It looks the NYT’s wants to raise a pay-wall starting in 2011. Borrowing from the FT-model, the NYT will allow lite-users the ability to read a number of articles a week/month for free, and then ask for payment beyond that. As you may know, I am skeptical that this will work.

First and foremost, as many others have said before, the FT and the WSJ, the only two papers to have successful online pay models, offer a monetizable news/information service. Bloomberg, another monetizable information provider, gets the vast majority of its revenue from very expensive terminal subscriptions. The key to these services is that only a very small cadre of people care about the stories that get reported; at the WSJ they even have a saying, the smaller the audience the more valuable the information. It’s so valuable, that typically these information providers have their subscriptions paid directly by the companies on which they report, who then turn around and report the subscription cost as a business expense.

However, the NYT doesn’t provide this type of journalism. It provides general interest stories, which are also covered by countless rivals. In fact, as most bloggers point out, there is almost no story in the NYT that isn’t also covered at least by Reuters, AP, and AFP as well. Because of the overcrowded market for general interest news, Reuters has actually taken to paying large traffic-directing aggregators, like The Drudge Report, to favor linking to their stories over the competition; the diametric opposite of a pay-wall.

Yet, despite all that, it seems that Arthur ‘Pinch’ Sulzberger, Jr. is playing follow the leader, and imitating Rupert Murdock’s plung into the pay-wall.

Which brings up my second criticism, that there is no business logic behind this move, other then they need more money. Historically, subscription revenue, $600-a-year for the NYT, do not even cover the paper and delivery costs associated with their production. (Econ: Price = MC) It was the combination of classified and display ads that subsidized the entirety of the Newsroom, and helped defray the printing costs. The problem, as I have laid out in detail before, is that digital ad prices are drastically lower then print ad prices per-impression. So while the NYT, the Post, the IHT, ect have never had a larger readership in all their history, they are going broke faster than they can grow.

This economic reality is not addressed by either Murdock or Sulzberger.

For Murdock it does not matter, his papers can be subsided by the rest of the News Corp, as I understand Fox News is raking it in, and Avatar is busting the box office coffers in full 3D glory. As the FT reported when Murdock announced the pay-wall idea at the end of Q3, News Corp is a family operation:

Profits staged a double-digit rebound in the three months to September 30, with 85 per cent of operating income now coming from cable channels including Fox News and its Hollywood studio…

Group revenues fell 4 per cent, dragged down by a $300m decline in its newspaper portfolio, which stretches from the Sun in London to The Wall Street Journal in New York. Operating income from newspapers and information services fell from $134m to just $25m, or 2.4 per cent of total profits.

…

The cable networks division secured its place as News Corp’s biggest profit engine, raising operating income by 41 per cent to $495m, owing largely to Fox News.

Fox film studio profits rose 56 per cent from the box office success of Ice Age: Dawn of the Dinosaurs and DVD sales of X-Men Origins: Wolverine. (Bolds Mine)

Lucky for the WSJ, The Times, The Sun, and The Post Murdock loves newspapers, and will prize them above all else as long as he is alive. It’s just in the man’s blood.

Sulzberger, on the other hand, does not have that luxury, even if he shares Murdock’s blood-for-ink preference. No, the NYT lives and dies on it’s own. Which is why the absence of a REAL business plan and rational for this pay-wall is so troubling. It does nothing to address the advertizing decline. They have not answered how this pay-wall will be more successful than its ill-fated Times-Select, which held opinion behind the pay-wall. And yet, here we go again, and it’s the same guy making this decision as made the last pay-wall decision, that all went nowhere; and who also made the call to buy a huge chunk of Manhattan Real Estate, burdening the company with massive debt, that it can ill afford. And for these reasons, I have to agree with Michael Wolff, that Pinch has to go, if the NYT is expected to save itself. Just because your family owns the paper, does not mean you know how to run the paper.

Finding a way to drive subscription revenue from online sources is not a bad idea, I’m simply saying that borrowing the FT-model and hoping it will auto-magically work, ain’t a good plan. Adding value and charging for that, might work. Creating new ad units, or interactive advertizing, also might work. But rather then innovating, or trying something new, they are dusting off the old, calling it new, and praying that it will work…somehow.

…good luck with that.

IN the media, especially the print media world, people have described the internet as a ‘linked economy’; meaning that more links signify greater value and should not only be spread freely and widely, but sought after. When you are talking about internet traffic, and page views, this formulation makes some sense.

I have issues with this turn of phrase, but I do think it makes a greater point about the revenue side of online media. Notably, that links are a primary source of revenue for most of the new media players. Google receives most of its money based on clicks and links, aggregators make all of their money based on them. The point is that links by themselves have, a very small, but measurable value.

Recently, Chris Aheam, President of Thomson Reuters Media, came out in full throated support of the linked economy, encouraging people to link to Reuters stories. This stands in contrast to Murdock who is planning to raise a pay wall at all of his sites in the next year, and the AP who along with Attributor have been talking of trying to charge people for excerpting AP stories, even if they are attributed and linked.

