Charging for web content? 'Nothing is imminent' at this paper

On Valentine’s Day, a Buffalo business news magazine reported annual operating profits at my regional metro daily, The Buffalo News, had “for the first time in at least 25 years … [fallen] below $10 million and the paper is exploring the possibility of perhaps charging for online content to offset circulation declines.”

Such is the trend — ad revenues diving into fiscal oblivion — at many of the nation’s large metropolitan dailies. As Alan Mutter at Newsosaur wrote in December:

Newspaper advertising sales this year will come in at less than half the record $49.4 billion achieved as recently in 2005, according to an analysis of the year-to-date performance of the industry. [emphasis added]

Imagine that: An industry’s ad sales have fallen by half in just seven years. But to listen to the publisher of The Buffalo News, you’d conclude he’s saying, “It’s not our fault.”

In a Buffalo First story by reporter James Fink, publisher Stan Lipsey suggests that the Buff News‘ sinking financial fortunes are due to factors beyond the newspaper’s control. Perhaps, but like many such managerial pronouncements in the industry over the past decade, admission of flawed management decisions past and present is nowhere in sight.

Lipsey, reports Fink, “in delivering his annual ‘State of the News’ address to the paper’s staff, said its operating profit last year decreased 43 percent to $9.3 million from $16.2 million in 2010.”

And one of the reasons? From Lipsey: “These are the results of Buffalo not attracting any new residents.”

True, Buffalo and western New York — the News‘ primary readership and advertising draw — have suffered population flight. Buffalo’s population has fallen nearly 11 percent between 2000 and 2010. And, as Steven Malanga writes in The Wall Street Journal, Gov. Andrew Cuomo, in announcing a plan to sink $1 billion into economic incentives for Buffalo, “ignores the factors that help keep areas like Buffalo inhospitable to new investment—namely steep tax rates and the high cost of government.”

So, no new investment, no new businesses booming, declining revenues from those remaining … and people fleeing because good-paying jobs are scarce, leaving fewer people to subscribe to the News. Score one for Lipsey.

But Lipsey does not point out that some of the News‘ difficulties — and those of the industry in general — lie in management decisions. Consider the News‘ website. It’s free. The newspaper industry is almost wholly to blame for the cultural belief that on the Internet all information is free. By failing to recognize in the mid- to late 1990s the Web as a formidable revenue generator, and thus a competitor, newspapers began websites and gave away their expensively generated content — for free. Writes Fink:

Among the revenue-generating options being considered by the paper is to institute a paywall system on its website to would limit the amount of free copy currently being offered.

“The paywall is something we are looking at but, I want to caution, that nothing is imminent,” Lipsey said.

In 2009, Joe Strupp of the then-potent Editor & Publisher interviewed gazillionaire Warren Buffett, owner of the News, about the industry’s complacency:

When the Internet came along, you gave away your [online] product for free and charged for it in another place [print]. I’m not positive what you would have done differently, but not figuring out some kind of business model was a mistake. [emphasis added]

Three years later, and nothing is imminent?

And there’s this from publisher Lipsey:

I don’t like to see ad revenues fall but that’s the card that’s been dealt to this newspaper and every other newspaper around the country.

His use of the passive construction implies that the card has been dealt by some outside agency.

No. No. No. The industry’s self-induced delusion about management responsibility for advertising declines (and thus profit declines) continues to hamper its ability to rebound as a vibrant and important business entity and necessary check-and-balance on government.

First, the News, like most of the industry, gave its product away online. Now aggregators reap the benefits of content they do not create. When revenues fell, the News, like most of the industry, shed expenses to shore up profits primarily by paring people. 2011 saw the acceleration of newspaper job cuts begun in earnest in 2007. Nearly 40,000 newspaper jobs were eradicated. In newsrooms, from a high of nearly 57,000 journalists, only 41,000 remain.

The industry in general and Lipsey at the News dealt themselves that card. They cut the competent, experienced people who produced the quality product that newspapers have long sold.

The Washington Post, for example, has cut 200 newsroom jobs in the past three years. It’s planning its fifth round of “voluntary” job reductions to cut 33 more positions. Says its executive editor, Marcus Brauchli:

Our objective is a limited staff reduction that won’t affect the quality, ambition or authority of our journalism. We believe this is possible, given the changes in how we work and the great successes we have had building our digital readership lately. [emphasis added]

Really? No change in quality? And copy editors are eligible for the “Separation Incentive Program” but the Style critics aren’t?

At the News, over the past few years, readers like me have seen talented, veteran reporters leave, reducing the quantity of quality work at the paper. Value to readers, and thus to advertisers, has been reduced. Without value, newspapers falter and, perhaps, eventually fail.

Back to Warren Buffett:

They should have probably tried to get more revenue from circulation over the years. Newspapers were essential years ago. If they had trained [readers] to value it more, they might have had a model that worked in this environment. [emphasis added]

Now we live in a smartphone and tablet world and the news biz is woefully far behind in maximizing both reporting and revenue opportunities. Reporting staffs at the News and other large metro dailies continue to shrink.

Meanwhile, governments and corporations increasingly go uninspected by experienced reporters because fewer are left to do so. The newspaper industry continues to falter under its part of the deal for First Amendment protection against government interference. It cannot be a check-and-balance against government or corporate malfeasance if there’s no one left to pound fists effectively against a closed backroom door.

3 comments on “Charging for web content? 'Nothing is imminent' at this paper

  1. Just an idea, but how about something like a centralized pay-per-article system? Imagine a hypothetical company called NewsToken. They get “providers,” both primary news sources, e.g., AP, UPI, AFP, NYT, LA Times, etc. as well as aggregators. They get subscribers, e.g., you and me. Subscribers pay NewsToken a reasonable subscription amount, something akin to what one would pay for a single newspaper. Then, when the subscriber opens a provider’s article online, by way of “some Internet technology” the subscriber’s balance at NewsToken is debited $.03. 1 cent for NewsToken, 2 cents to a primary source (e.g., NYT), or 1 cent each to a primary source and 1 cent to an aggregator in the event the article is read at an aggregator’s site, in essence, making the aggregator an affiliate as well as a (possibly) paying licensee of the primary source.

    A mere $25 subscription would yield 833 articles for the subscriber. 1 million article views would yield $100,000 in revenues to NewsToken. One million article views at a primary news site (again, e.g., NYT) would yield $200,000 in revenue. One million article views at an aggregator site would yield $100,000 in revenues for both the primary source as well as the aggregator.

    Granted, it’s a massively oversimplified idea from someone with absolutely zero knowledge of the business side of the industry. Would something like that even begin to be a workable solution? Would the numbers have to be adjusted upward to make the revenues sufficient for the providers/aggregators? Would such a model actually produce greater incentive for more aggregators to appear (assuming that would be a good thing insofar as they might contribute to expanding the reach of the original sources)?

  2. From what I read, Frank, it’s pay-wall systems vs. metering. I don’t know which will win out. Pay walls, methinks, require less coordination, if any, by newspapers with aggregators. The paper puts up the wall, and readers either subscribe or they don’t. The pay-per-view system, often called metering, seems to require much more coordination (and tough negotiations about who gets how much of the pie) between content providers and aggregators. I sure hope folks read your idea and react to it.

    Thanks for the comment.

  3. Pingback: Print ad revenues: Even a rock doesn’t fall this fast | Scholars and Rogues

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