MythBusters: Subscriptions Don’t Cover Salaries

The money quote from Hal Varian’s presentation to the Federal Trade Commission, according to TechCrunch, was this: “newspapers have never made much money from news.”

But for me, the kicker is this data point from slide #3:

Subscriptions account for 3% of revenue on average

Editorial expense is 14%, so subscriptions don’t even cover the cost of news gathering. Production and distribution (mostly the stuff related to atoms) is 52% of expenses.

Can we finally put the myth that “consumers pay for news” to bed, for once and for all?

Also, newspapers accounted for slightly more than 35% of all media ad dollars in 1949. By 1989, that was down to about 25%. In 1992, TV (network and cable) finally caught up and then passed newspapers. The other big challenge? Direct mail. Makes sense — and we can argue in another post about unintended consequences of federal legislation that makes direct mail (junk mail) dirt cheap, so to speak.

More evidence that the Internet is not the beast that killed newspapers (although an argument could be made about straws and camel backs): newspaper circulation peaked in 1990 but circulation per capita has been on a steady decline since at least 1960 (since 1950 per household), which reflects competition from other media, particularly television.

Varian, Google’s chief economist, was the keynote speaker earlier today at the Federal Trade Commission’s second round of hearings on the future of journalism. The Federal Communication Commission is also studying the issue. More from PaidContent.

A year ago yesterday I wrote “No More Free Content” in response to repeated chants by old school journos that all would be fine if people would just pay for online news like they always had paid for news.

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