Personally, I am much more on the side of Aheam, but because of the diffusion of content as it is today I am sympathetic to the notion that companies need to be able to monetize, in some form, their quoted work, regardless of where the work appears.

‘Fair use’ is concept that is currently influx, but I believe that if a company tried to start charging for any quotation usage it would be ruled illegal under this doctrine. Not to mention it would be prohibitively expensive to implement, and would target the people with the least ability to pay, bloggers.

Instead I would go in the opposite direction. Anyone can link, or quote any story, but they can’t just use the words from the story that have to use the links, the exact same links, from the original story in their excerpt. In the meantime media companies could start to sell the rights to have their advertiser-links be the link for a given brand word every time that word is used in the content copy. But you’re not going to use the link as it was given by the advertiser; you use a short-url. The beauty is that by using this redirect URL you can counts the clicks regardless of where the link is clicked from, and charge as the clicks pileup. The point would to say yes, you are allowed to use our content to better your content under ‘fair use’, however that also means that you must carry our contextualized-link advertisements as well.

As anyone who knows me already knows, I don’t believe subscriptions are viable. Sub revenue doesn’t even cover the print & delivery of a paper; it’s all subsidized by advertising. Currently digital display ads are pathetic. Yet, rather than address the problem of advertising online, most companies are searching for a vein in a stone…. Good luck with that. (Yes, I am shorting News Corp’s Stock through the 4^thQ)

For the record I respect Bill Keller of the NYT’s, he’s a good editor who helped the paper recover from the Jason Blair affair, and mostly navigated the Judy Miller escapade without too many unforced errors. That said: he is also a sanctimonious ass.

Recently, he was quoted as saying:

Saving the New York Times now ranks with saving Darfur as a high-minded cause.

Now of course that’s not exactly what he meant, and in fact he wrote an email to Michael Calderone to clarify his intent. Regardless, the Editor of the New York – fucking – Times, should not be shocked in any way to have his words pulled out of context. However he might have meant the comment, the fact that he made the comparison at all says something about the mindset in America’s Newsrooms.

Namely this: for all of their vaunted skills in uncovering and exposing the world’s problems, they are almost devoid of any real or innovative solutions. In fact, saving the NYT’s has at least one parallel to Darfur, neither will be solved as a result of high-minded anything.

And I admit it’s unfair to single out Keller, because like I said he’s better than he is bad. He is simply the most visible member of a news media culture.

For example, the Atlantic has a new poll of ‘industry insiders’ in which 65% said that the Internet has hurt media more than it has helped (granted that’s only 30 people). Yet, the rational that they offer shows their real concern isn’t for ‘Journalism as an ideal’, but rather a screed against the end of ‘Journalism as Practiced by Them’:

“The Internet has some plusses: It has widened the circle of those participating in the national debate. But it has mortally wounded the financial structure of the news business so that the cost of doing challenging, independent reporting has become all but prohibitive all over the world. It has blurred the line between opinion and fact and created a dynamic in which extreme thought flourishes while balanced judgment is imperiled.”

“A year ago, I would have given a different answer. The increases in audience reach and communication with the audience are incredibly gratifying. But the cost to the business model (R.I.P. Seattle P-I) and the inability of the business model to monetize the Internet means that there is a disturbing net cost to newsgathering. If you’re not covering your state delegation in D.C., or the state legislature back home, or the city council, bad things are going to happen, undiscovered.”

“News consumption depends on news production, and I don’t see anything on the Internet that produces news—that is, detailed responsible empirical journalism—the way newspapers do (or did). It is typical of Americans to get more excited about consumption than about production.”

Let’s take these as two main arguments, the business model, and the content quality.

This first point is a general trope used over and over again, and I hope to do a full post on this specifically. For now let me simply say: what the internet takes away, the internet also gives; meaning that even though the average-profit-per-impression is lower on the internet, the cost-per-impression is also extremely low. Paper, ink, printing, distribution and home delivery are damned expensive. That was THE barrier to entry for ages. Now you’ve eliminated that cost. So you don’t have to charge for papers, which only ever covered a small portion of the printing costs anyway. Rather it was the industry failure to better monetize their internet offerings that put them in this financial position (the 2^nd person at least seems to recognize this failing as partly internal).

This focus on trying to get consumers to pay more for something, which they never really paid for in the first place, is stupid. This isn’t a consumer problem (the main beneficiary of the internet), it’s an advertiser problem. And that is the fault of management, period, full stop.

Yet, it’s this second point that actively pisses me off. This idealized ‘just the facts’ journalism is unique to post-WWII America. The early forefathers of Newspapers as we know them today were the Colonial pamphleteers. People like Thomas Pain, and the Federalist , wanted to make an argument, so they paid to have their essays printed and published for dispersion. In many ways they were like bloggers, they made no money off their pamphlets, but they did inform, and got the message across. But make no mistake, political parties were the 1^st publishers, followed later by shipping companies, and later still by independent ‘publishing companies’. But all of them had a slant, and made no secret of it, imagine the British Press today, but 100 years ago.

