all-white areas are naive about what black and Hispanic culture is like -- and in general I think naivete is dangerous -- Spaniards were infuriatingly clueless about how Americans really live.

Americans don't hold strong but foolish views about how Spaniards or Italians or anyone lives because they don't give other countries much thought at all. But it was totally common for a Spaniard to ask me "Why does everyone bring guns to school in the U.S.?" while their friends looked at me with a straight face, expecting a serious answer, rather than turn to their friend like, "Nigga, is you crazy?" They had seen Bowling for Columbine -- I mean, how much more research can they be expected to do? It was a real "AFL-CIA" moment.

But that's an example of little consequence. What I really mean is that Spaniards are naive about how slobs live because there are such much fewer of them. Some pleasures we respond to on their own merits, almost reflexively. But many other things that enrich our lives do so even more when they stand out in contrast to their inferiors. Sporting a rakish necktie or savoring some French onion soup in America may make us more snobbish -- "Well, I for one still care about my appearance" -- but I think we draw greater satisfaction from it than a Frenchman does because we look around and see baggy cargo shorts and jelly beans and think to ourselves, "God, that could've been me..."

People in the Latin countries are more likely to take those pleasures for granted, having grown up with them, while the Americans who enjoy them don't process them in such a narrowly hedonistic way -- we feel a humbling sense of gratitude because throughout our daily lives we see how fragile civilized ways of eating and dressing are.

Returning finally to newspapers, I'd bet that those Americans who appreciate good reporting get more out of it than the Germans or Italians do because, as the article notes, we have a much wider variety of news sources here, much of it free crap, while journalism in much of Western Europe is dominated by a few high-quality sources. Reading the WSJ isn't merely rewarding -- it feels like they've come to the rescue! "Jesus, I almost had to go to CNN..."

And don't even get me started on how much more grateful we Americans are for Penelope Cruz than are the Spaniards, who take her for granted...

10 comments:

  1. all this is that the newspapers, especially the big ones can make piles of money (and do) with online advertising.

    What the papers want to do is make money to support the dead part of their industry: the paper.

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  2. "The writer emphasizes how less willing Americans are to pay relative to people from other countries, when of course the real news is that people are willing to pay for online news."

    If that's the case, how do you explain the failure of the New York Times' online subscription program, TimesSelect?

    "The consulting group who did the study suggests that charging for online news will make American newspapers more profitable."

    Subscription fees are a drop in the bucket. Two-thirds of newspapers' income comes from print advertising (source: Exploring Mass Media for a Changing World). Why do you think that "alternative newspapers" and the like can get away with giving away their product free of charge? Free online news isn't killing the papers - Craigslist is killing the papers.

    "We already knew that from the Wall Street Journal, Financial Times, and even the smaller-scale Arkansas Democrat-Gazette."

    All of those newspapers have near-monopolies on the news for a specific niche (the business community in the WSJ and FT's case, Little Rock, AR in the Democrat-Gazette's case). A paper like the New York Times (or any other general market broadsheet) that doesn't offer anything that can't be obtained from another source can't replicate that business model.

    Also, how would papers combat piracy? What's to stop people from stealing articles and putting them up on the web for free?

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  3. speaking of paid news, how well is your paid site working out?

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  4. The two surveys must have surveyed different sub-populations if their estimates are that far apart. Or they asked different questions. We'll find out when newspapers start charging.

    "how do you explain the failure of the New York Times' online subscription program, TimesSelect?"

    Simple -- that wasn't news, it was opinion columns. No one wants to pay to hear a bunch of retarded windbags when the blogosphere, chat rooms, online forums, etc. give it away for free -- and of equal or better quality.

    In contrast, actual news cannot be replaced by hanging out on blogs, chat rooms, etc. The TimesSelect experiment showed that people highly value news (FT, WSJ) but don't value opinion columnists' confusions at all.

    "Two-thirds of newspapers' income comes from print advertising"

    That's disappearing, at least over the short term. All the newspapers have mentioned this.

    "All of those newspapers have near-monopolies on the news for a specific niche"

    Meaning they provide a product that someone values -- of course they'll profit, while the NYT who provides opinion columns for a fee will go under.

    By your definition of "niche," every paper has a near-monopoly over a niche -- every local paper over its locality (cities with 10 papers don't exist), for example.

    "A paper like the New York Times (or any other general market broadsheet) that doesn't offer anything that can't be obtained from another source can't replicate that business model."

    Oh I think the NYT offers things that others couldn't. Can some cheap piece of crap afford foreign bureaus? No? Then they will have zero foreign reporting, and the NYT will.

    Even if a sub-par news source did its own foreign reporting, it would likely produce lower-quality reporting, not as much depth, etc. For some people, that would be sufficient; others would want more depth or polish and would pay for it (as they already do).

    But the larger point is true -- if you can't provide something that people want, you'll start going out of business. That's as it should be; doesn't imply that no newspaper can survive, or that everyone has to make it free, etc.

    "What's to stop people from stealing articles and putting them up on the web for free?"

    Nothing stops people from stealing recorded songs and putting them up on a file-sharing host for free. Should record companies start giving away all their songs for free?

    "how well is your paid site working out?"

    Scraped together $110 over the summer. I haven't put updates here for awhile; probably should.

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  5. In contrast, actual news cannot be replaced by hanging out on blogs, chat rooms, etc.

    A lot of people get their entire gossip/media news from Gawker which scours and distills gossip/media news from various sources. And there are many other sites like this for other topics, such as Valleywag for tech/Silicon Valley news, where people basically get all their news about that particular topic. Gawker and these other sites are basically blogs - they have a bunch of bloggers who read the news all day and write up relatively short posts detailing the facts with perhaps some personal opinion mixed in. These sites all rely on ad revenue.

