Repeat After Me: Newspaper Consumers Have Never “Paid” For Content

Instead, we have paid for the convenience of having content delivered to our door. Our subscription fees have historically barely covered transportation costs, much less the cost of printing plus salaries.

The myth that all would be well in newspaper-land if newspapers had only charged for digital content — of the consumer who has always paid for news — rears its head, again, in the Sunday New York Times, despite the fact that the assertion has no basis in newspaper economics. (Why am I no longer surprised that general newspaper business columnists, such as David Carr, seem to exist in a world isolated from economics and statistical analysis?)

Last year about this time, [David Carr] was talking with an executive from Apple about e-readers and print … much of it in the context of the mainstream media’s original sin of giving away content if people happened to be reading it in digital form. (emphasis added)

What paid for the daily newspaper for most of my lifetime? Classified ads.

Newspapers generally, at one point at their peak, they were generating close to 70 percent of their pretax profits from their classified advertising. (PBS Frontline, 2007)

And Clay Shirky noted in 1997 (that’s 13 years ago, Mr. Carr) that the classified ad cash cow was DOA in a digital era. It’s not Craig Newmark’s fault! It’s the nature of digital technology’s ability to transcend both time and space (geography), which has boosted the pockets of eBay’s founders, for example, more than Newmark’s. And before Craigslist reached the tipping point, there was Monster.com and Yahoo’s HotJobs.

How anyone with David Carr’s work history — he managed alternative weeklies in DC and Minneapolis from 1993-2000 — and beat (the business section) can regurgitate a discredited mantra like this one stretches the imagination past the breaking point. In tech jaron, he’s drinking far too much KoolAid.

I’m trying very hard not to start the New Year screaming, but I’m not quite succeeding.

Some Facts And Data
In the late 19th century, newspaper circulation exploded because technology made it possible for metropolitan areas to afford multiple daily newspapers; the only competitor was another newspaper. In the 1890s, Philadelphia had 10 newspapers; in the first half of the 20th century, nine Philly newspapers covered the Pennsylvania legislature despite the competition from radio (which cribbed news from newspapers). Digital technologies accelerated an audience fragmentation that began with the radio and picked up speed with television. For example, in 1964, 81 percent of American adults read a daily newspaper; by 2006, that number had dropped to 50 percent. Just as telling, in 1950, newspaper circulation was 353 per 1,000 population; it dropped to 202 per 1,000 population in 2000 (Media Economics, p 114).

In the 21st century, technology is facilitating advertiser freedom from a mainstream media lock on eyeballs. In 2000, advertising (all types) accounted for 81 percent of newspaper income (Media Economics, p 113), reflecting that lock. Advertising revenue dropped 29 percent from 2000 to 2008; estimates are that from 2000-2009 the drop will nudge 50 percent with newspapers experiencing the double whammy of digital technology disruption plus severe recession.

Craig Newmark runs Craiglist with a handful of employees and a lot of servers. Contrast that with newspapers: labor accounted for 40 percent of newspaper costs in 2000( Media Economics, p 115).

The challenge for newspapers is not that consumers want their content to be free. The challenge is learning how to survive in a market where you no longer have a monopoly.

For more on this topic, see:
No More Free Content and Follow Up: No More Free Content as well as The Future of Journalism Discussions Need Reality Economics