The reason that this actively pisses me off is that I fail to see how the American way of Journalism is much better then the old way, or more appropriately the British Way. In the American tradition, reporters are supposed to ask tough questions of those in power. These select few are given the almighty ‘Access’ with which to uncover the ‘Truth’. But the reality is that ‘Access’, not information nor understanding, has become the measure of good Journalism. The efforts to protect that access, IMHO, is the underlying cause of our collective Journalistic failure over the past 20-30 some odd years. From the failure of CNBC to actually ask tough questions of over-paied/under-performing CEOs; to Judy Miller, Vaunted NYT’s reporter, who propagandized for an Administration, and even did their dirty bidding in silencing an Administration critic. This Idealized American Journalistic Standard has led to shoddy reporting, NO-analysis (God Forbid), and a stack of Newspapers that treat their readers like 5th grade children.

NO!

This is weak willed crap posing as mild-mannered reporting. It uncovers little, and is played by those whom would seek to sub-divert thinking with emotional drivel. We don’t want facts, jack. We want analysis, and as long as you are upfront about your leanings, what’s the problem? That’s how they do it in the world’s oldest democracy, and some of them even managed call-out the false conclusions made in the run up to the Iraq War.

This is all to say two things:

Number One: Publishing Management needs to take responsibility for their epic mismanagement of their enterprises. Technology changes in every industry, most people deal with it, many top reporters took advantage of it. Your failure to develope new revenue sources, is your fault, not nature’s, not the internet.

Number Two: The American Journalistic Model is not the final buttress on the cathedral of democracy, and in fact its mores have hurt the public’s understanding and knowledge of government’s inter-workings. It’s been those opinionated and targeted independent media sources that have proven to be the sustained voice of the people, and defenders of freedom. Not those with the access, but those with the unanswered question, it is those people whom need to be protected, defended, and brought safely into the new digital media.

Dan Gross at Slate had a great piece up about the decline of Newspapers in America and it causes. His main point is that, contra popular belief; the internet did not and is not killing the Daily papers.

Rather, many of the papers that are folding had incompetent management, with heavy debt, running a company with declining revenue. He cites Sam Zell’s Real Estate expertise as a sure marker of Editorial and Publishing success. And of course, a little PR savvy is all you need to run a major newspaper, so Brian Tinery at the Philadelphia Daily News and Inquirer was a natural fit. Yes, let’s buy a newspaper franchise at $562M, $100M+ more then the next bidder, its ok we have a $450M credit line. Awesome!

But let’s not forget the one bon afide media genius of the pack, Conrad Black. Who confessed to stealing millions from Sun-Times Media during the 1990’s. While they were profitable then, the resulting tax liability, has financially held the firm’s head underwater. And as you know, are now also in bankruptcy.

It should be noted from a financial perspective Private Equity enterprises, as all of the above are, always operate from a heavy debt position, because being private they have no access to the equity markets for capital expansion.

Yet, one of my favorite people on the internet, a commentator on Barry Ritholtz’s blog The Big Picture, Marcus Aurelius responded to the fact that The New York Times and The Washington Post are both publically traded, and in the financial crapper:

We have experienced the dumbing-down, politicization and propagandizing of what were formerly true “news” organizations. What was formerly an adversarial relationship – that between the newspapers and the interests they investigated – has become a cozy relationship marked by access to “inside” information and functionaries, for the cost of repeating the party line.
Too often, what passes for news is misinformation, at best. A good example is Chris Whalen’s earlier post here at TBP – AIG: Before CDS, There Was Reinsurance. I doubt many papers will run stories related to this chicanery, and those that do will bury the story in favor of fluff.
The public wants less reporting and more investigation. If they can’t get hard facts and critical analysis from traditional sources, they’ll turn to non-traditional. The public (a.k.a. The Market) is speaking clearly to Big Corporate Media.
Italics mine

In my mind this gets to the heart of the matter not only for the newspapers, but infotainment in general (Fox & CNBC in particular). Within their ranks, journalist do not measure each other by the stories they break, they measure by the level of access. The causes are many, but the feed stock for this perversion is a group of publishers that love access just as much, but are still hamstrung to ensuring monthly debt payments.

My overall point, the one that Gross hints at and Aurelius nails, is that both ways are doomed to failure. Right now the poles are between “Pinch” Sulzberger with Bill Keller, who in their deification of ‘journalism’, have coddled their reporters from the bottom line to the point where the only way forward they see involves non-profit status, or some kind of charitable giving, akin to PBS, just to keep the model afloat. Or you have Roger Alies at Fox, who bases pay scales on Nielsen Ratings and the ability to cross leverage News Corp assets across mediums.

Thus, we have a world in which quality can’t compete and ranting counts as ‘news’. Neither situation is acceptable, and yet with the current management class that all we can get. In my opening salvo I mentioned that Editors and Publishers need to marry, and this is why I said that. Until the Edit and Publishing relationship gains some symmetry, where writers recognize that yes, they need to be concerned with money; and publishers stop treating their writers as power tools (Denton & Huffington), we will continue to have the worst of all worlds.