    I don't see how this model couldn't be replicated enough in all other traditional news divisions such as politics, national, world, business, etc. to replace or compete with most or all fee charging news outfits. Sites like Gawker with this model are like news retailers that directly distribute news to consumers. They can get news for free from the news "producers" or "wholesalers," or pay for the subscriptions, and then distribute the news for free and collect ad revenue. And these large news producer/wholesalers don't really have the pricing power to price the retailers and make it unprofitable for them because they have to charge low enough to attract individual subscribers.

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  6. The wholesaler / retailer analogy isn't apt because Wal-Mart buys lots of copies of a table; it doesn't buy one table and at little cost conjure up many copies.

    Stan Liebowitz's analogy is right: they're parasitic technologies. Why? They don't contribute new news -- if they do in some cases, then they are like the "wholesalers" who are the first link in the chain.

    Think through what would happen. The host news source does the original coverage, investigation, etc. The parasitic news source gets access to this (by subscribing or whatever), and re-distributes this information for free to its readers.

    Should this turn out to drive the host out of business, then guess what -- the parasite dies right after. You can't pass along news that isn't being produced because the would-be producers can no longer profit from doing so. With no news to pass on, no one reads their site, and their ad revenue shrinks to zero.

    I've never read Gawker, though I've seen it excerpted many times. I just took a look at Valleywag. The writing sucks, which is what you expect.

    Crazy as it may seem to Silicon Valley geeks and celebrity-obsessed morons, there are people who will pay for decent writing. Gawker would have to write up its own version of an NYT news story -- if they copied it verbatim, they'd get sued.

    So the market will segment into those who are OK with free, lousy writing, and those who will pay something for passably good writing -- and even more if it's really good.

    Again, think of the food analogy. People are incredibly heterogeneous in their sensitivity to price. The reason that supermarkets have expensive, high-quality meats and cheeses as well as dirt-cheap carby food is that there's demand for both.

    Silicon Valley may go for the lowest price by subsisting on ramen noodles, skittles, and mountain dew (or full throttle), but -- news flash -- a large fraction of people aren't so pathetic.

    Price sensitivity is probably some deep-down personality trait that applies across most items, so it's no wonder that these slobs are the loudest voices in the "don't charge me!" camp, while people who eat a reasonably healthy diet are more willing to throw a few coins in the NYT's hat for the news.

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  7. And of course, if news coverage does turn into a public good that private companies won't supply, then we'll get government newspapers. Aside from the conflicts of interest, it'll cost a decent buck in tax dollars to keep that going.

    Or they could do something like a patent system where the news producers put their product out but no one can re-distribute it for a week or a month. At that time, the news parasites could get their hands on it and re-distribute it, like generic drug companies.

    Nah, this is all too complicated -- easier instead to just smash the parasites.

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  8. We know people will pay for news - people used to all the time when the news came on a piece of paper.

    The question is, will people pay for news when it can be easily and immediately reproduced and delivered at virtually no cost (the structural source of the parasitism)?

    Asking people whether they'd be willing to pay for online news or not doesn't tell you much about the final market price because it only gauges (or attempts to gauge) the demand side. It ignores supply. The supply is very high because it's virtually costless to reproduce, and this is what ultimately drives the price of online news down and indeed very low. And this includes what you describe as "good writing" which, if it can't be outright copied, can be sufficiently reworked. The "good writing" found in standard news articles in major papers like the NY Times is generally formulaic and written at an 8th grade level.

    There will be market segmentation, but it won't really be about the news. The higher end, more expensive subscriptions will be selling status signaling, "inside" info, social networking, etc., that is, they won't really be selling the news.

    It's the inherent structural problem of a medium in which the marginal cost of producing a copy of the news (i.e. a webpage for the reader to view) is basically zero.

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  9. ""good writing" which, if it can't be outright copied, can be sufficiently reworked"

    That ups the cost to the parasite, though. To cheaply reproduce it, it'll have to be as close to verbatim as is legal -- even "boiling it down" will be highly costly, since weeding out signal from noise takes thought and effort.

    "The "good writing" found in standard news articles in major papers like the NY Times is generally formulaic and written at an 8th grade level."

    Nah, you haven't been around 8th graders for awhile. It's at least at 10th grade. Plus, I said good writing, not Shakespeare. Remember that we're comparing. The alternative to 10th grade news items in the NYT is not H.L. Mencken but the 4th grade level writing of Gawker and Valleywag.

    "The higher end, more expensive subscriptions will be selling status signaling, "inside" info, social networking, etc., that is, they won't really be selling the news."

    Not true so far. The WSJ and FT aren't about status-whoring -- that's what the NYT, WP, etc., have reduced themselves to in order to hang onto readers. Again, if you can't compete on price because it's free, you'll compete on those other margins.

    Compete on price like WSJ and FT, and you don't have to compete as much on the status-whoring margin.

    "It's the inherent structural problem of a medium in which the marginal cost of producing a copy of the news (i.e. a webpage for the reader to view) is basically zero."

    That's a hypothetical worry -- and a real one for digital songs, movies, and maaaaybe books. So far, the WSJ and FT haven't suffered from anything like Napster or eDonkey. The technology allows pirating newspaper articles just as easily as songs, movies, etc.

    So it must be that the demand for pirated news articles is minuscule, certainly compared to the demand for pirated songs and movies. The reason is clear enough: the male losers who download songs and movies use them as part of their identity, whereas being informed about what's going on isn't cool.

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